Regulation of Business Test Questions
Course Introduction
This course explores the complex relationship between government regulation and business activity. Students will examine the rationale, methods, and consequences of regulatory policies in areas such as competition, consumer protection, environmental standards, labor, and corporate governance. Through analysis of legal frameworks and real-world case studies, the course highlights how businesses respond to regulatory challenges and the ethical considerations involved in building compliance programs. Emphasis is placed on understanding both the domestic and international regulatory environments that impact business operations.
Recommended Textbook
Business Law and the Legal Environment Standard Edition 8th Edition by Jeffrey
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Page 2
F. Beatty
Chapter 1: Introduction to Law
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Q1) Describe the doctrine of precedent and its application to common law.
Answer: The doctrine of precedent,which developed gradually over centuries,requires that judges decide current cases based on previous rulings.This vital principle is at the heart of American common law.Precedent ensures predictability.The accumulation of precedent,based on case after case,makes up the common law.
Q2) Which is an example of a statute?
A)President Donald Trump issues an executive order banning the use of federal funds for abortion.
B)A North Dakota judge issues an injunction prohibiting a man from contacting his ex-wife.
C)The Ohio legislature passes a law requiring all bicycle riders to wear a helmet.
D)The Federal Communications Commission instructs all radio stations to refrain from broadcasting "indecent" programming during daylight hours.
Answer: C
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3
Chapter 2: Ethics and Corporate Social Responsibility
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Q1) Generally speaking,managers feel better about themselves when they behave ethically.
A)True
B)False
Answer: True
Q2) Research indicates that consumers are willing to pay more for a product that they believe to be ethically produced.
A)True
B)False
Answer: True
Q3) According to Immanuel Kant,the truth should be told,no matter the outcome.This is the idea behind what he called
A)moral universalism.
B)the categorical imperative.
C)moral relativism.
D)the veil of ignorance.
Answer: B
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Chapter 3: International Law
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Q1) The fundamental principle of international law is the notion that each government has the absolute authority to rule its people and its territory.
A)True
B)False
Answer: True
Q2) The Australian government has opened a for-profit tourist information center in New York City.If a dispute arises over the lease of the storefront,may the landlord sue the Australian government in the United States courts?
A)Yes,because the Australian government was engaged in a commercial activity.
B)No,because the Foreign Sovereign Immunities Act forbids U.S.courts from hearing any case (without exception)that involves a foreign government.
C)No,because the only way the Australian government can be sued is if it signed a written waiver of immunity.
D)Yes,because the Australian government violated international law.
Answer: A
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Chapter 4:
Common Law, Statutory Law, and Administrative Law
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Q1) The doctrine of stare decisis,though vital to the creation of the common law when this country was settled,is not important to our modern,complex society.
A)True
B)False
Q2) The Consumer Product Safety Commission (CPSC)is an independent administrative agency.Which statement is correct about the chairperson?
A)The chairperson serves at the whim of the President and can be fired at any time.
B)The chairperson can only be fired by the President for good cause.
C)The chairperson cannot be fired by the President since the CPSC is an independent agency.
D)The chairperson has a lifetime appointment and cannot be fired.
Q3) Discuss the four most important limitations on the power of federal administrative agencies.
Q4) Statutory law is to legislative bodies as common law is to A)rulemaking.
B)agencies.
C)courts.
D)administrative regulations.
Page 6
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Chapter 5: Constitutional Law
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Q1) Midori owned a home in Lexington,Kentucky.The city wanted her property to build a parking garage as part of a redevelopment.Even though Midori did not want to move,the city took her house (and provided her with compensation)through the power of A)due process.
B)eminent domain.
C)the incorporation doctrine.
D)the Supremacy Clause.
Q2) Which of the following limitations does NOT apply to the government in civil proceedings to take a person's liberty or property?
A)Procedural Due Process
B)The Takings Clause
C)Substantive Due Process
D)The Equal Protection Clause
Q3) The United States v.Lopez case demonstrates which of the following?
A)There are no limitations on the federal government's power pursuant to the Interstate Commerce Clause.
B)The states have extensive power to regulate interstate commerce.
C)There are limitations on federal power.
D)Gun ownership cannot be regulated.
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Page 7
Chapter 6: Dispute Resolution
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Q1) Define discovery,and identify and explain five of the most important forms of discovery.
Q2) Emails and their attachments are not subject to pretrial discovery.
A)True
B)False
Q3) Summary judgment is appropriate when there are no essential facts in dispute.
A)True
B)False
Q4) What is the primary trial court in the federal system?
A)Municipal Court
B)U.S.Supreme Court
C)U.S.Claims Court
D)U.S.District Court
Q5) Which of the following is NOT an example of a trial court of limited jurisdiction?
A)A probate court
B)A juvenile court
C)A small claims court
D)A general civil division court
Q6) Briefly describe the process of jury selection.
Page 8
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Chapter 7: Crime
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Q1) Which of the following makes it illegal for U.S.companies and citizens to bribe foreign officials to influence a governmental decision?
A)OSHA
B)RICO
C)CFAA
D)FCPA
Q2) Although RICO was passed to prevent gangsters from taking money they earned illegally and investing it in legitimate businesses,it is now often used against businesspeople who break the law.
A)True
B)False
Q3) Dan has a site on eBay where he sells various items.To get the most money for the items he sells,Dan often bids on his own goods in order to drive up the price.Dan is guilty of
A)phishing.
B)hacking.
C)shilling.
D)nothing;this is an acceptable practice.
Q4) Compare and contrast money laundering and embezzlement.Give an example of each.
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Chapter 8: Intentional Torts and Business Torts
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Q1) Tracy is an employee of Zebra Toy Company,and both parties are free to terminate her employment at will.One afternoon she has lunch with a friend who works in marketing for her company's biggest competitor,Tiger Toys.Over a period of about three months,Tiger Toy representatives convince Tracy to work with them.Tiger offers a larger base salary with bigger commissions than she had with Zebra.When Tracy leaves Zebra,it sues Tiger Toys claiming it intentionally interfered with a contractual relationship.Will Zebra Toy Company be successful?
Q2) Tipton Company makes a deal with Patton Company to purchase 100 canvas tarps.Patton's competitor,QC Industries,tells Tipton Company executives that Patton's goods are shoddy and Tipton cancels the contract with Patton.What will likely occur?
A)Patton will sue Tipton for defamation.
B)QC Industries will sue Patton for intentional infliction of emotional distress.
C)Patton will sue QC Industries for tortious interference with a contract.
D)Tipton will sue Patton for tortious interference with a prospective advantage.
Q3) The First Amendment guarantee of freedom of speech is an absolute right.
A)True
B)False
Q4) Discuss the four elements that must be proven in order to win a defamation case.
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Page 10
Chapter 9: Negligence, Strict Liability, and Product Liability
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Q1) In a strict liability case,the courts still consider if the defendant acted in a reasonable and prudent manner.
A)True
B)False
Q2) Evaluate the following scenarios and determine which represents Micha's highest liability?
A)Rose is lost and pulls her car into Micha's driveway for a moment to get her bearings. B)Oscar is a twelve-year-old neighbor of Micha's who has snuck into Micha's backyard to swim in his pool.
C)Juanita is a customer having a latte in the coffee shop Micha owns and operates. D)Ron is Micha's friend whom Micha has invited to his home to watch the Super Bowl.
Q3) Tort issues are firmly ingrained in law and do not change.
A)True B)False
Q4) A landowner's highest duty is owed to licensees. A)True B)False
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Chapter 10: Privacy and Internet Law
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Q1) The European Union does not view privacy as a fundamental right of its citizens,and the EU's policies toward privacy are limited.
A)True
B)False
Q2) What provisions are commercial email subjected to under the CAN-SPAM Act?
Q3) Stuart is vying for a promotion but faces competition from a coworker,Brenda.Without authorization,Stuart accesses stored company records and discovers an unfavorable email message Brenda had written about the company.Stuart sends the message to his supervisor in hopes of keeping Brenda from getting the promotion.Discuss whether Stuart has violated any statute and,if so,what sanctions he may face.
Q4) Under the ECPA,any intended recipient has the right to disclose the content of an email.
A)True
B)False
Q5) The internet was started in the 1960s as a project to link military contractors and universities.The World Wide Web was created as a subnetwork of the internet.
A)True
B)False
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Chapter 11: Introduction to Contracts
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Q1) In a unilateral contract,one party makes a promise that the other party can accept only by actually doing something.
A)True
B)False
Q2) Jennifer has offered to sell her laptop computer for $500 to Jack.She tells Jack that the computer is only six months old but,in fact,it is three years old,and Jennifer wants to unload the lemon.Jack agrees to buy the computer based on Jennifer's representations.This contract is
A)a void agreement because of the fraud involved.
B)a voidable contract,one that Jack can void.
C)a voidable contract,because it is unilateral.
D)a void contract because of the UCC.
Q3) Under a contract,Danielle is required to paint a room with paint chosen by the homeowners,the Flynns.After Danielle paints the room according to the contract requirements,her duties under the contract are discharged.
A)True
B)False
Q4) Briefly discuss the meaning of bilateral,unilateral,executory,and executed contracts.
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Page 13
Chapter 12: Agreement: Offers and Acceptances
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Q1) If an offer specifies no time limit in which to accept,
A)the offeree has 30 days to respond.
B)the offeree has 10 days to respond.
C)the offer is not valid and therefore it does not matter when the offeree responds.
D)the offeree has a reasonable period during which to accept.
Q2) Which term refers to whether an offeree accepts an offer by promising,by making a down payment,or by performing?
A)manner of acceptance
B)method of acceptance
C)definiteness
D)intent
Q3) Nella offers to sell her crop of strawberries,which have just been picked,to Morgan's Market.Since Nella does not specify a time limit for acceptance,Morgan's can accept the offer at any point in time.
A)True
B)False
Q4) Discuss the effect of the Uniform Commercial Code on the law of sales contracts in the area of open terms.
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Chapter 13: Consideration
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Q1) What is consideration and what are the two basic elements of consideration?
Q2) Zero,Inc.agreed to build Millie a storage building for $8,000.After beginning the project,Zero realized that it could not complete the job and make a profit.Zero demanded $9,500 to complete the building.Millie agreed to pay the $9,500.When the project was complete,Millie tendered $8,000 to Zero for the job.If Zero sues Millie for the remaining $1,500,
A)Zero will win because there was consideration for the additional $1,500.
B)Zero will win because Millie had a preexisting duty to pay any additional amounts.
C)Zero will lose because there was no legal consideration to support the additional $1,500.
D)Zero will lose because the UCC does not require consideration to modify an existing contract.
Q3) What phrase explains how a requirements contract can be valid?
A)"will buy 100 percent of output"
B)"willing to accept the entire quantity"
C)"no consideration needed"
D)"in good faith"
Q4) What two exceptions did the UCC create for accord and satisfaction check cases?
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Chapter 14: Legality
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Q1) Which of the following relationships generally fails to create an insurable interest?
A)Husband and wife
B)Doctor and patient
C)Debtor and creditor
D)Chief executive officer and corporation
Q2) The UCC deals with unconscionability in a contract by providing that a court may
A)refuse to enforce the contract.
B)enforce the remainder of the contract without the unconscionable clause.
C)limit the application of any unconscionable clause as to avoid any unconscionable result.
D)All of these are correct.
Q3) When Randy,an electrician,accepted a job with Buren Construction,Randy signed the following agreement: "Upon termination of my employment with Buren Construction,I agree never to work for another employer as an electrician." If Randy resigns from Buren Construction,this agreement would be upheld under the theory of freedom of contract.
A)True
B)False
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Page 16
Chapter 15: Voidable Contracts: Capacity and Consent
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Q1) Which of the following is NOT a true statement about fraud?
A)The plaintiff must prove that the defendant has knowledge of the falsity of his or her statement.
B)It is necessary for the plaintiff to show that he or she has suffered some type of detriment or injury because of his or her reasonable reliance on the defendant's false statement.
C)The defendant made the statement with the intent to induce the plaintiff to enter into the contract.
D)The plaintiff must show that although the defendant acted in good faith,the statement was material because the defendant expected the plaintiff to rely on it and enter into the contract.
Q2) If a salesperson says,"This is a great car and it's really fun to drive," but the car turns out to be a lemon,the salesperson has committed fraud.
A)True
B)False
Q3) In contract law,a minor is someone under the age of 21.
A)True
B)False
Q4) Discuss the meaning of "material fact" in fraud situations.
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Chapter 16: Written Contracts
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Q1) A legal right that an owner gives to another person to make some use of the owner's land is called
A)a deed.
B)a mortgage.
C)an easement.
D)a lease.
Q2) Either party may demand rescission of a fully executed oral contract if it was required to have been in writing under the Statute of Frauds.
A)True
B)False
Q3) Bry,Inc.and Gangl Co.entered into an oral agreement for the sale of 3,000 sweaters.Both parties performed as required under the contract.Bry delivered the sweaters,and Gangl accepted and paid for them.Since the contract is fully executed,it makes no difference that it was an oral agreement.
A)True
B)False
Q4) Any contract involving a sale of goods of $100 or more must be in writing.
A)True
B)False
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Chapter 17: Third Parties
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Q1) Which statement regarding assignment is accurate?
A)Gratuitous assignments are generally revocable regardless of whether they are oral or written.
B)An assignment for consideration is irrevocable.
C)An assignment becomes valid when the obligor receives notice of the assignment.
D)An assignment must be written and follow all legal formalities.
Q2) A donee beneficiary
A)is not entitled to enforce a contract against either party.
B)usually does not give consideration in return for the gift.
C)will generally become a creditor beneficiary after his or her rights vest.
D)is an incidental beneficiary.
Q3) Most,but not all,contract rights are assignable.
A)True
B)False
Q4) Contract prohibitions against assignments are invalid as a matter of public policy. A)True
B)False
Q5) Briefly discuss the enforceability of contracts by third parties.
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Chapter 18: Contract Termination
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Q1) A court may,at times,discharge a party who has not performed.
A)True
B)False
Q2) In January,All Seasons,Inc.ordered $4,000 of fireworks from Kaboom Ltd.with delivery to be on or before June 1.On April 15,Kaboom notifies All Seasons that it will not be able to perform the contract as agreed.How will the law characterize Kaboom's actions? Does All Seasons have to wait until June 1 before buying fireworks from another supplier?
Q3) Which of the following events would have the best chance of excusing performance of a contract based on commercial impracticability?
A)The price of a raw material increases slightly so that the contract will not be as profitable.
B)An unforeseeable trade embargo causes prices to triple.
C)The promisor of personal services dies.
D)The subject matter of the contract is destroyed.
Q4) What does the term "substantial performance" mean? What factors are generally considered when determining whether one of the parties has substantially performed?
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Page 20
Chapter 19: Remedies
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Q1) Banner enters into a contract with Sylvia to buy her house for $150,000.Sylvia decides later not to sell because she is so emotionally attached to the house.Banner insists that he is entitled to the house.Banner can successfully sue for specific performance.
A)True
B)False
Q2) Farmer Elvin is holding 200 pounds of potatoes in storage for Chef Noble but Chef Noble has breached the contract by failing to pay for the potatoes.If Farmer Elvin sells the potatoes to a local diner to make potato soup and salad,then this action would be considered a(n)
A)reasonable mitigation of damages.
B)attempt to maximize damages.
C)attempt to realize an unwarranted profit.
D)attempt at reformation.
Q3) A contract clause which specifies the amount of damages to be paid in the event of a breach is called
A)a covenant of damages clause.
B)a reliance interest of damages clause.
C)a liquidated damages clause.
D)an incidental damages clause.
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Page 21
Chapter 20: Practical Contracts
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Q1) Which of the following generally is NOT in the introductory paragraph of a contract?
A)the date of the contract
B)the covenants of the contract
C)the parties to the contract
D)the nature of the contract
Q2) Ambiguities in contracts are always interpreted in favor of the party who wrote the contract,since he or she is the one who knows what the provision is supposed to mean.
A)True
B)False
Q3) An agreement should definitely be in writing if you do not have an ongoing relationship with the other party.
A)True
B)False
Q4) Which of the following guidelines applies to writing the title of a contract?
A)It should be written in general terms,like "Memorandum of Agreement."
B)It should be written like a sentence,with only the first letter capitalized.
C)It should be brief with no more than five words.
D)It should be descriptive of the agreement and typed in all capital letters.
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Page 22
Chapter 21: Introduction to Sales
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Q1) Pizazz,Inc.sold a condo on the 34th floor in a building in downtown Chicago.This contract is governed by Article 2A of the UCC.
A)True
B)False
Q2) Lian contracted for financial services from E-wise.This contract is governed by Article 2 of the UCC.
A)True
B)False
Q3) Lorene,an artist,orally agrees to sell Sabrina a painting for $600.While Lorene is busy talking on the phone,Sabrina writes her a note on the back of an envelope she finds in her purse.The signed note states that she will stop by the studio to pick up the painting within the week.Sabrina changes her mind about the painting,and when Lorene sues to enforce the contract,Sabrina defends on the basis of the Statute of Frauds.Sabrina will succeed with this defense.
A)True
B)False
Q4) The UCC is federal legislation enacted by Congress.
A)True
B)False
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Chapter 22: Ownership, Risk and Warranties
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Q1) In a breach of warranty case,the buyer must
A)notify the seller of defects within a reasonable time.
B)bring any lawsuit no later than three years after the defect was discovered.
C)extend the statute of limitations in writing rather than orally if he chooses to allow a longer time for bringing suit.
D)notify the seller of defects within six months of his discovery or he cannot bring a lawsuit.
Q2) Discuss the concept of insurable interest.Indicate the difference between a buyer's and a seller's insurable interest.
Q3) Leonardo fraudulently obtained a piece of jewelry from Jessica.He then sold the piece to Midori,who did not know about the fraud.Which of the following describes the situation?
A)Leonardo had voidable title and Midori gets a void title.
B)Leonardo had void title and Midori gets good title.
C)Leonardo had voidable title and Midori gets good title.
D)Leonardo had good title and Midori gets good title.
Q4) Crops are considered identified when they are planted.
A)True
B)False
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Chapter 23: Performance and Remedies
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Q1) A buyer's material breach gives the seller the right to refuse to deliver the goods.
A)True
B)False
Q2) What is the "perfect tender rule" and what restrictions has the UCC put into place that limit the perfect tender rule's effect?
Q3) Under the "perfect tender rule" the buyer may reject the goods if they fail in any respect to conform to the contract.
A)True
B)False
Q4) Under the UCC,a buyer's right to reasonably obtain substitute goods because another party has not honored a contract is called A)breach.
B)cure.
C)cover.
D)consideration.
Q5) The term tender means to physically deliver the goods to the buyer.
A)True B)False
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Page 25
Chapter 24: Secured Transactions
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Q1) Morefield Custom Design sends 30 recliners by rail to Danville Furniture.To show where the goods will be shipped and who gets them when they arrive,Morefield will obtain ____,which can be used as collateral in a secured transaction.
A)a warehouse receipt
B)a bill of lading
C)chattel paper
D)a deposit account
Q2) Great State Bank and First Federal Bank have a security interest in TriColor's equipment.If neither secured party is perfected,the first to sue or repossess has priority over the collateral.
A)True
B)False
Q3) There is no way to attach a security interest in electronic chattel paper. A)True
B)False
Q4) Fowler Bros.has applied to Gibralter Bank for a $50,000 loan for its business expansion.If Fowler Bros.plans to use its account at Gibralter Bank as collateral,discuss what the bank needs to do for a security interest to attach.
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Page 26
Chapter 25: Creating a Negotiable Instrument
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Q1) Because negotiable instruments are more valuable than non-negotiable ones,it is important for buyers and sellers to be able to tell,easily and accurately,if an instrument is indeed negotiable.What six standards must an instrument meet in order for it to be negotiable?
Q2) Discuss the effect on an instrument of: (a)contradictory amounts between the numerals and amount written in words on a check;(b)the interest rate left blank on a promissory note;and (c)contradictory terms that are typed or printed onto a promissory note and terms that are handwritten.
Q3) To be negotiated,bearer paper must simply be delivered to the recipient.
A)True B)False
Q4) A bank that draws a check on itself has issued A)a special indorsement. B)a claim in recoupment. C)a certificate of deposit. D)a cashier's check.
Q5) A draft is always a check,but a check is not always a draft. A)True B)False
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Chapter 26: Liability for Negotiable Instruments
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Q1) Check kiting is defined as
A)indorsing a check while knowing that the check is a stolen check.
B)carelessly paying an unauthorized instrument.
C)a scheme of overdrawing account "A" by depositing a check in account "B," then overdrawing account "B" to cover the insufficient funds in account "A."
D)issuing an instrument to an impostor who negotiates the instrument to a bank that is unaware of the fraud.
Q2) When a person indorses a check,the indorser assumes contractual liability based on the indorsement.This liability expires unless presentment is made
A)within 3 days of indorsement.
B)within 7 days of indorsement.
C)within 30 days of indorsement.
D)within a reasonable time after the indorsement.
Q3) James Packard,a lawyer representing Robert Marino,received a check for $16,000 in settlement of Robert's case.Instead of turning over the money to Robert or putting it into a trust fund for him,James forged Robert's indorsement and deposited the money into his own account without notifying Robert.Discuss the claims the parties have.
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Chapter 27: Accountants Liability
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Q1) An auditor suspects its client is committing illegal acts that will have a material impact on its financial statements.What is the auditor legally required to do and under what circumstances would the auditor directly notify the SEC?
Q2) Under what circumstances are accountants liable to their clients for fraud?
Q3) Adam claimed that N & A,its accounting firm,negligently prepared an audit.To hold the accounting firm liable,which of the following elements must be established?
A)scienter or guilty knowledge
B)a fiduciary relationship
C)failure to exercise due care
D)an executed engagement letter
Q4) In 2007,the Securities and Exchange Commission (SEC)began to allow foreign companies to use which of the following for its reporting standards?
A)SOX
B)GAAP
C)GAAS
D)IFRS
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Chapter 28: Agency Law
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Q1) HBR Accounting hired Denise,a CPA,to prepare tax returns.Which statement is correct?
A)Denise is a gratuitous agent and has a duty not to commit gross negligence.
B)Denise is a gratuitous agent and has a duty not to commit ordinary negligence.
C)Denise,as a CPA,is an agent with special skills.She is held to a higher standard than ordinary negligence.
D)Denise,as a CPA,is an agent with special skills.She is held to a lower standard than ordinary negligence.
Q2) Mrs.O'Leary hired Jenna to sell her house in Michigan.She executed a power of attorney in favor of Jenna authorizing her to do "anything and everything associated with the sale of real estate,acting as a prudent person." On May 30,Jenna finalized a deal with Brandon for the purchase of the house.Brandon and Jenna signed the real estate contract that day.Jenna learned the next day that Mrs.O'Leary had died May 29.
A)The contract is void since the agency terminated May 29.
B)The contract is valid since the agency's purpose was achieved before Jenna was notified of Mrs.O'Leary's death.
C)The contract is voidable at the option of Mrs.O'Leary's estate.
D)The contract is voidable at the option of Brandon.
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Page 30
Chapter 29: Employment and Labor Law
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Q1) A union declares its workers are going on strike.The employer states the collective bargaining agreement is still in force for another eight months and that it contains a no-strike clause.The union claims the CBA's no-strike provision is not binding since new union leadership is in place.Which of the following statements is correct?
A)The union can strike since new leadership is now in control.
B)The union can strike since no-strike provisions have been ruled by the courts to be unenforceable.
C)The union cannot strike,as strikes to exert economic pressure on management are prohibited by the NLRA.
D)The union cannot strike because of the no-strike clause in the contract.
Q2) Prior to the Industrial Revolution,the primary English law of employment was that,in the absence of a contract,a worker was hired for a year at a time.
A)True
B)False
Q3) Firing an employee for her refusal to violate the law would raise a claim of wrongful discharge.
A)True
B)False
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Chapter 30: Employment Discrimination
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Q1) Sullivan Consumer Products Co.asks its employees to apply four tests in determining whether their behavior violates Title VII with respect to sexual harassment.Which of the following is one of the four tests?
A)Would your friends be impressed with your behavior?
B)Do you think your behavior is humorous?
C)Would your behavior help you to get a promotion?
D)Would you like your behavior reported in your local newspaper?
Q2) Which of the following are remedies available to a successful plaintiff under Title VII?
A)hiring,reinstatement,and back pay
B)front pay,reasonable attorney fees
C)compensatory and punitive damages
D)All of these are correct.
Q3) Title VII of the Civil Rights Act of 1964 applies to employers with any number of employees,making it illegal to discriminate on the basis of race,color,religion,sex,or national origin.
A)True
B)False
Q4) What is the process for filing a suit under Title VII of the Civil Rights Act?
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Page 32
Chapter 31: Starting a Business: Llcs and Other Options
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Q1) Andy wants to start his own business.He has decided to rent space in a "strip mall" and open a pet shop.Additionally,he will provide dog grooming services.He figures he can do almost everything himself,though he will need to hire a part-time employee on an "as needed" basis.His friend,Lacy,has agreed to work when needed. Andy is considering operating his business as a sole proprietorship.What are the primary legal advantages and disadvantages to this form of business ownership for Andy's pet shop?
Q2) For those wishing to purchase a franchise,the Federal Trade Commission acts as a guardian ensuring that the business idea is sound and that the information in the Franchise Disclosure Document is accurate.
A)True
B)False
Q3) Which is true of an S corporation?
A)There can be no more than 50 shareholders.
B)There can be only one class of stock.
C)A majority of shareholders must agree the company should be an S corporation.
D)All of these are correct.
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Chapter 32: Partnerships
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Q1) Alicia and Ted have a written agreement wherein they will share the losses of their joint business.This agreement is strong evidence they are partners.
A)True
B)False
Q2) A partnership can only be held liable for the partners' authorized acts.
A)True
B)False
Q3) Larry and Reed are partners in Custom Pet Grooming.As they are both nearing retirement age,when they form their partnership,they agree they will end their business relationship and sell Custom Pet Grooming in three years.Larry and Reed have a A)franchise.
B)term partnership.
C)partnership at will.
D)partnership by estoppel.
Q4) Elion was a partner in a partnership.Elion's death would be considered a wrongful dissociation.
A)True
B)False
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Page 34
Chapter 33: Life and Death of a Corporation
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Q1) Wizardry Corporation's purpose clause in its charter states the following: "To operate a home-cleaning service business." After a few years of successful operation,Wizardry is offered the challenge of landscaping a neighboring business.If Wizardry accepts the offer,it would be violating its charter under
A)the de jure doctrine.
B)the de facto doctrine.
C)the ultra vires doctrine.
D)an estoppel theory.
Q2) Which state does your textbook cite as being particularly attractive to companies looking to incorporate?
A)Ohio
B)Alaska
C)Utah
D)Delaware
Q3) MegaCorp has five directors.The company has 1,050 shares of voting stock.Jessica would like to purchase enough stock to elect herself to the board of directors.The company allows for cumulative voting.Explain the concept of cumulative voting and also state how many shares of MegaCorp stock Jessica will need to own to assure herself a place on the board of directors.
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Page 35
Chapter 34: Management Duties
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Q1) A manager used her position in the company to develop a new business the company might have pursued on its own.This is a breach of the
A)duty of care.
B)duty of non-competition.
C)duty of loyalty.
D)duty of recognition.
Q2) A manager who has engaged in self-dealing has violated the duty of loyalty to the corporation,unless the self-dealing was entirely fair to the corporation.
A)True
B)False
Q3) A fundamental problem of the modern corporation is the conflict of interests between managers,shareholders,and stakeholders.
A)True
B)False
Q4) A public offer to buy a block of stock directly from shareholders is called a tender offer.
A)True
B)False
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Chapter 35: Shareholder Rights
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Q1) Charles owns 1,000 shares of stock in Temperan,Inc.Charles wants to obtain corporate records including the corporation's minute book and accounting records.Under the Model Act,Charles is entitled to this information if he requests it in good faith and
A)he has a proper purpose.
B)he owns at least 1 percent of the company or $2,000 of stock.
C)he is an employee of Temperan.
D)he is a controlling shareholder.
Q2) Minority shareholders have no right to overturn an ordinary business transaction between the corporation and a controlling shareholder.
A)True
B)False
Q3) Loraine is a shareholder of Taley Corp.She would like to inspect and copy the company's minute book,accounting records,and shareholder lists.Under what circumstances is Loraine allowed to inspect or copy corporate records?
Q4) Under both state and federal law,a shareholder can generally revoke a proxy at any time.
A)True
B)False
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Chapter 36: Bankruptcy
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Q1) Karen has filed for bankruptcy.Who has the authority to confirm or reject a plan of payment,and what factors will be considered when deciding whether to approve a repayment plan under Chapter 13?
Q2) Under the federal Bankruptcy Code,the exemption amount for the debtor's personal residence is
A)$23,675.
B)$55,200.
C)unlimited.
D)$125,000.
Q3) Which is an example of a priority claim?
A)alimony
B)income tax
C)child support
D)All of these are correct.
Q4) Which of the following is a primary goal of the Bankruptcy Code?
A)to preserve as much of the debtor's property as possible
B)to pay off the debtor's creditors as quickly as possible
C)to secure debt counseling for the debtor
D)to keep the debtor from falling behind in payments
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Chapter 37: Securities Regulation
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Q1) Ed,a vice-president of Palmette Products,Inc. ,buys 1,000 shares of his company's stock on June 15.His son has medical problems in September,and Ed sells the stock at a profit.Under Section 16,Ed
A)must turn over to Palmette any profits he made on the sale.
B)may keep any profits on the sale since he had a good reason to sell and was not selling in order to manipulate the market.
C)may keep the profits from the sale as long as he reported his sale to the SEC within two business days.
D)may keep any profits from the sale if he did not act on secret information when he sold the shares.
Q2) MegaCorp wishes to sell $25 million of securities.The only investors will be 20 unaccredited investors.Which of the following applies to this offering?
A)Rule 504,option 1 of Regulation D of the 1933 Act
B)Rule 505 of Regulation D of the 1933 Act
C)Rule 506 of Regulation D of the 1933 Act
D)Rule 504,option 2 of Regulation D of the 1933 Act
Q3) Discuss the process an issuer follows for either an IPO or a secondary offering.
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Page 39
Chapter 38: Antitrust
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Q1) A major motion picture distributor offers to provide a television station with three very popular,desirable films.However,as part of the agreement,the distributor requires that the television station also purchase four films that are not very desirable.This type of arrangement is called a
A)reciprocal dealing agreement.
B)reverter arrangement.
C)joint custody arrangement.
D)tying arrangement.
Q2) Per se violations are subject to both civil and criminal penalties.
A)True
B)False
Q3) A vertical allocation of customers or territory
A)is a per se violation of Section 1 of the Sherman Act.
B)is a rule of reason violation of the Sherman Act.
C)is not a violation of the Sherman Act.
D)is illegal if it adversely affects one party over the other.
Q4) Explain horizontal price-fixing and vertical minimum and maximum price-fixing.Discuss their status under antitrust laws.
Q5) Discuss when monopoly power is not a violation of Section 2 of the Sherman Act.
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Chapter 39: Consumer Protection
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Q1) MoneyMaker Toy Company violated the safety standards set forth by the Consumer Product Safety Commission when it produced a toy gun that caused injury to hundreds of children.Because of MoneyMaker's actions
A)the CPSC can impose civil penalties on the company.
B)the CPSC can impose criminal penalties on the company.
C)users can sue for damages,including attorney's fees,if MoneyMaker knew it was violating a consumer product safety rule when it produced the guns.
D)All of these are correct.
Q2) Under the Truth in Lending Act,a lender must disclose all of the following EXCEPT
A)the average percentage rate charged by competitors.
B)the amount financed.
C)the annual percentage rate (APR).
D)the finance charge.
Q3) The Truth in Lending Act applies to private individuals who loan money.
A)True
B)False
Q4) What must a seller disclose under the Magnuson-Moss Warranty Act?
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Chapter 40: Environmental Law
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Q1) Armand Industries is producing a foul-smelling odor as a by-product of its factory's operations.However,the emission is not harmful to the health of those exposed to it.Armand would be subject to a primary national ambient air quality standard established by the EPA.
A)True
B)False
Q2) The Environmental Protection Agency (EPA)was created by Congress to A)consolidate environmental regulations under one agency. B)protect corporate investors.
C)prevent conflicts between the Departments of Commerce and Interior.
D)eliminate discrimination.
Q3) Weste,Inc.decided to expand by building a $50 million manufacturing facility.Weste,Inc.is not a federal agency and the expansion is not regulated or approved by the government.Nevertheless,Weste must prepare an environmental impact statement.
A)True B)False
Q4) Foiler Manufacturing,a new corporation,estimates it may generate approximately 200 kilograms of hazardous waste each month.Discuss the EPA requirements it faces in relation to this waste.
Page 42
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Chapter 41: Intellectual Property
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Q1) A new savings and loan bank called Federal Deposit Bank applied for a trademark of its name.Why will this bank probably not receive trademark approval?
A)It is similar to an existing mark.
B)It is a generic trademark.
C)It is a deceptive mark.
D)It is a scandalous or immoral mark.
Q2) Clarissa trademarked her new company Samjack after her two sons Sam and Jack.This would be considered a fanciful trademark.
A)True
B)False
Q3) A color cannot be trademarked since it cannot be kept from use by other businesses.
A)True B)False
Q4) Unlike with patents,the ideas underlying copyrighted material need not be novel. A)True
B)False
Q5) Briefly define patent,copyright,and trademark,and explain how long they last.
Q6) Identify the main provisions of the Digital Millennium Copyright Act.
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Chapter 42: Real Property and Landlord Tenant Law
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Q1) Whether or not the zoning board will grant a request for a variance depends upon
A)the type of the proposed building.
B)the reaction of the neighbors.
C)the reason the owner claims she or he is harmed by the zoning ordinance.
D)All of these are correct.
Q2) The landlord's first important duty to a tenant is to
A)deliver possession.
B)maintain premises.
C)pay the security deposit.
D)provide eminent domain.
Q3) Discuss the tenant's and the landlord's basic duties under a landlord-tenant relationship.
Q4) What is the doctrine of adverse possession? Briefly explain how it works.
Q5) What is an abatement?
A)the power of the government to take private property for public use
B)an order requiring a homeowner to eliminate a nuisance
C)a process under which the original tenant transfers all of his rights and duties to a new tenant
D)the duty to keep losses at a minimum
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Chapter 43: Personal Property and Bailment
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Q1) Jared owns 100 acres of woodland.One day,he and Margie are hiking through Jared's woods and Margie finds a gold ring.The true owner is never discovered.Which of the following statements about this situation is correct?
A)Because the ring was found on Jared's property,he is probably entitled to keep it.
B)Margie found the ring,and since the true owner is unknown the ring now belongs to her.
C)By law,Margie needs to return the ring to the spot where she found it,just in case the true owner returns for it.
D)The ring must be sold and the profit split evenly between Jared and Margie.
Q2) In January,Erwin told David,his nephew,that he would give him a car when he graduates from college.David graduated in May.If Erwin refuses to give David a car,David can sue him for breach of an inter vivos gift.
A)True
B)False
Q3) All bailments have to be by agreement between the bailor and bailee.
A)True
B)False
Q4) Distinguish between a contract and a gift.Give an example of each.
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Chapter 44: Planning for the Future: Wills, Trusts and Insurance
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Q1) Discuss the differences between a will and a trust.
Q2) The person who receives the proceeds from an insurance policy is the A)owner.
B)testator.
C)insurer.
D)beneficiary.
Q3) Myron had two children,Cheryl and Pete,who predeceased him.Cheryl had three children and Pete had one child.Myron had a will.Which of the following is true?
A)If Myron's will indicates that the issue are to inherit per stirpes,Pete's child will receive one half of Myron's estate.
B)If Myron's will indicates that the issue are to inherit per stirpes,Pete's child will receive one fourth of Myron's estate.
C)If Myron's will indicates that the issue are to inherit per capita,Pete's child will receive one half of Myron's estate.
D)If Myron's will indicates the issue are to inherit per capita,each of Cheryl's children will receive one sixth of Myron's estate.
Q4) Identify four ways a trust can be terminated.
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