Legal Environment of Business
Textbook Exam Questions
Course Introduction
The Legal Environment of Business explores the fundamental principles and frameworks that shape the relationship between business operations and the law. This course introduces students to the structure of the U.S. legal system, the sources and types of law affecting business, and the regulatory landscape governing areas such as contracts, torts, agency, employment, intellectual property, and business organizations. Emphasis is placed on how legal concepts impact managerial decision-making, ethical considerations, and risk management. Through case studies and real-world examples, students gain a practical understanding of how legal issues influence business strategy, operations, and compliance in a dynamic global environment.
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The Legal Environment of Business 13th Edition by Roger E. Meiners
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Chapter 1: Todays Business Environment: Law and Ethics
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Sample Questions
Q1) Which of these issues may impact a company's operations?
A) international issues
B) political issues
C) ethical issues
D) legal issues
E) all of these issues can impact operations
Answer: E
Q2) The legal system is designed to resolve public disputes but private disputes are always resolved informally.
A)True
B)False
Answer: False
Q3) Which of the following statements is true?
A) formal law is respected in all nations
B) the sale of marijuana is illegal worldwide
C) the sale of alcoholic beverages is legal worldwide
D) law imposes structure on society by limiting activities that hurt the "public interest"
E) all of the other choices are correct
Answer: D
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Page 3
Chapter 2: The Court Systems
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Q1) ____ involves the use of the law and the legal process to resolve disputes among individuals, businesses, and governments.
A) civil litigation
B) subject matter jurisdiction
C) territorial jurisdiction
D) concurrent jurisdiction
E) criminal litigation
Answer: A
Q2) The Constitution requires each state court system to have appeals courts and a supreme court.
A)True
B)False
Answer: False
Q3) A suit involving a dispute for $1 million over a contract signed in California under California law with parties from two different states could be tried in federal or California courts using the same law.
A)True
B)False
Answer: True
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Page 4
Chapter 3: Trials and Resolving Disputes
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Q1) Refer to Fact Pattern 3-2. Before arbitrating this disputes, Ellen and James might be wise to attempt:
A) litigation
B) physical violence
C) negotiation
D) reconciliation
E) animation
Answer: C
Q2) When a court orders someone not to do something, this is known as:
A) a reformation
B) an injunction
C) restitution
D) specific compulsion
E) nominal performance
Answer: B
Q3) In most court systems, the close of the pleadings stage comes once the complaint is filed.
A)True
B)False
Answer: False
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Chapter 4: The Constitution: Focus on Application to Business
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Q1) Which of the following is likely to violate the due process clause:
A) laws that do not treat people equally
B) laws that shock the conscience of a court
C) laws that infringe on fundamental liberty interests
D) b and c
E) a, b and c
Q2) The First Amendment provides protection for which of the following kinds of speech?
A) political speech by private citizens
B) political speech by corporations
C) commercial speech by businesses
D) commercial speech by private citizens
E) all of the other choices
Q3) The state of Virginia did not violate the equal protection clause of the Constitution by having an all male military academy because it offered alternative choices for women students.
A)True
B)False
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Page 6
Chapter 5: Criminal Law and Business
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Sample Questions
Q1) Criminal law is:
A) primarily made up of statutes passed by Congress and state legislatures
B) primarily from common law
C) primarily from British law
D) primarily made up of statutes derived from International law
E) primarily made up of laws adapted from civil law
Q2) To be convicted of a crime, it must be shown that the accused in fact committed the illegal act.
A)True
B)False
Q3) If a business receives money that it believes to be "suspicious" it must report the transaction to the relevant government authority.
A)True
B)False
Q4) The Miranda rights include being told that a person being accused of a crime has the right to be represented by counsel.
A)True
B)False
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Chapter 6: Elements of Torts
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Q1) Constitutional privilege applies only to federal judges for statements they make from the bench.
A)True
B)False
Q2) Negligence torts are based on the idea that:
A) we have a duty to conduct ourselves in all situations so as not to create an unreasonable risk of harm or injury to others
B) society owes victims of accidents compensation
C) businesses make more money than individuals and so are financially capable of compensating victims of accidents
D) if business are not held responsible for injuries caused by carelessness they will become even more careless
E) none of the other specific choices
Q3) In Squish La Fish v. Thomco Specialty Products, where a company bought an adhesive that did not work as expected, the appeals court held that there may be a case of negligent misrepresentation by the seller.
A)True
B)False
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8
Chapter 7: Business Torts and Product Liability
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Q1) The sophisticated user defense:
A) relieves a manufacturer of liability for failing to warn of a product's characteristics or dangers when "the end user does not know of a product's dangers"
B) does not relieve a manufacturer of liability for failing to warn of a product's characteristics or dangers when "the end user knows or reasonably should know of a product's dangers"
C) limits damage awards to less than $1 million when "the end user knows or reasonably should know of a product's dangers"
D) limits damage awards to less than $100,000 when "the end user knows or reasonably should know of a product's dangers"
E) none of the other choices are correct
Q2) A ____ is, legally, a manufacturer's assurance that a product will meet certain quality and performance standards.
A) certificate of quality
B) certificate of use
C) notarized promise
D) pledge
E) none of the other choices are correct
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Chapter 8: Real and Personal Property
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Q1) Property is:
A) something inherited from an ancestor
B) the legally protected expectation of being able to use a thing for one's advantage
C) always a physical object that can be sold or given to another person
D) never a physical object
E) something universally recognized as subject to unrestricted trading
Q2) Which of the following is an example of a covenant:
A) only single-family homes allowed in a sub-division
B) only pastel paint colors may be used on houses in a sub-division
C) no houses in a sub-division may have dog kennels
D) no houses in a sub-division may have fences
E) all of the other specific choices are correct
Q3) A private nuisance involves:
A) a reasonable interference with the enjoyment of land
B) a substantial interference with the use of land
C) an unreasonable interference with the enjoyment of land
D) either b or c
E) violation of a statute prohibiting bad acts
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Chapter 9: Intellectual Property
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Sample Questions
Q1) Fair use depends if the copying is for commercial or educational use.
A)True
B)False
Q2) Patents may be granted for compositions of matter.
A)True
B)False
Q3) The Lanham Act does not protect:
A) trademarks
B) trade names
C) copyrights
D) all of the other specific choices are correct
E) none of the other specific choices are correct
Q4) Which of the following is an example of intangible property:
A) computers
B) furniture
C) land
D) patents
E) all of the other specific choices are correct
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Chapter 10: Contracts
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Sample Questions
Q1) 16-year-old Green bought a car that he later wanted to return for a full refund. If the dealer refuses a court is likely to hold that:
A) contracts do not permit refunds, so the sale was final
B) as a minor Green could disaffirm the contract, receive a refund and receive damages for fraud against a minor
C) as a minor Green cannot disaffirm the contract
D) as a minor he could disaffirm the contract; his parents would have to take responsibility for the contract
E) none of the other choices
Q2) Ford promises to deliver 100,000 new cars to Hertz by June 1 for its rental fleet. Ford only delivers 98,300 of the cars by June 1 and promises the rest soon. Ford has
A) breached the contract and Hertz may reject all the cars
B) engaged in anticipatory breach and Hertz may reject all the cars
C) engaged in rescission and Hertz may reject all the cars
D) violated a condition precedent and Hertz may reject all the cars
E) none of the other choices
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Chapter 11: Domestic and International Sales
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Q1) With respect to parol evidence, the common law of contracts and Article 2 are the same.
A)True
B)False
Q2) Under the UCC, the seller's basic obligation includes being concerned with:
A) the appropriate manner of delivery
B) the timeliness of delivery
C) the place of delivery
D) the quality of the goods provided
E) all of the other specific choices are correct
Q3) The buyer's payment for the goods under Article 2 is due when the goods leave the seller's facilities.
A)True
B)False
Q4) An item is movable if:
A) it can be carried from one location to another
B) it can be cannot be moved
C) it is a service that can be performed anywhere
D) it can be easily reproduced
E) it can be bought in any state
Page 13
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Chapter 12: Business Organizations
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Q1) Corporations are "persons" that enjoy many of the same rights and privileges accorded real persons.
A)True
B)False
Q2) Certificates of limited partnership that are filed with the state must state what the plan is in case the partnership must be terminated.
A)True
B)False
Q3) In In re 1545 Ocean Avenue, LLC, when the members of an LLC got into a dispute the party wishing to keep the entity in existence had to buy out the unhappy member.
A)True
B)False
Q4) Many states allow partnerships to be treated as legal entities for certain purposes. A)True
B)False
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Page 14
Chapter 13: Negotiable Instruments, Credit, and Bankruptcy
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Sample Questions
Q1) Billy wants to borrow $10,000 to start a male belly dancing business. Creditors are not anxious to lend him the funds. Billy convinces Gary to back-up the credit he gets from a bank. Gary is:
A) the principal
B) the grantor
C) the testator
D) the detainor
E) none of the other choices
Q2) To be ordinary holder of a negotiable instrument, the holder must give value for it, take it without knowledge that it is overdue or defective, and must take it in good faith.
A)True
B)False
Q3) The debtor on a mortgage is known as:
A) the bank
B) the debtee
C) the mortgagor
D) the mortgagee
E) none of the other choices
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15
Chapter 14: Agency and the Employment Relationship
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Q1) Cook instructs Chan, her agent, to buy a van for her business. Chan contracts for a van with a third party, who knows that Chan is an agent. If Cook does not like the van and refuses to pay for it, the seller may sue:
A) Chan because she did not have authority to enter into a final contract without permission
B) Cook because Chan has actual authority to make a contract on behalf of her principal
C) Cook if Chan signed the contract expressly on behalf of Cook; that is, the principal was revealed before the contract was made
D) Cook but only if Chan has apparent authority to enter into the contract
E) no one; there was no valid contract
Q2) An implied ratification takes place when the principal behaves as if she has the intention of ratifying an unauthorized agreement.
A)True
B)False
Q3) A general power of attorney is usually given to a special agent.
A)True
B)False
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Page 16
Chapter 15: Employment and Labor Regulations
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Q1) The Landrum-Griffin Act provides which of the following?
A) a Bill of Rights for employers
B) states the right to pass laws that prohibit agency shops
C) penalties for union officials who abuse the powers of their offices
D) prevents federal courts from issuing injunctions to prevent orderly labor disputes
E) all of the other choices
Q2) The result of the decision from the Supreme Court's Chicago Teachers Union and Beck decisions has been that:
A) unions no longer spend agency fees on political activities
B) unions generally ignore the rulings and they are hard to enforce
C) non-union members no longer have to pay agency fees
D) Congress repealed the Taft-Hartley Act
E) none of the other choices
Q3) Under federal law, commercial truck drivers must be tested for drug and alcohol use if they are in an accident.
A)True
B)False
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Page 17
Chapter 16: Employment Discrimination
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Q1) An employer cannot be found liable for sexual discrimination based on the content of e-mails that employees send each other.
A)True
B)False
Q2) A(n) ____ is a deliberate effort by an employer to remedy discriminatory practices in the hiring, training, and promotion of protected class members, when a particular class is underrepresented in the employer's workforce.
A) equal employment action program
B) affirmative action program
C) fair employment action program
D) anti-discriminatory program
E) compensatory employment program
Q3) A person who took a job to work on utility poles and then discovered he was afraid to climb poles would be protected as a disabled person who could not be fired.
A)True
B)False
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Chapter 17: The Regulatory Process
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Q1) Which classification of administrative rules are usually the most important:
A) interpretative
B) agency
C) procedural
D) substantive
E) none of the other choices are correct
Q2) Substantive rules issued by administrative agencies have the same force and effect of law as Congressional statutes.
A)True
B)False
Q3) Presidents use ____ to instruct administrative agencies to undertake certain tasks.
A) executive orders
B) executive suggestions
C) executive budget cuts
D) executive writings
E) executive mandates
Q4) One agency created in the 1930s was the Federal Communications Commission.
A)True
B)False
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Chapter 18: Securities Regulation
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Sample Questions
Q1) Refer to Fact Pattern 21-1. Suppose Bettina took Rob's advice and called her offerings "brownie squares" rather than a stock. The SEC decided to sue Bettina for failure to follow federal securities laws. To prove that the "brownie squares" were securities for purposes of federal regulation, the SEC must show that:
A) the investors expected to make a profit
B) the investors actually invested money
C) the investors controlled the work that makes Bettina a success or failure
D) the investors expected to make a profit and the investors controlled the work that makes Bettina a success or failure
E) the investors expected to make a profit and the investors actually invested money
Q2) At least 40 percent of the directors of investment companies must be outside directors with no business relationship with the company.
A)True
B)False
Q3) Investment advisers may not, by law, be the managers of an investment company.
A)True
B)False
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Page 20
Chapter 19: Consumer Protection
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Q1) The Food Quality Protection Act of 1996 states that food should have a "de minimus" chance of harming consumers.
A)True
B)False
Q2) Under the FTC's advertising substantiation program, if any consumers will be misled by an advertisement, it must be modified.
A)True
B)False
Q3) Which of the following was a factor in triggering the passage of the Pure Food and Drug Act:
A) studies by a government chemist showed some food preservatives were harmful to humans
B) publication of Rachel Carson's book Silent Spring
C) deaths WWI from impure food
D) deaths in WWII from impure drugs
E) all of the other specific choices are correct
Q4) The British Office of Fair Trading operates somewhat like the FTC in the U.S.
A)True
B)False
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Chapter 20: Antitrust Law
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Q1) Acme produces hamburger at a processing plant. Stores send trucks to pick up the meat. Prince, a large chain of grocery stores, tells Acme it will buy its hamburger if Acme will charge it 5% less than what the grocery stores pay. Acme sells the meat to Prince for less. What violation of the antitrust law may have occurred?
A) illegal resale price maintenance
B) illegal exclusive dealing
C) illegal price discrimination
D) illegal boycott
E) none of the other choices
Q2) Horizontal market division is often held to violate antitrust law because it:
A) eliminates competition among firms competing in a national market
B) increases efficiency, but raises prices
C) leads to price fixing
D) gives consumers more choice
E) decreases exports
Q3) Price fixing is generally considered to be the worst violation of antitrust law.
A)True
B)False
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22
Chapter 21: Environmental Law
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Q1) In Babbitt v. Sweet Home, involving logging of areas where the spotted owl nested, the Supreme Court held that the:
A) northern spotted owl was no longer an endangered species
B) habitat protection is a key part of the specie protection
C) Secretary of Interior overstepped his authority in defining harm as habitat destruction
D) authority to regulate the habitat of the northern spotted owl belonged to the EPA, not the Department of Interior
E) northern spotted owl's habitat did not satisfy cost-benefit calculations
Q2) In pollution cases, strict liability for abnormally dangerous activities applies to which of the following:
A) businesses that produce or emit toxic pollutants
B) businesses that import raw materials from China
C) businesses that sell food
D) businesses with more than 5 employees
E) business with more than $10,000 in government contracts
Q3) Firms that emit waste water into water bodies must have a discharge permit.
A)True
B)False
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Chapter 22: The International Legal Environment of Business
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Q1) Australian immigration policy encourages immigration by highly educated people.
A)True
B)False
Q2) A(n) ____ may not be withdrawn.
A) nonbinding letter of credit
B) revocable letter of credit
C) conditional letter of credit
D) unconditional letter of credit
E) none of the other specific choices are correct
Q3) The Foreign Corrupt Practices Act prohibits companies from importing foreign goods that might corrupt the morals of Americans.
A)True
B)False
Q4) The ____ allows a court to give up its right to jurisdiction over foreign enterprises or countries.
A) doctrine of neutrality
B) doctrine of litigation
C) doctrine of noninvolvement
D) doctrine of arbitration
E) none of the other choices are correct
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