Strategic Management and Law
Exam Answer Key
Course Introduction
This course explores the intersection of strategic management and legal principles within the context of organizational decision-making and competitive advantage. Students will learn how legal considerations, such as contracts, intellectual property, corporate governance, compliance, and risk management, inform and shape strategic choices in both domestic and international settings. The course emphasizes the importance of integrating legal thinking into business strategy to mitigate risks, identify opportunities, and achieve sustainable success. Case studies and practical examples are used to illustrate how legal frameworks impact strategic planning and the implementation of business objectives.
Recommended Textbook Managers and the Legal Environment Strategies for the 21st Century 7th Edition by Constance E.
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Chapter 1: law, value creation, and risk management
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Q1) U.S.business law promotes consumer welfare through which of the following?
A) By encouraging the sale of safe products at a fair price
B) By preventing deceptive practices
C) By refusing to recognize consumer privacy
D) By encouraging the sale of safe products at a fair price and by preventing deceptive practices, but not by refusing to recognize consumer privacy
Answer: D
Q2) Which of the following is a type of relationship building lobbying prevalent in China?
A) Xantu
B) Olaying
C) Guanxi
D) Quinta
Answer: C
Q3) Private law provides the legal rules within which firms compete.
A)True
B)False
Answer: False
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Chapter 2: Ethics ant the law
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Q1) If an action does not maximize shareholder value,and the firm has no ethical reason to act,the action should not be taken.
A)True
B)False
Answer: True
Q2) Boycotting is a way in which customers show displeasure with unethical corporate activity.
A)True
B)False
Answer: True
Q3) Which of the following allows rights-based moral theories to be compared to other theories such as a utilitarian framework?
A. Deontology
B. Teleological theory
C. Comparative justice
D. Rawlsian moral theory
Answer: C
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Chapter 3: Courts, sources of law, and dispute resolution
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Q1) Which of the following was the result at the U.S.Supreme Court level in Wal-Mart Stores,Inc.v.Dukes,the case in the text involving the issue of whether the plaintiffs could proceed with a class action against Wal-Mart alleging sex discrimination?
A) That the plaintiffs would be allowed additional time to establish beyond a reasonable doubt that at least 50% of the plaintiffs involved had suffered sex discrimination at which point a class would be certified.
B) That the issue of whether a class action was appropriate was an issue for the jury's determination.
C) That a class action was appropriate because the plaintiffs had established that the company operated under a general policy of discrimination.
D) That a class action was inappropriate because the plaintiffs had failed to show that the company operated under a general policy of discrimination.
Answer: D
Q2) Court opinions are published in collections of court opinions called reporters.
A)True
B)False
Answer: True
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Chapter 4: Constitutional bases for business regulation
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Q1) In the U.S.,racist speech is unprotected by the First Amendment.
A)True
B)False
Q2) Procedural due process protects fundamental rights.
A)True
B)False
Q3) What did the U.S.Supreme Court decide regarding whether the Violent Crimes Against Women Act was validly enacted by Congress?
A) That the law was validly enacted under the authority of the due process clause of the U.S. Constitution.
B) That the law was validly enacted under the authority of the equal protection clause of the U.S. Constitution.
C) That the law was not valid because it discriminated against men.
D) That the law was not valid because Congress exceeded its authority under the Commerce Clause of the U.S. Constitution.
Q4) The Second Amendment to the U.S.Constitution grants persons the right to bear arms.
A)True
B)False
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Chapter 5: Agency
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Q1) The respondeat superior doctrine typically applies to the actions of independent contractors.
A)True
B)False
Q2) Refer to fact pattern 5-2. Who is liable for Wesley's injured foot?
A) Only Billy
B) Only Samantha
C) Both Billy and Samantha with Billy having he right to recover from Samantha any amounts paid
D) Both Billy and Samantha with Samantha having he right to recover from Billy any amounts paid
Q3) An independent contractor is also considered an employee of the person for whom work is being done.
A)True
B)False
Q4) The most common form of agency relationship is employer-employee.
A)True
B)False
Q5) What is considered in determining the scope of an agent's implied authority?
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Chapter 6: Administrative Law
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Q1) The president of a company wishes to comment on a proposed administrative agency rule. What does a comment letter usually contain?
Q2) Actions of administrative agencies often affect businesses but rarely affect individuals.
A)True
B)False
Q3) Critics of administrative agencies claim that they violate the doctrine of separation of powers.Explain the basis for this criticism.Explain why agencies are so prevalent despite the absence of any explicit provision for their existence in the Constitution.Discuss fully.
Q4) Determining whether a regulated company or person is complying with laws and regulations cannot be a function of administrative agencies because of Congressional prohibitions.
A)True
B)False
Q5) The Fifth Amendment's protection against self-incrimination does not apply to corporations.
A)True
B)False
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Chapter 7: Contracts
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Q1) Courts enforce liquidated damages as a form of a penalty.
A)True
B)False
Q2) Mutuality of obligation applies only to bilateral contracts.
A)True
B)False
Q3) List the elements necessary for the doctrine of promissory estoppel to be applied.
Q4) Refer to fact pattern 7-1. What damages,if any,could Danny likely collect against Prudence in litigation over the car?
A) None
B) Reliance damages consisting of $500
C) Incidental damages consisting of $50
D) Compensatory damages consisting of $500
Q5) The statute of frauds requires certain types of contracts to be evidenced by some form of written communication.
A)True
B)False
Q6) What are the four basic elements necessary for a valid contract?
Q7) Define the term "consideration" as it is used in contract law.
Page 9
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Chapter 8: sales,licensing,and e-commerce
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Q1) The UCC permits a contract to be enforced if the parties intended a binding contract,even though important terms may have been left open for later agreement.
A)True
B)False
Q2) Which of the following is an example a statement made by a salesperson that would be considered "puffing"?
A) This car will get 35 miles per gallon.
B) This is a genuine diamond ring.
C) This is an original work of art.
D) This copier is the best in the business.
Q3) Under the UCC,the implied warranty of merchantability guarantees that the goods are reasonably fit for the general purposes for which they are sold,and that they are properly packaged and labeled.
A)True
B)False
Q4) The UCC treats fixtures as goods.
A)True
B)False
Q5) What does Section 201 of the UCC provide regarding a statute of frauds?
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Chapter 9: Torts and Privacy protection
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Q1) Set forth the majority rule in relation to an accountant's liability for negligence to a third party with whom the accountant does not have a contractual relationship as well as the source of the rule.
Q2) Refer to fact pattern 9-3. What would you tell Alex regarding whether he should sue Alex for committing a battery?
A) That it appears that the necessary elements are present for him to succeed in an action against Blake for battery so long as he can show apprehension of being struck. B) That he could not win in an action for battery because he admitted that he was not afraid.
C) That he could not win in an action for battery because Blake did not actually strike him.
D) That he could not win in an action for battery because it appears that Blake's actions were justified.
Q3) Which of the following is not a part of the measure of compensatory damages?
A) The cost to repair or replace an item.
B) The decrease in market value of an item.
C) Compensation for medical expenses.
D) Damages to deter others from engaging in similar conduct.
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Chapter 10: product liability
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Q1) In regard to successor liability,courts applying the ______ look for constancy between the buyer and seller to determine whether the successor company is essentially a mere continuation or reincarnation of the predecessor entity.
A) market-share approach
B) product-line theory
C) traditional successor liability rule
D) continuity-of-enterprise approach
Q2) The doctrine of strict product liability in tort is grounded in the common law and was transported to this country from England in the 1800's.
A)True
B)False
Q3) Under what circumstances will a successor corporation be held liable in a product liability action under the traditional successor liability rule?
Q4) Under federal law a retailer who had no role in the manufacture of a defective good may not be held liable to a consumer injured by the good.
A)True
B)False
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Chapter 11: Intellectual property
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Q1) The packaging or dressing of a product may be protected under the trademark laws as trade dress.
A)True
B)False
Q2) Jill invented a new type of device to control dog barking without harming the dog. A month later,Sam independently invented an almost identical type of device. Sam filed for a patent immediately. When Jill became aware of his filing,she also filed for patent protection. Assuming that there is no statutory bar,between Jill and Sam,who should be awarded the patent prior to September 16,2003 and why? What about after September 16,2013? What law affects the result after September 16,2013? What would the result be in most other countries?
Q3) Which of the following is an example of an arbitrary trademark?
A) Camel
B) Kodak
C) Exxon
D) Clorox
Q4) Service marks are a form of trademarks.
A)True
B)False
Q5) Discuss in detail common law rights,if any,in a trademark in the U.S.
Page 13
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Chapter 12: The employment agreement
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Q1) Pursuant to federal law,states have the same rules in place in regard to implied contracts of employment.
A)True
B)False
Q2) The ______ prohibits employers from using genetic information to make decisions about hiring,firing,or compensation.
A) The Family Medical History Act
B) Genetic Prohibition and Protection Act
C) The Privacy in Testing Act
D) Genetic Information Nondiscrimination Act
Q3) Which of the following are included within OSHA requirements regarding posting of information?
A) OSHA requires that notices of any potentially dangerous conditions be posted.
B) OSHA requires that any citations for violations be posted.
C) OSHA requires that notices of any potentially dangerous conditions be posted and also that citations for penalties be posted.
D) OSHA does not have any posting requirements.
Q4) What standards are applied in regard to judicial review of ERISA decisions by plan administrators?
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Chapter 13: civil rights and employment discrimination
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Q1) Which of the following must the plaintiff prove in an Age Discrimination in Employment case?
A) The plaintiff must prove by a preponderance of direct evidence that age was a motivating factor for the challenged employer decision.
B) The plaintiff must prove by a preponderance of the evidence, which may be direct or circumstantial, that age was a motivating factor for the challenged employer decision.
C) The plaintiff must prove by a preponderance of direct evidence that age was the but-for cause of the challenged employer decision.
D) The plaintiff must prove by a preponderance of the evidence, which may be direct or circumstantial, that age was the but-for cause of the challenged employer decision.
Q2) A reasonable accommodation for a disabled employee is required whether or not it would impose an undue hardship on the employer.
A)True
B)False
Q3) Set forth the categories of individuals classified as disabled under the Americans with Disabilities Act.
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Chapter 14: Criminal law
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Q1) Which of the following was the result in Kyllo v.United States,the case referenced in the text in which the court addressed whether the police may use infrared thermal-image scanners to scan homes without a warrant in order to find artificial heat sources,such as heat being released from grow lights for hidden marijuana crops?
A) That the police may not use infrared thermal-image scanners to scan homes without a warrant.
B) That the police may use infrared thermal-image scanners to scan homes without a warrant.
C) That the police may use infrared thermal-image scanners to scan homes without a warrant only if the police received a tip from an informant that the process would reveal criminal activity.
D) That the police may use infrared thermal-image scanners to scan homes without a warrant only if the home owner had previously been arrested for an offense involving drug trafficking.
Q2) Requiring a person to appear in a lineup does not violate the Fifth Amendment privilege against self-incrimination.
A)True
B)False
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Chapter 15: Environmental law
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Q1) A[n] ______ is an effect of a purchase or use decision by one set of parties on others who did not have a choice and whose interest was not taken into account.
A) Externality
B) bystander influence
C) afflicting action
D) effectation
Q2) Define the term "navigable waters" as used in the Clean Water Act and set forth what the U.S.Supreme Court has said that the term includes and excludes. Why was the U.S.Supreme Court concerned with limiting the scope of the term "navigable waters"?
Q3) The federal government originally did not regulate the pollution created by industry.As environmental law developed,the government began to issue permits to businesses to control and regulate the amount of their pollution.Many industries claim that the cost of compliance with current environmental laws unduly hampers their ability to compete effectively in the marketplace.Is it fair to business owners to be burdened with these costs? Are the strict liability provisions in the federal environmental acts ethical and fair? Discuss fully.
Q4) Set forth the Clean Air Act's four types of air quality goals.
Q5) What is the Kyoto Protocol? Is the U.S.a signatory?
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Chapter 16: Antitrust
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Q1) Refer to fact pattern 16-2. Which of the following is true regarding whether the imposition of maximum prices under the facts presented would be an antitrust violation?
A) The U.S. Supreme Court has ruled that such restrictions do not violate federal antitrust law.
B) The imposition of maximum pricing restrictions is per se illegal under federal antitrust law.
C) A rule of reason approach is used in determining whether the imposition of maximum prices is illegal under federal antitrust law.
D) A presumption of reasonableness approach is used in determining whether the imposition of maximum prices is illegal under federal antitrust law.
Q2) Which of the following is not an illegal horizontal market division?
A) Division by a class of customers
B) Division by exclusive distributorships
C) Division by geographic territory
D) Restricting product output
Q3) Explain the purpose and scope of the Robinson-Patman Act.What factors will courts use in determining whether or not a violation has occurred? Discuss fully.
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Chapter 17: Consumer Protection
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Q1) Under the Magnuson-Moss Warranty Act,a seller who offers a written warranty on goods must provide a full warranty.
A)True
B)False
Q2) When does an advertiser violate the Federal Trade Commission bait and switch advertising rules?
Q3) Which of the following is true regarding USDA standards for organic food?
A) Neither pesticides, genetic engineering, growth hormones, nor irradiation may be used.
B) Pesticides may be used, but genetic engineering and the use of growth hormones is disallowed.
C) Pesticides and irradiation may not be used, but genetic engineering and the use of growth hormones is allowed.
D) The USDA has no standards for organic food.
Q4) State laws regulating genetically modified food are typically declared unconstitutional on the basis that they are preempted by federal law.
A)True
B)False
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Chapter 18: real property and land use
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Q1) What must a person do to acquire a parcel of land by adverse possession?
Q2) John owns a 20-acre parcel of land in Smallville.Bob is a developer that wants to build a subdivision in Smallville.He offers John $1,000 for a 30-day option to purchase the land for $1 million.John agrees.Clara is John's sister and has a valid right of first refusal on the same land.Bob has been told by his bank that the bank will provide a construction loan for the development.What rights did Bob legally obtain when he purchased his option? What effect will Clara's rights have on Bob's option? Explain the three types of loans-construction,gap,and take-financing-that could be involved to complete the development.Discuss fully.
Q3) A _______ permit allows uses that are not permitted as a matter of right under a zoning ordinance and imposes conditions to ensure that the use will be appropriate for the particular situation.
A) conditional-use
B) limited-access
C) nonconforming
D) division
Q4) The ownership interests of tenants in common are by definition equal.
A)True
B)False
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Chapter 19: Forms of business organizations
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Q1) B corporations have no duty to maximize shareholder value even when there is a change of control.
A)True
B)False
Q2) A partnership may acquire property in its own name.
A)True
B)False
Q3) Which of the following is generally true regarding the liability of members of a limited liability partnership for malpractice?
A) Members split evenly among themselves 50% of any assessed liability for malpractice against any member with the limited liability company retaining liability for the remaining 50%.
B) Members are not liable for their own malpractice or for the malpractice of other members because recovery for malpractice may only be obtained from assets of the limited liability partnership itself.
C) Members are liable for their own malpractice but not for the malpractice of other members.
D) Members are liable for their own malpractice and also for the malpractice of other members.
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Chapter 20: Directors, Officers, and Controlling
Shareholders
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Q1) In order to take advantage of the business judgment rule,directors must have made an informed decision and have no conflict of the interest with the corporation.
A)True
B)False
Q2) In the context of takeovers,board members cannot reject an offer without taking sufficient time to analyze its merit.
A)True
B)False
Q3) Some jurisdictions permit the shareholders to amend the articles of incorporation to relieve directors of any financial liability for violations of the duty of A) care.
B) loyalty.
C) avoiding self dealing.
D) voting.
Q4) Under no circumstances do controlling shareholders owe fiduciary duties to other shareholders.
A)True
B)False
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Chapter 21: Public and Private Offerings of Securities
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Q1) Which of the following was passed in 2010 and represents the most sweeping reform of U.S.financial markets since the Great Depression?
A) The Laughlin - Glover Investor and Financial Reconciliation Act
B) The Mallicoat - Whaley Consumer and Investor Securities Protection Act
C) The Dodd - Frank Wall Street Reform and Consumer Protection Act
D) The Barnhill - Obama Wall Street Investors Reconciliation Act
Q2) Which of the following is true regarding uniform state regulation of securities?
A) Federal law has entirely preempted the area, and there is no state regulation of securities.
B) Many states have adopted the Uniform Securities Act.
C) Many states have adopted the Proposed Uniform Trading Act.
D) There is no proposed uniform act in regard to securities, and state regulation is inconsistent.
Q3) Set forth the difference between firm commitment underwriting and best-efforts underwriting.
Q4) According to the SEC,a hyperlink embedded within a prospectus causes the hyperlinked information to be treated as part of the prospectus.
A)True
B)False
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Chapter 22: Securities Fraud and insider trading
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Q1) What is the duty of an independent public accountant if,in the course of an audit,the accountant detects information indicating that an illegal act has or may have occurred?
Q2) If a purchase or sale by an officer,director,or greater-than-10 percent shareholder that would otherwise result in recoverable short-swing profits was involuntary and did not involve the payment of cash and if there was no possibility of speculative abuse of inside information,than a court may hold that it was a(n)________ to which no liability will attach.
A) innocent transaction
B) approved negotiation
C) unorthodox transaction
D) designated sale
Q3) In relation to forward-looking statements,under the bespeaks caution doctrine,a court may determine that the inclusion of sufficient ________ in a document renders immaterial any misrepresentation or omission contained therein.
A) facts
B) cautionary statements
C) expert opinions
D) information
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Chapter 23: Debtor-Creditor Relations and Bankruptcy
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Q1) A commitment fee is an amount a lender requires as consideration for its promise to keep a commitment to loan available.
A)True
B)False
Q2) Refer to fact pattern 23-1. Which of the following is true regarding the repayment of the loan to Bailey's mother?
A) It will be considered a preference because Bailey's mother would be considered an insider, and it was made within one year of the filing for bankruptcy.
B) Although Bailey's mother would not be considered an insider, the payment would be considered a preference because it was made within one year of the filing for bankruptcy.
C) The filing will be considered a preference only if Bailey and his mother had an agreement that she would advance the amounts to him again once the bankruptcy was completed.
D) The payment would not be considered a preference because it was not made within 30 days of the filing for bankruptcy.
Q3) Set forth the five events referenced in the text that usually constitute events of default.
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Chapter 24: International Business
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Q1) The transfer of technical data to a foreign citizen while present in the U.S.is generally not considered to be an export.
A)True
B)False
Q2) In a series of laws,known collectively as the ________ laws,Congress has authorized the President to raise U.S.tariffs on specified products and to provide other forms of import protection to U.S.businesses.
A) export-relief
B) domestic-relief
C) import-relief
D) international-relief
Q3) Exports are controlled by means of export
A) duties
B) licenses
C) subsidies
D) customs valuations
Q4) Civil law systems are based on British law.
A)True
B)False
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