Legal Environment of Business
Exam Answer Key
Course Introduction
The Legal Environment of Business course provides students with a foundational understanding of the laws and regulations that shape the business landscape. Emphasizing key topics such as contracts, torts, agency relationships, business organizations, and the regulatory environment, the course explores how legal principles impact decision-making and operations within various industries. Through case studies and real-world examples, students learn to identify legal risks, understand compliance requirements, and appreciate the ethical considerations affecting modern businesses. This knowledge equips future business professionals to navigate legal challenges and fosters informed, responsible management practices.
Recommended Textbook Business Law Today Comprehensive 9th Edition by
Roger LeRoy Miller
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Chapter 1: The Legal Environment
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Q1) Standard Business Company appeals a decision against it,in favor of Top Flight Corporation,from a lower court to a higher court.Standard is
A)the appellant.
B)the appellee.
C)the defendant.
D)the plaintiff.
Answer: A
Q2) 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
Q3) Refer to Fact Pattern 1-1.These opinions are collected and published in volumes called
A)citations.
B)codes.
C)regulations.
D)reporters.
Answer: D
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Chapter 2: Constitutional Law
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Q1) Bailey,the president of Carmichael Commodities Company,claims that certain actions by the federal government and by the state of Delaware infringe on rights guaranteed by the Bill of Rights.All of these rights limit
A)neither Delaware nor the federal government.
B)the federal government only.
C)Delaware and the federal government.
D)Delaware only.
Answer: B
Q2) Under the Constitution,Congress
A)administers the laws.
B)enforces the laws.
C)interprets the laws.
D)makes the laws.
Answer: D
Q3) Whether the federal government preempted a certain area is always clear.
A)True
B)False
Answer: False
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Chapter 3: Courts and Alternative Dispute Resolution
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Q1) A long arm statute permits a court to exercise jurisdiction over an out-of-state defendant.
A)True
B)False
Answer: True
Q2) For purposes of diversity of citizenship,a corporation is a citizen only of the state in which it is incorporated.
A)True
B)False
Answer: False
Q3) Betty files a suit against Carl.Before going to trial,the parties meet,with their attorneys to represent them,to try to resolve their dispute without involving a third party.This is A)arbitration.
B)litigation.
C)mediation.
D)negotiation.
Answer: D
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Chapter 4: Torts and Cyber Torts
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Q1) The extreme risk of an activity is a primary basis for imposing strict liability.
A)True
B)False
Q2) Liz trespasses on Mega Corporation's property.Through the use of reasonable force,Mega's security guard Ned detains Liz until the police arrive.Mega is liable for A)assault and battery.
B)false imprisonment.
C)intentional infliction of emotional distress.
D)none of the choices.
Q3) Only a foreseeable intervening event can break the connection between a wrongful act and an injury to another.
A)True
B)False
Q4) An individual's right to privacy includes the exclusive use of his or her identity.
A)True
B)False
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Chapter 5: Intellectual Property and Internet Law
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Q1) A certification mark distinguishes products approved,or "certified," by the government.
A)True
B)False
Q2) Ross e-mails Super Snowboard Company's marketing campaign to Winter Sports Corporation,Super's competitor,without its permission.This is
A)copyright infringement.
B)patent infringement.
C)trademark infringement.
D)a theft of trade secrets.
Q3) A suggestive use of ordinary words may not be trademarked.
A)True
B)False
Q4) Patent infringement occurs only if an invention is copied in its entirety.
A)True
B)False
Q5) A license permits the use of intellectual property for certain limited purposes.
A)True
B)False
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Chapter 6: Criminal Law
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Q1) Unlike a "natural person," a corporation cannot be compelled to give self-incriminating testimony.
A)True
B)False
Q2) A federal judge must adhere strictly to federal sentencing guidelines.
A)True
B)False
Q3) Bruno is a businessperson with investments in legal and illegal operations.Bruno may be subject to penalties under RICO
A)for making an unprofitable,but legal,investment.
B)for the commission of any business fraud.
C)only in a case involving a "racket."
D)only in a case involving organized crime.
Q4) The only defense to criminal liability that justifies the use of force is self-defense.
A)True
B)False
Q5) Criminal liability depends on the performance of a prohibited act.
A)True
B)False
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Chapter 7: Cyber Crime
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Q1) A hacker is someone who uses one computer to break into another.
A)True
B)False
Q2) In Las Vegas,Nevada,Kurt places a bet on a football game with a bookmaker via a Web site based in Las Vegas.In Cleveland,Ohio,Dorothy places a bet on the same game with a bookmaker via a Web site based in Cleveland.Gambling is regulated in A)all states.
B)only a few states.
C)no state.
D)Ohio only.
Q3) Digital pirates may be prosecuted under state,but not federal,law.
A)True
B)False
Q4) Hackers sometimes rent their "crimeware" as a service.
A)True
B)False
Q5) Any crime committed with a computer is a computer crime.
A)True
B)False
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Chapter 8: Ethics and Business Decision Making
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Q1) To assist in detecting illegal bribes,Cut Rite Contractors,Inc.,and all U.S.companies,must
A)conceal financial records that reveal past bribes.
B)keep records that "accurately and fairly" reflect financial activities.
C)make bribes through third parties rather than directly to officials.
D)permit payments to foreign officials that are unlawful in that country.
Q2) Applied Business Corporation makes and markets its products nationwide.Under the stakeholder approach,to be considered socially responsible when making a business decision,Applied must take into account the needs of
A)its consumers,the community,and society only.
B)its employees and owners only.
C)its employees,owners,consumers,the community,and society.
D)no one.
Q3) To be ethical is to "do the right thing" but it does not otherwise "pay."
A)True
B)False
Q4) Managers must apply different standards to themselves than they apply to their employees.
A)True
B)False
Page 10
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Chapter 9: Nature and Classification
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Q1) When Jeff's car breaks down,he asks Kwik Tow,Inc.,to tow it from its location to Loyal Repair Shop.There is no discussion of a price,and Jeff and Kwik do not sign any documents.After the tow,Kwik sends Jeff a bill.With respect to Jeff's obligation to pay the bill,this is
A)an express contract.
B)an implied-in-fact contract.
C)an implied-in-law contract.
D)no contract.
Q2) When the words in a contract have more than one meaning,they are cut from the contract.
A)True
B)False
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
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Chapter 10: Agreement in Traditional and E-Contracts
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Q1) Nate tells Opal,"I might sell the skis that I bought last fall since I haven't used them and the skiing season is almost over." This is
A)an acceptance of an offer.
B)an invitation to accept an offer.
C)an offer.
D)a statement of future intent.
Q2) The UETA applies to an e-transaction unless the parties "opt out."
A)True
B)False
Q3) An offer must be practical to be effective.
A)True
B)False
Q4) An offer must be communicated to the offeree to be effective.
A)True
B)False
Q5) A "sale" of software generally involves a right to use the software and a passage of ownership rights in the software to the buyer.
A)True
B)False
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Chapter 11: Consideration
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Q1) Refer to Fact Pattern 11-5.In Enita's suit against Dag to recover her repair and medical expenses,Enita will most likely recover
A)half the amount to pay those costs over what Dag already paid her.
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.
Q2) Auto Body Repair Shop (ABRS)promises to pay Ben $1,000 a week to work for ABRS.Ben accepts and quits his job with Car Care Service.ABRS fails to provide a job for Ben.Ben has a cause of action based on
A)an illusory promise.
B)a release.
C)past consideration.
D)promissory estoppel.
Q3) 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.
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Page 13
Chapter 12: Capacity and Legality
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Q1) Parents are always liable for the contracts made by their minor children.
A)True
B)False
Q2) Airway International,Inc.,is a commercial passenger airline.Airway includes on its tickets a clause that states the airline is not liable for any injury to,or the death of,any passenger caused by its,or its employees',negligence.An Airway flight from Boston to New York crashes into Long Island sound,resulting in the deaths of all passengers.The cause of the accident is found to be due to Airway's negligence.Based on the clause on its tickets,can Airway avoid liability
Q3) A contract in which the stronger party dictates the terms is an adhesion contract.
A)True
B)False
Q4) A person who enters into a contract when he or she is intoxicated can void the contract if the terms are obviously favorable to the other party.
A)True
B)False
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Chapter 13: Voluntary Consent
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Q1) Genie.com initiates an online dating service.To attract subscribers and encourage participation,Genie.com creates and posts profiles of fictitious persons and exaggerated profiles of actual users.Fooled by the false profiles,Ham buys a subscription.He is most likely a victim of
A)undue influence.
B)fraud.
C)mistake.
D)nothing.
Q2) Hillside Homes,Inc.,and Ideal Builders,Inc.,enter into a construction contract that includes six pages of detailed calculations.Later Hillside,whose project manager compiled the figures,discovers that some numbers were multiplied incorrectly,but Ideal refuses to make changes.A court would most likely
A)allow the parties to rescind the contract.
B)award damages to Hillside for the mistakes.
C)award damages to Ideal for the mistakes.
D)enforce the contract without requiring changes.
Q3) Only a mistake in value will make a contract voidable.
A)True
B)False
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Page 15
Chapter 14: The Statute of Fraudswriting Requirement
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Q1) Beta Grocers orders by phone twenty cartons of canned beets from Carotene Food Packers,Inc.After ten cartons are delivered and accepted,Beta repudiates the contract.Carotene can enforce the contract to
A)any extent because the order was placed orally.
B)no extent because the order was placed orally.
C)the extent of the ten accepted cartons.
D)the extent of the twenty ordered cartons.
Q2) A prenuptial agreement does not have to be in writing to be enforceable.
A)True
B)False
Q3) Pablo and Melia enter into an oral contract for Pablo's sale to Melia of a laptop computer for $400.Assuming the terms can be proved,the contract is enforceable by A)the seller or the buyer.
B)the manufacturer of the laptop.
C)any third party who overheard the parties making the agreement.
D)none of the choices.
Q4) Under the Statute of Frauds,oral contracts are void.
A)True B)False
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Chapter 15: Performance and Discharge
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Q1) Quito contracts with Rewind Graphix,Inc.,to pay $5,000 for its work on the animated film "Song." After Rewind performs,they sign an accord,in which Quito promises to pay $4,000 within ten days instead of $5,000 later.But Quito does not pay.Rewind can sue Quito
A)under no circumstances.
B)on the accord only.
C)on the accord or the original obligation.
D)on the original obligation only.
Q2) A discharge in bankruptcy will ordinarily bar enforcement of most of a debtor's contracts by creditors.
A)True
B)False
Q3) An intentional variation from a contract prevents substantial performance.
A)True
B)False
Q4) A novation revokes and discharges a prior contract.
A)True
B)False
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Chapter 16: Breach and Remedies
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Q1) Damages are designed to punish a breaching party and deter others from similar conduct.
A)True
B)False
Q2) Reformation allows a court to rewrite a contract to reflect the parties' true intentions.
A)True
B)False
Q3) On a contract breach,the nonbreaching party's only option is to refuse to perform.
A)True
B)False
Q4) Grady enters into a contract to buy 440 acres from Hollis to expand Grady's ranch.If Hollis breaches the contract,Grady's normal remedy would be A)damages.
B)quasi contract.
C)reformation.
D)specific performance.
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Chapter 17: Third Party Rights
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Q1) The vesting of contractual rights in a third party will always prevent the original parties to the contract from modifying it.
A)True
B)False
Q2) Oral assignments are prohibited.
A)True
B)False
Q3) If a contract does not require that performance be rendered directly to a third party,the third party will be considered an intended beneficiary.
A)True
B)False
Q4) No special form is required to create a delegation of duties.
A)True
B)False
Q5) An incidental beneficiary can sue directly to enforce a promisor's promise. A)True
B)False
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Page 19
Chapter 18: The Formation of Sales and Lease Contracts
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Q1) Kelly offers to buy 1,000 gallons of oil from Jim for fifty cents per gallon.Jim believes Kelly offers $1 per gallon and orally agrees to the sale.When the parties later dispute the price in court,Jim's claim of $1 and Kelly's testimony that she offered fifty cents
A)supports an enforceable contract for a price of $1 per gallon.
B)supports an enforceable contract for a price of seventy-five cents per gallon.
C)supports an enforceable contract for a price of fifty cents per gallon.
D)prevents the enforcement of any contract between these parties.
Q2) Better Sales,Inc.,is the offeror and City Goods Corporation is the offeree under a unilateral sales contract in which Design Products Company is also interested.Better is not notified of City's performance within a reasonable time.Better
A)may treat the offer as having lapsed.
B)must assume that City has started to perform.
C)must contact City.
D)must contract with Design.
Q3) Under the UCC,a merchant who sells one type of good will be considered a merchant for any other type of good that he or she may sell.
A)True
B)False
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Chapter 19: Title and Risk of Loss
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Q1) When a document of title is required,title passes to a buyer when and where the document is delivered.
A)True
B)False
Q2) A bill of lading serves as a contract for the transportation of goods.
A)True
B)False
Q3) Entrusting goods to a merchant who deals in goods of the kind gives the merchant the power to transfer all rights to a buyer in the ordinary course of business.
A)True
B)False
Q4) Timekeep Watches,Inc.,ships an assortment of timepieces to Unique Jewelers,Inc.,which agrees to pay for items that are not returned within six months.This is A)a bailment.
B)a consignment.
C)a sale on approval.
D)a sale or return.
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Chapter 20: Performance Breach of Sales Lease Contracts
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Q1) A buyer who rightfully rejects nonconforming goods can resell the goods and keep the proceeds.
A)True
B)False
Q2) Relax Chair Company contracts to deliver 100 chairs to Stuffy Furnishings Store on May 1 for which Stuffy agrees to pay.Relax tells Stuffy on April 15 that delivery will be delayed until June 1.Stuffy may
A)await performance,sue Relax,or suspend its own performance.
B)only await Relax's performance for a commercially reasonable time.
C)only sue Relax for breach of contract.
D)only suspend its own performance.
Q3) If a nonconforming installment substantially impairs the value of a whole contract,the buyer can treat the entire contract as having been breached. A)True B)False
Q4) The doctrine of commercial impracticability only extends to problems that could have been foreseen.
A)True
B)False
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Chapter 21: Warranties and Product Liability
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Q1) Strict liability applies to the suppliers of component parts.
A)True
B)False
Q2) Imported Carpets Store and Jill enter into a contract for a sale of an Oriental rug.Imported Carpets,a merchant who deals in goods of the kind sold,generally describes the goods,details technical specifications,and shows a sample.Under the UCC,if these are inconsistent
A)the general description displaces the sample.
B)the general description displaces the technical specifications.
C)the sample takes precedence over the general description.
D)the sample takes precedence over the technical specifications.
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) In sales law,a warranty is an assurance by one party of the existence of a fact on which the other party can rely.
A)True
B)False
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Chapter 22: Negotiable Instruments: Transferability Liability
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Q1) If a note is payable in thirty days,payment is due by midnight on the thirtieth day.
A)True
B)False
Q2) Presentment warranties protect the person who presents an instrument for payment.
A)True
B)False
Q3) To be negotiable,an instrument must be signed in the lower right-hand corner.
A)True
B)False
Q4) Quincy draws a check payable to "Replay Stadium" to buy two season tickets to the next year's State College football games.This instrument is A)a bearer instrument.
B)an order instrument.
C)valid but nonnegotiable.
D)void.
Q5) A blank indorsement specifies no particular indorsee. A)True B)False
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Chapter 23: Checks and Banking in the Digital Age
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Q1) The bank on which a check is drawn is the payor bank.
A)True
B)False
Q2) Dhani signs a check "pay to the order of Etan" drawn on Dhani's account in First State Bank and dates the check "May 1." Etan presents the check to the bank for payment on December 15.This is
A)a dishonored check.
B)an overdraft.
C)a postdated check.
D)a stale check.
Q3) Elmo pays First National Bank $1,000 plus a service fee to draw a check on itself made payable to Go Delivery Service.This is
A)a cashier's check.
B)a certified check.
C)a trade acceptance.
D)a traveler's check.
Q4) Gaining unauthorized access to an electronic fund transfer system is a felony.
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) Lena borrows from Mac and Nicol,using the same collateral for both loans.Only Nicol has a perfected security interest.Lena defaults on both loans.The party with first rights to the collateral is
A)Lena.
B)Mac and Nicol,in proportion to Lena's debt to each.
C)Mac only.
D)Nicol only.
Q3) Idle Investments,Inc.,and Harbor Bank are secured parties with security interests in property owned by GR8 Manufacturing Corporation.Priority between these security interests is generally determined by A)the amount of the claim.
B)the custom in the trade.
C)the time of perfection.
D)the time the security agreement was signed.
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26
Chapter 25: Other Creditors Remedies and Suretyship
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Q1) Dolf borrows money from Elin.Dolf defaults.To use attachment as a remedy,Elin must first
A)file a suit against Dolf.
B)lose a suit against Dolf.
C)succeed in a suit against Dolf.
D)take possession of Dolf's property.
Q2) A creditor with a mechanic's lien on property can sell the property to satisfy the debt. A)True
B)False
Q3) A court may not order a bank,as a result of a garnishment proceeding,to turn over funds belonging to a debtor to pay a debt.
A)True
B)False
Q4) A mortgagee can obtain a judgment against a mortgagor to cover the difference between the amount of a mortgage debt and the proceeds of a foreclosure sale.
A)True
B)False
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Chapter 26: Bankruptcy
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Q1) Nano Games Corporation's creditors agree to a workout with the firm.This is
A)an agreement to pay a debt dischargeable in bankruptcy.
B)an accountant's summary of a debtor's financial situation.
C)a privately negotiated adjustment of creditor-debtor relations.
D)a reorganization of corporate debts and debtors.
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) A bankruptcy estate consists of all the debtor's interests in property currently held,wherever located.
A)True
B)False
Q4) Refer to Fact Pattern 26-2.The highest priority with respect to payment of claims belongs to
A)Kay and Music,Inc.
B)Jazz Dance Studio.
C)Lora.
D)unnamed general creditors.
Page 28
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Chapter 27: International Law in a Global Economy
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Q1) All nations have restrictions on imports.
A)True
B)False
Q2) The doctrine of sovereign immunity can immunize a foreign nation from the jurisdiction of U.S.courts.
A)True
B)False
Q3) A foreign citizen can bring a civil suit in a U.S.court for a violation of a treaty of the United States.
A)True
B)False
Q4) The government of the United States and the governments of other nations have the power to enforce their respective national laws within their borders.The power to enforce international law within the borders of all nations rests with
A)no court or international organization.
B)the European Union.
C)the International Court of Justice.
D)the United Nations General Assembly.
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Chapter 28: Agency Relationships in Business
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Q1) Bubbly Soda Company hires Carlo to work on Bubbly's shipping dock,checking outgoing loads and dispatching Bubbly's drivers.With respect to Carlo,Bubbly is most likely
A)an employee.
B)an agent.
C)an independent contractor.
D)a principal.
Q2) A fiduciary relationship allows parties to avoid obligations without liability.
A)True
B)False
Q3) Jock hires Kym to act as his agent to purchase Lifetime Gym & Fitness,Inc.Jock tells Kym to reveal that she is buying the firm on behalf of a third party and to tell Lifetime's seller who that third party is.Jock is
A)a disclosed principal.
B)an apparent principal.
C)an undisclosed principal.
D)a partially disclosed principal.
Q4) Employees who deal with third parties are agents of their employers. A)True
B)False
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Chapter 29: Employment, immigration, and Labor Law
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Q1) Emma,Frick,Glenda,and Huey are employees of different-sized employers in different industries.A minimum wage must be paid to employees in
A)all industries.
B)covered industries only.
C)no industries.
D)small-business industries only.
Q2) Employer who willfully violates safety regulations can be prosecuted under state criminal laws.
A)True
B)False
Q3) An employer may not hire substitute workers to replace strikers.
A)True
B)False
Q4) Borealis Power Company is subject to mandatory workers' compensation laws in the states in which it does business.Chad and Dex work for Borealis as part of a crew that travels to remote locations to repair downed power lines and other damaged equipment.At a distant site,Chad is injured in an accident that is entirely Dex's fault.Chad files a claim for workers' compensation.Should the claim be granted What would be Borealis's best defense against it
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Chapter 30: Employment Discrimination
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Q1) To establish a prima facie case of discrimination under the Americans with Disabilities Act of 1990,a plaintiff must show that discriminatory intent motivated an employer's decision.
A)True
B)False
Q2) United Industrial Corporation gives preferential treatment in hiring and promotion to the members of all protected classes.This treatment results in discrimination against members of the majority.This is
A)a bona fide occupational practice.
B)a business necessity.
C)constructive discharge.
D)reverse discrimination.
Q3) An employer who discovers an employee's misconduct after discharging the employee may have a good defense to an employment discrimination suit.
A)True
B)False
Q4) Under current law,an employer cannot adopt an affirmative action plan.
A)True
B)False
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Chapter 31: Sole Proprietorships and Private Franchises
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Q1) A sole proprietorship's income is taxed as the owner's personal income.
A)True
B)False
Q2) Cal sells "DownSize," a weight-reduction program,from a Web site,in competition with Eat-Less Inc.'s product "Fit 'n Trim." Eat-Less files a suit against Cal,alleging in part that he is a sole proprietor,but his enterprise should be deemed a different form of business.Cal's enterprise should most likely be considered
A)a corporation because DownSize is sold online.
B)a franchisee because DownSize is sold in competition to Fit 'n Trim.
C)a sole proprietorship because Cal is a sole proprietor.
D)no form of business entity because Cal has no formal organization.
Q3) One of the advantages of a sole proprietorship is that the owner is not liable for the actions of the business.
A)True
B)False
Q4) The termination provision of a franchise contract is usually more favorable to the franchisor.
A)True B)False
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Chapter 32: All Forms of Partnerships
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Q1) On a partner's dissociation,his or her interest in the partnership must be purchased.
A)True
B)False
Q2) For most purposes,the law recognizes a partnership as an aggregate of its members.
A)True
B)False
Q3) 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
Q4) Mabel and Nicol do business as One World Realty.In acting on the firm's behalf in a deal with Property Acquisition Company,Mabel fails to account for the profit.To her firm,Mabel is
A)liable for breach of the duty of care.
B)liable for breach of the duty of economic sense.
C)liable for breach of the duty of loyalty.
D)not liable.
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34
Chapter 33: Limited Liability Companies Special Business
Forms
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Q1) A business trust is created by a written trust agreement.
A)True
B)False
Q2) Flip is a member of Great States Trucking LLC.Flip's relationship to Great States ends,but the firm continues to do business.This is A)dissociation.
B)dissolution.
C)winding up.
D)wrongful.
Q3) For federal jurisdictional purposes,a limited liability company can choose to be treated like a corporation.
A)True
B)False
Q4) Loni,Michel,and Nita are investors in Oceanic Exploration,a business trust.A business trust is managed by its A)directors and officers.
B)general partners.
C)managing members.
D)trustees.
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Chapter 34: Corporate Formation and Financing
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Q1) Convenience Mart,Inc.,is a close corporation.Convenience Mart is
A)eligible to make public offerings of securities.
B)exempt from filing a certificate of incorporation.
C)generally allowed to restrict the transfer of its stock.
D)taxed in the same manner as a partnership.
Q2) Like the bylaws of other corporations,the bylaws of Retail Sales,Inc.,
A)establish the operating name of the corporation.
B)establish the value and classes of corporate stock.
C)were adopted at its first organizational meeting.
D)were submitted for approval to the public official in charge.
Q3) Common stock provides a proportionate interest in the corporation with regard to control.
A)True
B)False
Q4) A corporation has perpetual existence in most states unless the articles of incorporation state otherwise.
A)True
B)False
Q5) Incredible eSales Corporation is a new Internet business.How can Incredible eSales obtain capital to finance its operations
Page 36
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Chapter 35: Corporate Directors,officers, Shareholders
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Q1) Shareholder voting agreements are usually held to be invalid and unenforceable.
A)True
B)False
Q2) Niche Stores,Inc.,must hold a shareholders' meeting
A)once a month.
B)once a year.
C)once every two years.
D)only when it is called by the board of directors.
Q3) Directors are rarely compensated,but when they are,they cannot set their own compensation.
A)True
B)False
Q4) Kelly transfers shares of stock that she owns in Lone Starz Company to Max.A shareholders' meeting takes place before Max's ownership is entered in Lone Starz's stock book.A vote at the meeting can be cast by
A)Kelly and Max.
B)Kelly only.
C)Max only.
D)neither Kelly nor Max.
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Chapter 36: Corporate Acquisitions, takeovers, Termination
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Q1) The term for the legal death of the artificial "person" of Skytop Services,Inc.,or any other corporation,is
A)surviving corporation.
B)dissolution.
C)takeover.
D)winding up.
Q2) Stratified Industries,Inc.,increases its holdings,making tender offers in many states.These offers are subject to A)federal securities laws only.
B)state antitakeover statutes only.
C)neither state statutes nor federal laws.
D)state antitakeover statutes and federal securities laws.
Q3) A corporation that is selling all of its assets must obtain approval only from its board of directors.
A)True
B)False
Q4) Dissolution is the legal death of the artificial "person" of a corporation.
A)True
B)False
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Chapter 37: Investor Protection,insider Trading, Corp Gov
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Q1) SEC Rule 10b-5 prohibits the commission of fraud in connection with the purchase or sale of any security
A)True
B)False
Q2) Begin Anew Enterprise,Inc.,completes its registration process and issues a free-writing prospectus.This tells prospective investors
A)about investing freely.
B)how to write their own prospectus.
C)that they can "freely write their own ticket" to buy Begin's securities.
D)that they may obtain the prospectus at the SEC's Web site.
Q3) A free-writing prospectus may be used before the Securities and Exchange Commission completes its review of a related registration statement.
A)True B)False
Q4) Any corporation with more than $10 million in assets and five hundred or more shareholders must register their securities with the Securities and Exchange Commission.
A)True
B)False
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Chapter 38: Administrative Law
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Q1) Under the exhaustion doctrine,a party must feel "exhausted" about an administrative action or regulation to challenge it in court.
A)True
B)False
Q2) Truck Transport Company is subject to a decision by the National Labor Relations Board.Truck 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) 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
Q4) Only experts can submit comments on a proposed administrative rule.
A)True
B)False
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Chapter 39: Promoting Competition
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Q1) To violate antitrust law,an activity must involve two or more persons.
A)True
B)False
Q2) North Mining Company and South Excavation Company agree to abide by the decisions of East Coast Financial Corporation as to their respective levels of production,markets,and prices,effectively reducing competition and increasing profits.This is most likely
A)a common,legal,time-honored type of business arrangement.
B)an illegal restraint on trade.
C)an innovative,legally efficient approach to doing business.
D)an outdated,but legal business trust.
Q3) To acquire monopoly power in its market,Perfect Plastics,Inc.,sets its prices lower than its competitors.Under the Sherman Act,this is
A)a per se violation.
B)a violation if its competitors make similar deals.
C)a violation if it thereby acquires monopoly power.
D)not a violation.
Q4) A price-fixing agreement has the potential to lessen competition.
A)True
B)False
Page 41
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Chapter 40: Consumer Law
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Q1) In the ordinary course of business,Xtra Charge Company sells goods to Yvon and other consumers on credit under installment sales contracts that typically require at least one year of monthly payments.Xtra does not disclose all of the credit terms to its customers.This practice is most likely to result in
A)a cease-and-desist order.
B)a fine.
C)no sanctions.
D)rescission of the contracts.
Q2) Quik Collection Agency calls Pat several times a day,and sometimes in the middle of the night,about an overdue bill that Regal Sporting Goods turned over to Quik for collection.This is a violation of
A)no federal law.
B)the Fair and Accurate Credit Transactions Act.
C)the Fair Debt Collection Practices Act.
D)the Truth-in-Lending Act.
Q3) Credit can be denied solely on the basis of marital status.
A)True
B)False
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Chapter 41: Environmental Law
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Q1) Bread & Pastries Baking Company operates a commercial baking plant-a "major source"-that emits hazardous air pollutants for which the Environmental Protection Agency has set maximum levels of emission.The plant does not use any equipment to reduce its emissions.Under the Clean Air Act,this is most likely
A)a violation.
B)not a violation because baking is not considered to be polluting.
C)not a violation because the plant does not use any equipment.
D)not a violation because the plant is not a mobile source.
Q2) Injured individuals can rely on the common law to obtain damages and injunctions against business polluters.
A)True
B)False
Q3) Refer to Fact Pattern 41-1.The court is most likely to award Sid damages
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.
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Chapter 42: Liability of Accountants Other Professionals
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Q1) Boris is an accountant.Under the Sarbanes-Oxley Act of 2002,the degree of government oversight over the public accounting practices of Boris and other accountants was
A)decreased.
B)increased.
C)new.
D)unchanged.
Q2) The liability of professionals is based solely on common law.
A)True
B)False
Q3) A client's negligence may constitute a defense to a charge of negligence against an accountant.
A)True
B)False
Q4) Under the Restatement (Second)of Torts,accountants can be held liable for negligence to any third parties.
A)True
B)False
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Chapter 43: Personal Property and Bailments
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Q1) Ben allows Cody to store his trailer on Ben's property for $20 a month while Cody is out of town.Later,Ben notices rainwater collecting in the trailer and covers it with a tarp at a cost of $40.This cost is most likely borne by A)Ben and Cody.
B)Ben only.
C)Cody only.
D)neither Ben nor Cody.
Q2) Nero and Olav each buy certain quantities of oil to sell to Petro Refinery,and agree to share storage costs until Petro can take delivery.The oil is commingled so that Nero's oil cannot be distinguished from Olav's.This is A)accession.
B)confusion.
C)conversion.
D)irresolution.
Q3) A finder acquires title to lost property good against the whole world,including the original owner.
A)True
B)False
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Chapter 44: Real Property and Landlord-Tenant Law
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Q1) Eminent domain is the right of an owner in fee simple absolute to use his or her property in whatever way he or she wishes.
A)True
B)False
Q2) Life tenants are persons who share ownership rights simultaneously.
A)True
B)False
Q3) A warranty deed provides the most protection against defects of title. A)True
B)False
Q4) Mix-It Concrete Company has the right to enter Nim's land and remove the rock from Nim's quarry.This is A)a fee simple absolute.
B)a license.
C)an easement.
D)a profit.
Q5) Generally,contract doctrines apply to a landlord-tenant relationship. A)True
B)False
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Chapter 45: Insurance,wills,and Trusts
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Q1) Holly obtains an insurance policy from Inviolable Insurance Corporation (IIC).IIC may cancel,or refuse to renew,the policy because of A)Holly's appearance as a witness against IIC.
B)Holly's national origin.
C)Holly's race.
D)none of the choices.
Q2) 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
Q3) In his will,Vigor makes a gift of $10,000 to Wylie.This is A)a general bequest.
B)an abatement.
C)a residuary.
D)a specific devise.
Q4) To "publish" a will means to record it in the appropriate county office.
A)True
B)False
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