Fundamentals of Business Law Exam Practice Tests
Course Introduction
Fundamentals of Business Law introduces students to the essential principles and legal concepts that govern business operations in a modern marketplace. The course covers foundational topics such as contracts, torts, agency relationships, sales of goods, negotiable instruments, and the formation and regulation of business entities. It also addresses issues related to government regulation, ethical considerations in business decisions, dispute resolution, and the protection of intellectual property. By exploring real-world case studies and landmark legal decisions, students will gain a solid understanding of how the law affects businesses and the legal responsibilities of business professionals.
Recommended Textbook Essentials of the Legal Environment 4th Edition by Roger LeRoy Miller
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25 Chapters
1489 Verified Questions
1489 Flashcards
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Page 2
Chapter 1: Business and Its Legal Environment3
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Sample Questions
Q1) To Cody, the written law of a particular society at a particular time is most significant.Cody is
A)a legal positivist.
B)a legal historian.
C)a legal realist.
D)a person who adheres to the natural law school.
Answer: A
Q2) Refer to Fact Pattern 1-1.Bellamy's opinion is
A)a concurring opinion.
B)a dissenting opinion.
C)a majority opinion.
D)a per curiam opinion.
Answer: A
Q3) Federal statutes apply to all states.
A)True
B)False
Answer: True
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Chapter 2: Shifting Legal Priorites for Business:
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Sample Questions
Q1) Sustainability-economic development that meets the needs of the present without compromising the ability of future generations to meet their needs-has been legislatively committed to by
A)no state statute or federal law.
B)at least one state-Oregon.
C)federal statutes only.
D)international law only.
Answer: B
Q2) Jennifer, a sophomore at West High School, posts suggestive-but not pornographic or obscene-photos of herself on Facebook.The images do not identify the school and require "friend" status to be viewed.Jennifer intends the photos to be humorous, and this is how her friends understand them.Under the First Amendment, West can most likely
A)suspend or otherwise punish Jennifer for posting the photos.
B)require that Jennifer remove the photos but not punish her.
C)require that Jennifer remove the photos and punish her.
D)not punish Jennifer or restrict her posts.
Answer: D
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Chapter 3: Courts and Alternative Dispute Resolution
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Sample Questions
Q1) To resolve a dispute, Amy in Boston and Chris in Denver utilize E-Solution, an online dispute resolution (ODR)service.This limits these parties' recourse to the courts
A)not at all.
B)until the ODR service has issued a decision.
C)with respect to any dispute arising between them.
D)with respect to this dispute only.
Answer: A
Q2) Negotiation normally involves just the parties to a dispute without their attorneys.
A)True
B)False Answer: False
Q3) A business firm may have to comply with the laws of any jurisdiction in which it actively targets customers.
A)True
B)False
Answer: True
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Chapter 4: Ethics and Business Decision Making
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Sample Questions
Q1) Richard suspects his supervisor of unethical accounting practices.However, he does not want to lose his job if he reports the supervisor and the supervisor finds out who reported him.An important feature of online reporting systems like EthicsPoint is
A)the employee reporting the unethical behavior can do so anonymously.
B)the employee reporting the unethical behavior is financially compensated if he loses his job as a result of the report.
C)the employee reporting the unethical behavior must give his full name when making the report.
D)the employee reporting the unethical behavior must have another employee supporting him.
Q2) Housemate, Inc., makes and sells a variety of household products.With a fair amount of certainty, Housemate's decision makers can predict whether a given business action would be legal in A)all situations.
B)many situations.
C)no situations.
D)practically no situations.
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Chapter 5: Constitutional Authority to Regulate Business
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Sample Questions
Q1) The Constitution sets out the authority and the limits of the branches of the government.The term checks and balances means that
A)Congress writes checks and the other branches balance the budget.
B)each branch has some power to limit the actions of the others.
C)the courts balance their authority to the other branches' checklists.
D)the president "checks" the courts, which "balance" the laws.
Q2) The Eighth Amendment prohibits excessive bail and fines, as well as cruel and unusual punishment.
A)True
B)False
Q3) Mary creates a t-shirt design that expresses support for a presidential candidate and distributes t-shirts to all her friends.The t-shirts are an example of A)unprotected speech.
B)controlled speech.
C)symbolic speech.
D)illegal speech.
Q4) A law that has any impact on religion is unconstitutional.
A)True
B)False
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Chapter 6: Administrative Law
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Sample Questions
Q1) If a business firm refuses to comply with an agency's request to inspect facilities or business records, the agency must defer to the refusal.
A)True
B)False
Q2) Freight Transport Company is subject to a decision by the National Labor Relations Board.Freight Transport appeals the decision, arguing that it is arbitrary and capricious.This could mean that the decision
A)followed a consideration of legally appropriate factors.
B)justifiably changed the agency's prior policy.
C)was accompanied by a rational explanation.
D)was plainly contrary to the evidence.
Q3) In reviewing the actions of the U.S.Office of Nuclear Energy and other agencies, the courts
A)are usually reluctant to review questions of fact.
B)rarely defer to the technical expertise of administrative agencies.
C)often rule on the merits of policy determinations.
D)never defer to an agency's interpretation of law.
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Chapter 7: Torts and Product Liability
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Sample Questions
Q1) Furious Toyz Corporation makes skateboards, which it sells to consumers, including Gitana.Gitana is injured due to a defect in the board that causes an accident in which Haley, a bystander, is also injured.In a product liability suit based on strict product liability, Furious Toyz may be liable to
A)Gitana and Haley.
B)Gitana only.
C)Haley only.
D)no one.
Q2) Ike pushes Joan, who falls and breaks her arm.Ike is liable for the injury
A)if Ike intended to push Joan.
B)only if Ike did not intend to break Joan's arm.
C)only if Ike had a bad motive for pushing Joan.
D)only if Ike intended to break Joan's arm.
Q3) If it can be shown that a trespass to land was warranted, a complete defense exists.
A)True
B)False
Q4) Publishing false information about another's product is conversion.
A)True
B)False
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Chapter 8: Online Developments:
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Sample Questions
Q1) Delfino, an executive with Cartwright Corporation, orders corporate employees to unknowingly transfer corporate funds to Delfino's personal account.This use of the employees' services is most likely
A)honest-services fraud, a federal crime.
B)a violation of corporate rules but no crime.
C)a breach of workplace rules generally but no civil or criminal wrong.
D)unethical but no crime.
Q2) A Little Bit of Lipstick, Inc., is a small, U.S.-based business that sells nanotechnology-based cosmetics for export.Under the National Export Initiative, the federal government is
A)pursuing trade agreements to improve market access for U.S.firms.
B)banning lending to small businesses, especially for export purposes.
C)placing less emphasis on exports than other governments.
D)playing a less active role in promoting exports in emerging markets.
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Chapter 9: Criminal Law and Cyber Crime
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Sample Questions
Q1) Only blue-collar crimes are prosecuted under RICO.
A)True
B)False
Q2) Mens rea refers to the mental state necessary for criminal liability.
A)True
B)False
Q3) Jean sends e-mail to Irwin promising a percentage of the amount in a foreign bank account for assistance in transferring the funds to a U.S.bank account.Irwin forwards his account number, but the funds are never sent.Instead, Jean quickly withdraws the funds in Irwin's account.This is
A)cyber fraud.
B)embarrassing to Irwin, but not a crime.
C)cyberterrorism.
D)hacking.
Q4) 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.
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Chapter 10: Intellectual Property and Internet Law
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Sample Questions
Q1) A copy must be exactly the same as the original to infringe a copyright.
A)True
B)False
Q2) New Apps Company develops "Browser Lite," software to speed the display of graphics on Web sites.Browser Lite has the most copyright protection under A)the Berne Convention.
B)the Paris Convention
C)the TRIPS Agreement.
D)the public domain.
Q3) It is possible to copyright an idea.
A)True
B)False
Q4) Downloading software or music into a computer's random access memory without authorization is copyright infringement.
A)True
B)False
Q5) In the United States, a patent is given to the first person to file for it.
A)True
B)False
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Chapter 11: International Law in a Global Economy
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Sample Questions
Q1) International law is a body of law that governs relations between and among citizens, not nations.
A)True B)False
Q2) Under the act of state doctrine, a firm whose assets a foreign government has expropriated may not recover compensatory damages in a U.S.court.
A)True B)False
Q3) A party to a licensing agreement generally agrees to pay royalties on some basis.
A)True B)False
Q4) Sudan seizes the assets of Triage Medical, Inc., a U.S.firm.Triage's recovery from Sudan in a U.S.court may be prevented by
A)the act of state doctrine.
B)the doctrine of sovereign immunity.
C)the Foreign Corrupt Practices Act.
D)the principle of comity.
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Page 13
Chapter 12: Business Organizations
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Sample Questions
Q1) Robert owns Textbooks Plus, a sole proprietorship that sells textbooks.When Robert dies, Textbooks Plus will
A)automatically dissolve.
B)pass directly to his oldest child.
C)pass directly to the state.
D)be evenly divided among all Robert's heirs.
Q2) The laws governing franchising are primarily designed to protect franchisors from dishonest franchisees.
A)True
B)False
Q3) The minimum number of directors that must be present before a board can transact business is a quorum.
A)True
B)False
Q4) A partner's profit from a partnership is taxed as income to the firm. A)True
B)False
Q5) A sharing of profits and losses is the only requirement of a partnership. A)True
B)False
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Chapter 13: Beyond Our Borders:
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Sample Questions
Q1) Eduard is a shareholder of Deutsche Internationale, a German firm.In Germany
A)most claims against firms are alleged in shareholders' derivative suits.
B)the law does not provide for derivative litigation.
C)derivative actions can only challenge directors' actions that shareholders could not legally ratify.
D)if a derivative action is unsuccessful, a firm can sue the plaintiff.
Q2) Duc Tho, Ltd., a Vietnamese firm, delivers a shipment of umbrellas to Rain Gear Inc., a U.S.firm.Rain Gear accepts the goods, but later discovers that they are nonconforming.After revoking acceptance of the goods, under the Convention on Contracts for the International Sale of Goods, Rain Gear can A)rescind the contract.
B)recover the goods.
C)reject the goods.
D)none of the choices.
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15
Chapter 14: Formation of Traditional and E-Contracts
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Sample Questions
Q1) Lightspeed Corporation makes computers, each of which is packaged with a shrink-wrap agreement.Milo buys a Lightspeed desktop.The shrink-wrap agreement is most likely enforceable if
A)Milo buys the computer directly from Lightspeed.
B)Milo expressly agrees to the terms in the shrink-wrap agreement.
C)Milo reads the shrink-wrap agreement.
D)the terms in the shrink-wrap agreement concern warranties.
Q2) A unilateral contract is formed when the one receiving the offer completes the requested act or performance.
A)True
B)False
Q3) An invitation to negotiate-"can you afford this"-is an offer. A)True B)False
Q4) An implied contract is implied from the conduct of the parties. A)True B)False
Q5) A void contract is enforceable if it is in writing.
A)True
B)False
16
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Chapter 15: Contract Performance, Breach, and Remedies
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Sample Questions
Q1) The duty owed under the mitigation of damages doctrine depends on the nature of the contract.
A)True
B)False
Q2) Rescission advances the contracting parties to the position they would have been in if the contract had been fully performed.
A)True
B)False
Q3) Sonny agrees to buy a unique collection of Olympics memorabilia for $7,000 from Jana and sends $1,500 as a down payment.When Sonny sends Jana the rest of the price, she refuses to ship the collection.Sonny should seek A)a penalty.
B)liquidated damages. C)restitution.
D)specific performance.
Q4) Equitable remedies include rescission and restitution. A)True
B)False
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Page 17
Chapter 16: Sales and Leases
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Sample Questions
Q1) Under the UCC, parties to sales and lease contracts are not free to establish whatever terms they wish.
A)True
B)False
Q2) Merchants are required to warrant that the goods they sell or lease are fit for the particular purpose for which a buyer or lessee will use the goods.
A)True
B)False
Q3) Robert is selling his used lawnmower.He wants to disclaim any implied warranties.Robert
A)can not disclaim implied warranties.
B)should include a written disclaimer that the lawnmower is being sold "as is."
C)should orally disclose all known faults of the lawnmower.
D)should include a written warranty of title.
Q4) The UCC imposes some different rules on merchants. A)True B)False
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Chapter 17: Creditors Rights and Bankruptcy
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Sample Questions
Q1) Some student loans are dischargeable in a Chapter 7 bankruptcy.
A)True
B)False
Q2) One goal of bankruptcy law is to protect a debtor.
A)True
B)False
Q3) Dina asks Edie to co-sign a credit application so that she can borrow money and buy a truck from First Street Motors.If, after the loan agreement is signed, Dina agrees to a higher rate of interest without telling Edie, then Edie is A)discharged from the agreement.
B)liable at the higher rate of interest.
C)liable at the lower rate of interest.
D)liable for the principal only.
Q4) An artisan's lien is a security device created at statutory law through which a creditor can recover payment for labor and materials used to increase the value of real property.
A)True
B)False
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19
Chapter 18: Mortgages Foreclosures After the Recession
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Sample Questions
Q1) Tracy borrows $30,000 from Secure State Bank.The lender accepts Tracy's equity in her home as collateral, which can be seized if the loan is not repaid on time.With respect to any proceeding that occurs if Tracy fails to make the payments, this loan is subordinated.This means that it
A)takes a higher priority.
B)takes a lower priority.
C)has the same priority as the primary mortgage.
D)fluctuates with the market value of the property.
Q2) Darwin borrows $200,000 from Evermore Bank to buy a home.Less than six months into the term, Darwin stops making payments on the loan.To initiate the process to repossess and auction off the property securing the loan, Evermore must
A)issue a notice of sale to the borrower.
B)offer the property for sale in an auction on the courthouse steps.
C)record a notice of default with the appropriate county office.
D)resort to litigation to establish clear ownership of the property.
Q3) The annual percentage rate is the actual cost of a loan on a yearly basis.
A)True
B)False
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Chapter 19: Employment, Immigration, and Labor Law
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Sample Questions
Q1) Julia is an agent who purchases wool for Kara's Knitting Company.In the course of her performance for Kara's Knitting Company, Julia pays for the gas for the company car and for some storage boxes for the wool.Kara's Knitting Company must reimburse Julia because of the principal's
A)duty of performance.
B)duty of loyalty.
C)duty of compensation.
D)duty of reimbursement.
Q2) Dag is an employee of Ridge Mining Company.Under federal labor law, Dag and other employees have the right to
A)bargain collectively with Eagle through their representatives.
B)insist that Ridge require union membership as a condition of work.
C)interfere with the efforts of others to form labor organizations.
D)refuse to bargain with Ridge through their representatives.
Q3) A disclosed principal is a principal whose identity is not known by the third party at the time the contract is made by the agent.
A)True
B)False
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Chapter 20: Beyond Our Borders:
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Sample Questions
Q1) Porto Bella Ltd., a Brazilian firm, requires its employee David to stay connected with work after office hours through a smartphone.In Brazil, David and other employees who are required to use mobile devices after work are
A)entitled to receive overtime wages.
B)prohibited from receiving overtime wages.
C)considered overworked and underpaid.
D)paid by their government for staying connected.
Q2) Women's groups contend that sexual harassment is viewed with "quiet tolerance" in corporations based in A)Asia.
B)Europe.
C)North America.
D)South America.
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22
Chapter 21: Employment Discrimination
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Questions
Q1) Elsa participates in a Title VII investigation at the firm where she works.As a result, Elsa's employer demotes her.Elsa can file a A)harassment complaint.
B)retaliation claim.
C)constructive discharge claim.
D)disparate-impact discrimination claim.
Q2) Machine Corporation requires its employees to have a high school diploma, claiming a definite connection between a high school education and job performance.In a suit against Machine Corporation under Title VII, this requirement is shown to have a discriminatory effect.The employer has A)no defense.
B)a bona fide occupational qualification defense.
C)a business necessity defense.
D)a seniority systems defense.
Q3) Disparate-impact discrimination occurs when a protected class of individuals is adversely affected by an employer's practices, even though they do not appear to be discriminatory.
A)True
B)False
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Page 23
Chapter 22: Environmental Law
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Sample Questions
Q1) The courts have considerably scaled back the Clean Water Act's protection of wetlands.
A)True
B)False
Q2) The Environmental Protection Agency periodically updates the pollution standards.
A)True
B)False
Q3) States may restrict a business's discharge of chemicals into the air or water.
A)True
B)False
Q4) Petro Industries, Inc., operates an oil refinery near Quigley River, which flows into Royal Lake.Discharging oil from the refinery into the river can result in
A)penalties and damages.
B)penalties only.
C)damages only.
D)no penalties or damages.
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Page 24
Chapter 23: Antitrust Law and Promoting Competition
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Q1) An act must substantially affect interstate commerce to violate antitrust law.
A)True
B)False
Q2) A trade association practice or agreement that restrains trade is analyzed under the rule of reason.
A)True
B)False
Q3) The possession of monopoly power alone does not constitute the offense of monopolization.
A)True
B)False
Q4) Cooperative research by small-business firms is exempt from antitrust law.
A)True
B)False
Q5) Resale price maintenance agreements are subject to analysis under the rule of reason.
A)True
B)False
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Chapter 24: Online Developments:
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Q1) Etoile Metrics, S.A., a French software firm, is harmed by an exclusive-dealing scheme engineered by Flash Search, Inc., a U.S.software firm.Compared to U.S.laws, the European Union's laws
A)define less conduct as anticompetitive.
B)define more conduct as anticompetitive.
C)declare the same conduct-not more or less-to be anticompetitive.
D)include less detailed provisions on monopolization.
Q2) DeLuxe, S.A., is a French company with offices and operations located throughout Europe.With respect to the direction and control of DeLuxe and other firms in continental Europe, the prevailing coordinated model of corporate governance gives priority to the interests of a corporation's A)directors.
B)executive and financial officers.
C)shareholders.
D)stakeholders-employees, managers, suppliers, customers, and the community.
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Chapter 25: Investor Protection, Insider Trading, Corp Gov
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Q1) Global Investments Corporation buys and sells securities.Section 10(b)of the Securities Exchange Act of 1934 applies to
A)only the purchase or sale of a security involving an insider.
B)only the purchase or sale of a security involving short-swing profits.
C)only the purchase or sale of a security involving a tipper and tippee.
D)the purchase or sale of any security.
Q2) Willful violations of the Securities Act of 1933 may be subject to civil liability, but not criminal prosecution.
A)True
B)False
Q3) The Securities Exchange Act of 1934 provides for continuous, periodic disclosures by publicly held corporations.
A)True
B)False
Q4) A corporation can recapture any profits realized by an insider on any purchase or sale of the firm's stock within any six-month period.
A)True
B)False
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