Business Its legal ethical and global environment 10th Edition By Marianne M. Jennings Chapter 1_21

1. The U.S. system of law is based primarily on code law. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of International Law KEYWORDS: Bloom's: Knowledge 2. GATT is the result of a multilateral treaty. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of International Law KEYWORDS: Bloom's: Knowledge 3. Sovereign immunity protects individual nation's operations from outside interference. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Principles of International Law KEYWORDS: Bloom's: Knowledge 4. Under the doctrine of sovereign immunity, commercial transactions cannot be regulated. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Principles of International Law KEYWORDS: Bloom's: Knowledge 5. Expropriation is prohibited in countries that are members of the United Nations. a. True

b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Principles of International Law KEYWORDS: Bloom's: Knowledge 6. Nationalization is a process of eminent domain. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Principles of International Law KEYWORDS: Bloom's: Knowledge 7. U.S. courts have no jurisdiction over foreign businesses with operations in the United States. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Principles of International Law KEYWORDS: Bloom's: Knowledge 8. U.S. securities laws would not apply to countries selling securities in the United States under the doctrine of sovereign immunity. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Principles of International Law KEYWORDS: Bloom's: Application 9. The act of state doctrine precludes outside interference in expropriation. a. True b. False

ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Principles of International Law KEYWORDS: Bloom's: Application 10. The Overseas Private Investment Corporation is an insurer against expropriation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Principles of International Law KEYWORDS: Bloom's: Knowledge 11. Repatriation is the limitation on removal of profits earned in a country from that country. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Principles of International Law KEYWORDS: Bloom's: Knowledge 12. The doctrine of forum non conveniens is used to dismiss cases brought in courts in the wrong nation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Principles of International Law KEYWORDS: Bloom's: Application 13. The U.S. antitrust laws apply only to U.S. firms. a. True b. False ANSWER: False POINTS: 1

DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Protections in International Competition KEYWORDS: Bloom's: Knowledge 14. The Export Trading Company Act allows for international joint ventures that would otherwise be anticompetitive. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Protections in International Competition KEYWORDS: Bloom's: Knowledge 15. Some of the most active pirates are from Cuba. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of International Law KEYWORDS: Bloom's: Knowledge 16. Under the doctrine of sovereign immunity, a country cannot be forced to answer civil or criminal charges in a U.S. court. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Principles of International Law KEYWORDS: Bloom's: Knowledge 17. A foreign country engaging in commercial transactions in the United States is not protected by the doctrine of sovereign immunity for those transactions. a. True b. False ANSWER: True POINTS: 1

DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Principles of International Law KEYWORDS: Bloom's: Knowledge 18. Foreign businesses engaging in commercial activity in the United States are not subject to U.S. antitrust laws. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Principles of International Law KEYWORDS: Bloom's: Knowledge 19. Tariffs can be revenue-raising and protectionist for domestic goods. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Protections in International Competition KEYWORDS: Bloom's: Knowledge 20. GATT is a 150-member free trade agreement. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of International Law KEYWORDS: Bloom's: Knowledge 21. The Kyoto Treaty has now been ratified by all signatory countries. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal Sources of International Law Bloom's: Knowledge

22. The Justice Department does not offer any assistance to companies with questions about Foreign Corrupt Practices Act requirements. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trust, Corruption, Trade, and Economics KEYWORDS: Bloom's: Knowledge 23. The Act of State Doctrine applies to antitrust issues for member countries of the United Nations. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Principles of International Law KEYWORDS: Bloom's: Knowledge 24. MFN stands for most favored nation status under GATT. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of International Law KEYWORDS: Bloom's: Knowledge 25. Sovereign immunity provides that our court system cannot be used to right injustices in other countries. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal

TOPICS: KEYWORDS:

Principles of International Law Bloom's: Knowledge

26. Expropriation or nationalization is protected under the act of state doctrine. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Principles of International Law KEYWORDS: Bloom's: Knowledge 27. The Hickenlooper Amendment is the Foreign Corrupt Practices Act. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Principles of International Law KEYWORDS: Bloom's: Synthesis 28. The Export Trading Company Act provides antitrust exemptions for international joint ventures. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Protections in International Competition KEYWORDS: Bloom's: Knowledge 29. The U.S. courts can be used by citizens of foreign countries to recover for injuries occurring in their countries at the hands of U.S. companies. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Principles of International Law

KEYWORDS:

Bloom's: Knowledge

30. The Foreign Corrupt Practices Act applies to all companies doing business abroad. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trust, Corruption, Trade, and Economics KEYWORDS: Bloom's: Application 31. The only types of transactions covered under the Foreign Corrupt Practices Act are those that involve contracts with foreign governments. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trust, Corruption, Trade, and Economics KEYWORDS: Bloom's: Application 32. The Foreign Corrupt Practices Act is not applicable in NAFTA or GATT contracts. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trust, Corruption, Trade, and Economics KEYWORDS: Bloom's: Application 33. NGO officials are included as government officials for purposes of the Foreign Corrupt Practices Act . a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trust, Corruption, Trade, and Economics KEYWORDS: Bloom's: Application

34. The LESCANT factors are a means of understanding various issues in cultures prior to beginning contract negotiations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of International Law KEYWORDS: Bloom's: Knowledge 35. The Export Trading Company Act of 1982 provides an exception to U.S. antitrust laws in international markets. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Protections in International Competition KEYWORDS: Bloom's: Synthesis 36. The OECD is resistant to the U.S. position against bribery. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trust, Corruption, Trade, and Economics KEYWORDS: Bloom's: Knowledge 37. OECD has relationships with 70 countries and NGOs. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trust, Corruption, Trade, and Economics KEYWORDS: Bloom's: Knowledge

38. The WTO is the body charged with OECD enforcement. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of International Law KEYWORDS: Bloom's: Synthesis 39. NAFTA applies only to goods that originate in the U.S., Mexico, and Canada. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of International Law KEYWORDS: Bloom's: Knowledge 40. The effect of the FCPA has been to decrease U.S. companies’ competitiveness. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trust, Corruption, Trade, and Economics KEYWORDS: Bloom's: Evaluation 41. EU and countries’ antitrust laws do not apply to U.S. companies doing business in the EU. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Protections in International Competition KEYWORDS: Bloom's: Application 42. There was some resistance to granting China MFN status. a. True

b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of International Law KEYWORDS: Bloom's: Knowledge 43. GATT is an example of a bilateral trade agreement. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of International Law KEYWORDS: Bloom's: Knowledge 44. NAFTA is an example of a bilateral trade agreement. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of International Law KEYWORDS: Bloom's: Knowledge 45. The U.S. sanctions against trade with Iran are an example of a unilateral trade sanction. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of International Law KEYWORDS: Bloom's: Knowledge 46. Which of the following is not a source of international law? a. custom b. private law c. treaties

d. All of the above are sources of international law.

ANSWER: d POINTS: 1 DIFFICULTY: Knowledge NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of International Law KEYWORDS: Bloom's: Knowledge 47. Which of the following countries does not base their legal systems on code law? a. Great Britain b. Italy c. France d. Spain ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of International Law KEYWORDS: Bloom's: Synthesis 48. The act of state doctrine: a. is not recognized by the United States. b. prohibits one government from interfering in the acts of state of another government. c. is prohibited by members of the United Nations. d. all of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Principles of International Law KEYWORDS: Bloom's: Comprehension 49. A U.S. luxury liner was attacked by an Iraqi ship in the Persian Gulf. Many passengers were injured and the ship was damaged. The owner of the ship brought suit in federal district court against the government of Iraq. The suit will: a. be heard because the attack was a violation of international law. b. be heard because the attack harmed U.S. citizens. c. not be heard under the doctrine of sovereign immunity. d. be heard but only in the International Court of Justice.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking

TOPICS: KEYWORDS:

Principles of International Law Bloom's: Analysis

50. Which of the following is not a LESCANT factor? a. language b. law c. social organization d. contexting ANSWER: b POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of International Law KEYWORDS: Bloom's: Knowledge 51. The contact lens company, Here's Clear Eye, sold thousands of pairs of contact lenses in Kenya. The lenses were defective and resulted in severe eye infections, and in 156 cases, blindness. The purchasers of the lenses who bring suit in Kenya will be entitled to recover their purchase price, attorney fees and medical bills. Kenya does not permit recovery for pain and suffering nor for permanent injury. Several of the purchasers who are blind have brought suit in South Carolina, the home of Here's Clear Eye. South Carolina permits recovery for permanent injury as well as punitive damages. The average recovery in Kenya for the purchasers is $600. A lawyer for the purchasers from Columbia, South Carolina estimates the average verdict will be $600,000. Which of the following statements is true? a. The Kenya purchasers may use the South Carolina courts because their remedies in Kenya are inadequate. b. The South Carolina cases will be dismissed on the grounds of forum non conveniens. c. The Kenya purchasers can recover only punitive damages in South Carolina. d. The Kenya purchasers can recover only for permanent injuries in South Carolina.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Principles of International Law KEYWORDS: Bloom's: Analysis 52. Nike and Reebok, the number-one and number-two athletic shoe companies in the United States, could combine to do business: a. but they would violate U.S. antitrust laws. b. outside the U.S. under the Export Trading Company Act. c. but would risk charges of monopolization. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Protections in International Competition

KEYWORDS:

Bloom's: Synthesis

53. The government of Argentina has taken over all the country's banks. No compensation has been paid. Some U.S. citizens and businesses had accounts in the banks. Absent treaty provisions the takeover: a. can be set aside by a U.S. federal court because no compensation was paid. b. can be partially set aside by a U.S. federal court on the accounts of U.S. citizens and businesses. c. can be reviewed by the U.S. State Department. d. is immune from review under the act of state doctrine.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Principles of International Law KEYWORDS: Bloom's: Synthesis 54. The European Union: a. is a trademark registration organization. b. eliminated tariff protections for its members in 1992. c. is an international court of justice. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of International Law KEYWORDS: Bloom's: Synthesis 55. Which of the following is a multilateral treaty? a. a treaty between the United States and Canada on acid rain b. a treaty between Mexico and the United States on border drug traffic c. a treaty between England, Japan, and the United States on trade with China d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of International Law KEYWORDS: Bloom's: Application | Bloom's: Synthesis 56. The _____ Doctrine confirms the independence of sovereign nations and their courts. a. International Sovereignty b. Act-of-Sovereign c. Act-of-State

d. Act-of-Solidarity ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Principles of International Law KEYWORDS: Bloom's: Application 57. U.S. businesses that break laws while operating in foreign countries: a. cannot be prosecuted in those countries. b. are immune under the act of state doctrine. c. are subject to full prosecution, fines, and imprisonment. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Principles of International Law KEYWORDS: Bloom's: Application 58. Italian manufacturers of leather goods have agreed to charge uniform prices on all sales in the United States in order to better compete with U.S. manufacturers. Which of the following statements is true? a. The agreement is a violation of U.S. antitrust laws, and the Italian manufacturers can be prosecuted. b. The manufacturers are protected under the act of state doctrine. c. The manufacturers enjoy sovereign immunity. d. The manufacturers are protected under the forum non conveniens doctrine.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Protections in International Competition KEYWORDS: Bloom's: Synthesis 59. Which of the following sets limits on removal of profits from a country? a. expropriation b. forum non conveniens c. repatriation d. sovereign immunity ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal

TOPICS: KEYWORDS:

Principles of International Law Bloom's: Synthesis

60. The CISG: a. is the contract law of the EU. b. is part of GATT. c. was drafted by a commission of the United Nations. d. has been adopted in virtually every nation.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of International Law KEYWORDS: Bloom's: Comprehension 61. Expropriation is the: a. taking of private property by a country. b. development of tariffs for goods leaving the country. c. collection of a line of credit by property repossession. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Principles of International Law KEYWORDS: Bloom's: Comprehension 62. U.S. antitrust laws: a. do not apply to companies based in other countries that are doing business in the United States. b. do not apply to U.S. companies doing business in other countries. c. apply to companies based in other countries that do business in the U.S. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Protections in International Competition KEYWORDS: Bloom's: Application 63. The Export Trading Company Act of 1982: a. permits combinations of U.S. firms for purposes of international competition. b. is part of NAFTA. c. is under judicial challenge by the Justice Department.

d. is a tariff provision in the U.S. ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of International Law KEYWORDS: Bloom's: Knowledge 64. Sovereign immunity: a. applies to U.S. businesses here if they are engaged in international transactions. b. applies to commercial transactions by private foreign firms. c. does not apply to clear violations of international law by governments engaged in commercial transactions. d. means each country is equal in its authority over its own laws and operations.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Principles of International Law KEYWORDS: Bloom's: Comprehension 65. Most favored nation status means: a. there are no import or export tariffs. b. the country can engage in software importation with no intellectual property protections in place. c. the country is a party to the NAFTA treaty. d. there are no human rights issues in the country. e. none of the above ANSWER: e POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of International Law KEYWORDS: Bloom's: Comprehension 66. What is the purpose of the LESCANT factors? a. To deal with issues beyond the law when doing business in other countries. b. To control tariff imports and exports. c. To establish a uniform system of international contract laws. d. To eliminate grease payments. e. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal Sources of International Law Bloom's: Comprehension

67. Which of the following would be a violation of the Foreign Corrupt Practices Act? a. A payment to a foreign government official to have a license application accelerated. b. A payment to a member of the International Olympic Committee in order to obtain his or her vote on an Olympic site. c. A payment to an official of a government-owned telecommunications company in order to speed up installation of phones in a business office. d. A payment to a customs official in order to allow the unloading of goods from a ship. e. All of the above are violations of the Foreign Corrupt Practices Act. ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trust, Corruption, Trade, and Economics KEYWORDS: Bloom's: Application 68. Which of the following are included as categories to whom payments are prohibited to influence results or outcome under the Foreign Corrupt Practices Act? a. government officials b. judicial figures c. government administrative hearing officers d. head of the United Nation's International Labor Organization e. All of the above are included.

ANSWER: e POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trust, Corruption, Trade, and Economics KEYWORDS: Bloom's: Application 69. What is the effect of trade sanctions? a. businesses are prohibited from dealing with certain countries b. businesses are prohibited from selling certain items in countries subject to the sanctions c. there is no effect; they are strictly voluntary d. either a or b e. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal

TOPICS: KEYWORDS:

Sources of International Law Bloom's: Application

70. Which of the following is not part of the Foreign Corrupt Practices Act? a. financial statement disclosure requirements b. requirement of internal monitoring in companies to prevent violations c. requirement of public disclosure of all bids in foreign countries d. requirement of monitoring contracts with foreign agents e. both a and d are not part of the Foreign Corrupt Practices Act ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trust, Corruption, Trade, and Economics KEYWORDS: Bloom's: Comprehension 71. The FCPA does not make which of the following acts criminal? a. giving money to a foreign political candidate b. giving a gift of clothing to a foreign political official c. giving money as a means of preventing action from being taken d. giving a payment for facilitation ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trust, Corruption, Trade, and Economics KEYWORDS: Bloom's: Application 72. Forum non conveniens: a. is a principle of U.S. justice. b. is a principle of jurisdiction. c. can require a case to be sent out of the U.S. d. all of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Principles of International Law KEYWORDS: Bloom's: Knowledge 73. Rich Hasbro is a vice president for Huffy Diapers. He currently heads the African division of this international company. He has just been able to secure approval for sale of Huffy Pull-Ons in the Sudan. When the Pull-Ons arrive at the borders, a customs agent demands $5,000 before he will allow the Pull-Ons into his country. Rich tells the trucking

company, “Pay him. I’ll reimburse.” a. Rich has not violated the FCPA because this is a facilitation payment. b. Rich has not violated the FCPA because a third party made the payment. c. Rich has violated the FCPA. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trust, Corruption, Trade, and Economics KEYWORDS: Bloom's: Application 74. An NGO: a. is not subject to the controls of the FCPA. b. is not subject to any nation’s laws. c. is an oil cartel. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trust, Corruption, Trade, and Economics KEYWORDS: Bloom's: Comprehension 75. Which of the following is covered under the FCPA’s prohibitions? a. obtaining business b. retaining business c. directing business d. all of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trust, Corruption, Trade, and Economics KEYWORDS: Bloom's: Comprehension 76. Which of the following does the U.S. Justice Department refer to as a “red flag” for FCPA violations? a. large consulting fees b. hiring consultants to do all foreign business c. allowing consultants to act independently in foreign countries d. all of the above ANSWER: d POINTS: 1

DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trust, Corruption, Trade, and Economics KEYWORDS: Bloom's: Application 77. Most-favored-nation status is: a. part of the GATT treaty. b. part of United States’ trade policy only. c. is only part of EU governance. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of International Law KEYWORDS: Bloom's: Comprehension 78. The United State has, since 1989, prohibited U.S.-based companies from selling military equipment to China. This restriction is an example of: a. a treaty trade restriction. b. an individual nation sanction. c. an illegal boycott. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of International Law KEYWORDS: Bloom's: Application 79. OPEC is: a. a treaty among the EU, the Arab nations and the U.S. b. an international environmental NGO. c. an oil cartel. d. disbanded.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of International Law KEYWORDS: Bloom's: Knowledge

80. Adam Smith supported international trade because: a. countries could focus on what they did well and then trade with other countries for goods and services they did not do so well. b. he felt tariffs were the best way to raise money for government purposes. c. companies could operate without regulation. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of International Law KEYWORDS: Bloom's: Comprehension 81. The Alternative Fines Act: a. is an act used by U.S. Customs to increase the penalties for those who try to circumvent tariffs. b. was declared unconstitutional. c. is a form of expatriation. d. is used by the Justice Department in FCPA violations.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trust, Corruption, Trade, and Economics KEYWORDS: Bloom's: Comprehension 82. Andre Dubai is the CEO of Lacota, a firm headquartered in Portugal. Lacota has acquired 10 companies in the United States. One of the companies is publicly traded on NASDAQ. Lacota does not have the reporting mechanisms, ethics codes, or board structure for its NASDAQ company that are required under U.S. laws for publicly traded companies.

Dubai says that he and Lacota have sovereign immunity from U.S. laws. a. Dubai is correct; the business is, for all purposes, located in Portugal. b. Lacota cannot be forced to comply with U.S. securities laws because U.S. courts have no jurisdiction over it. c. Dubai, Lacota, and their NASDAQ company must comply with U.S. laws. d. both a and b ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Principles of International Law KEYWORDS: Bloom's: Synthesis 83. Sunoco Oil Company had long-term oil supply contracts with KW, an oil company in Kuwait. The contracts were negotiated in 1989. The contracts ran smoothly until 1990, when armed forces from Iraq took possession of the oilproducing facilities of Kuwait. The eventual result was the Persian Gulf War which began in early 1991. Sunoco's oil was not delivered for over one year. Sunoco wishes to know its damage rights against KW for the year-long interruption in its

oil supply.

ANSWER:

Sunoco probably has a force majeure clause in its contract with KW, which will excuse KW from performance because of events like the declaration of war and the taking of a country and its property by another country. Even without a force majeure clause, KW could argue impossibility - because of the takeover by another country and the war and the eventual burning of the wells, no one could have performed on the contract. In addition, the Iraqi takeover brought all business to a halt.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of International Law KEYWORDS: Bloom's: Application 84. Go-Video has developed a DVD recorder that is dual deck and is capable of playing one DVD while recording on the other DVD. Several Japanese manufacturers have taken action to block the entry of the machine onto the market by prohibiting dealers from handling the product (if they do, their dealership for the Japanese DVD recorders and TVs is terminated). Go-Video has brought suit against the Japanese manufacturers for violation of the antitrust laws. Are the Japanese manufacturers subject to U.S. antitrust laws?

ANSWER: The companies are subject to U.S. jurisdiction for criminal violations if they are doing business in the United States.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Protections in International Competition KEYWORDS: Bloom's: Application 85. Otis Elevator became a joint venturer with the government of South Vietnam, with a 70/30 profit split. The Vietnamese government then imposed a rule that allowed it to take 90% of all profits earned in Vietnam. Does Otis have any rights to return to the 70/30 split?

ANSWER: Otis has no remedy in the U.S. and expropriation is a valid act of state. Otis has encountered one of the risks of international business.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Principles of International Law KEYWORDS: Bloom's: Application 86. PepsiCo entered into an agreement with the Indian government to provide training in farming techniques and return 40 percent of its profits from Indian operations to the government in order to obtain the right to do business in India.

Describe all of the laws and principles of international law involved in this agreement.

ANSWER: The Indian government is engaged in expropriation, but it is done in an up-front matter. That is, the U.S. company has agreed to these conditions as a means of obtaining the right to do business in India. In addition PepsiCo is trying to exercise social responsibility for the right to enter the country by agreeing to help with the advancement of farming and crops.

The contract would be governed by Indian law and would be enforced by the courts of India.

However, there is substantial risk associated with such agreements because to the extent there is a change in political power, there could be changes in the agreement, including a change in

the profit split.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Principles of International Law KEYWORDS: Bloom's: Synthesis 87. Suppose Rich is required to pay a $500 levy for every $10,000 of Pull-Ons brought into the Sudan. “If I could just get those numbers down on the shipping documents, I could save a bundle on these levys.” Rich works with a customs officer and two sets of shipping documents. The customs officer files papers showing half of the goods actually brought into his country. Instead of paying $500 as a levy, Rich pays $250 and pays $50 for each $10,000 to the agent for the help with the documents. Has Rich violated the FCPA? ANSWER: Students should mention the Kay consider where the court held that having documents falsified to reduce costs is a FCPA violation.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trust, Corruption, Trade, and Economics KEYWORDS: Bloom's: Application 88. Why are pirates so difficult to prosecute?

ANSWER: Beyond catching the pirates and proving their crimes, what crimes are committed and under what laws? Does any country have jurisdiction in international waters? Does any country have a right to prosecute a citizen of another country for crimes committed in another country? Additionally, there are different attitudes concerning pirates in different countries.

All of these issues combine to make the prosecution of pirates difficult.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of International Law KEYWORDS: Bloom's: Analysis Swenson’s Ice Cream is doing business in Somalia. After three successful years of operating three ice cream parlors in the country, the Somali government took over the three ice cream parlors and began operating them and keeping the money paid by customers.

89. Which of the following terms applies to this action by the Somali government? a. Sovereign immunity b. Expropriation c. Repatriation d. Protectionism ANSWER: b POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Principles of International Law KEYWORDS: Bloom's: Application 90. Swenson’s wishes to challenge the actions of the Somali government in court. Which of the following best describes Swenson’s right to do so? a. Swenson can file suit in federal district court in the United States and seek to have the confiscation issue addressed by a judge. b. Swenson can file suit in federal district court in Somalia and seek to have the confiscation issue addressed by a judge. c. Swenson is without remedy in this situation. d. Under the Geneva Convention, the property must be returned to Swenson.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Principles of International Law KEYWORDS: Bloom's: Application 91. Actor Gerard Depardieu moved to Belgium in order to avoid having to pay French taxes of nearly 75% on his income, thereby denouncing his French citizenship. Mr. Depardieu wishes to avoid which of the following by denouncing his citizenship and living in Belgium? a. Repatriation b. Extradition c. Expropriation d. Sovereign immunity ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Principles of International Law KEYWORDS: Bloom's: Application 92. Jack Zettler, a resident of Germany, works as an agent for Samson Enterprises, a U.S. company. Jack’s job is to help negotiate steel rail contracts for Samson with the German government. Jack often takes German Department of Transportation officials out for beer or coffee to discuss Samson and its products. Which of the following statements is correct? a. Jack has violated the FCPA by offering government officials something of value. b. Jack may have violated German law, but Samson is not subject to the FCPA provisions when doing business in Germany. c. Neither Jack nor Samson has violated the FCPA. d. Only U.S. employees working in other countries can violate the FCPA. ANSWER: c POINTS: 1

DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Trust, Corruption, Trade, and Economics KEYWORDS: Bloom's: Synthesis

1. Embezzlement is theft by an employee. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Theft and Embezzlement KEYWORDS: Bloom's: Knowledge 2. Economic pressure is generally not a reason for corporate crime. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What is Business Crime? The Crimes Within a Corporation KEYWORDS: Bloom's: Comprehension 3. Intrabusiness crime is internal or employee crime. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What is Business Crime? The Crimes Within a Corporation KEYWORDS: Bloom's: Comprehension 4. Mens rea is the particular mental state required to establish a crime. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Elements of Business Crime KEYWORDS: Bloom's: Knowledge 5. Directors are liable for a crime if the corporation is found guilty of the crime. a. True

b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Who is Liable for Business Crime?

KEYWORDS: Bloom's: Application 6. Some crimes do not carry a mens rea requirement. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Elements of Business Crime KEYWORDS: Bloom's: Comprehension 7. RICO is a federal criminal statute. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Racketeer Influenced and Corrupt Organization Act (RICO) KEYWORDS: Bloom's: Knowledge 8. Criminal fraud is the same as contract fraud. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Criminal Fraud KEYWORDS: Bloom's: Comprehension 9. RICO applies only to corporations. a. True b. False ANSWER: False

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Racketeer Influenced and Corrupt Organization Act (RICO) KEYWORDS: Bloom's: Knowledge 10. Racketeering acts under RICO include theft, burglary, and arson. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Racketeer Influenced and Corrupt Organization Act (RICO) KEYWORDS: Bloom's: Knowledge 11. The Fourth Amendment is the Miranda warning amendment. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Knowledge 12. The Sixth Amendment is the right-to-speedy trial amendment. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Knowledge 13. Probable cause is required only for warrantless searches. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Comprehension 14. The exceptions for obtaining warrants include evidence in "plain view." a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Comprehension 15. The Fourth Amendment privacy protections do not apply to business records. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Comprehension 16. "Taking the Fifth" refers to the Fifth Amendment protection against self-incrimination. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Comprehension 17. Corporate officers cannot invoke the Fifth Amendment for a corporation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal

TOPICS: KEYWORDS:

Procedural Rights for Business Criminals Bloom's: Comprehension

18. The failure to give Miranda warnings is fatal to a case. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Comprehension 19. A preliminary hearing is the same proceeding as an arraignment. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Comprehension 20. The omnibus hearing is held before the preliminary hearing. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Comprehension 21. The defendant enters his/her plea at the arraignment. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Comprehension

22. Bond or bail is established at the initial appearance. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Comprehension 23. A grand jury issues an information. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Comprehension 24. Plea bargaining is done only before the arraignment. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Comprehension 25. A preliminary hearing requires that the defendant take the stand. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Comprehension 26. RICO applies only to repeat offenders.

a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Racketeer Influenced and Corrupt Organization Act (RICO) KEYWORDS: Bloom's: Comprehension 27. Under RICO, business owners can be criminally liable for violations even though they were not directly running the business. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Racketeer Influenced and Corrupt Organization Act (RICO) KEYWORDS: Bloom's: Comprehension 28. Corporate officers are not liable for acts delegated to subordinates. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Who is Liable for Business Crime?

KEYWORDS: Bloom's: Comprehension 29. The failure to follow crime prevention programs can result in harsher sentences under the U.S. corporate sentencing guidelines. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Reforming Criminal Penalties KEYWORDS: Bloom's: Knowledge 30. Employee protection against retaliation for reporting activities is a critical part of crime prevention under U.S.

guidelines. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Reforming Criminal Penalties KEYWORDS: Bloom's: Knowledge 31. Bribery is an ethical violation, but is not a crime. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Commercial Bribery KEYWORDS: Bloom's: Comprehension 32. An employee who is following orders cannot be held liable for any criminal charges that result from that conduct. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Who is Liable for Business Crime?

KEYWORDS: Bloom's: Comprehension 33. Voluntary reporting of criminal violations reduces a company's fines under the federal sentencing guidelines. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Reforming Criminal Penalties KEYWORDS: Bloom's: Knowledge 34. In punishments for corporate criminal cases, shame punishment is increasing. a. True

b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Reforming Criminal Penalties KEYWORDS: Bloom's: Knowledge 35. The corporate sentencing guidelines provide a mathematical formula for determination of corporate sentences for crimes. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Reforming Criminal Penalties KEYWORDS: Bloom's: Knowledge 36. Under the sentencing guidelines the Justice Department can agree to a non-prosecution agreement (NPA), but not to a deferred-prosecution agreement (DPA). a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Reforming Criminal Penalties KEYWORDS: Bloom's: Comprehension 37. Mens rea can be established without a confession. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Elements of Business Crime KEYWORDS: Bloom's: Application 38. The USA Patriot Act requires those handling large sums of cash to verify the sources of those funds. a. True

b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Business Crime and the USA Patriot Act KEYWORDS: Bloom's: Knowledge 39. Commercial bribery is only criminal for the recipient. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Commercial Bribery KEYWORDS: Bloom's: Comprehension 40. The “culpability multiplier” is part of the U.S. sentencing guidelines. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Reforming Criminal Penalties KEYWORDS: Bloom's: Application 41. Involvement of the top officers in corporate crimes increases the penalty under the U.S. sentencing guidelines. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Reforming Criminal Penalties KEYWORDS: Bloom's: Application 42. A willful violation of OSHA carries a possible one year prison sentence. a. True b. False ANSWER: True

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Penalties for Business Crime KEYWORDS: Bloom's: Comprehension 43. The White-Collar Criminal Penalty Act of 2002 is known as the King Pin Act. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Federal Laws Targeting Officers and Directors for Criminal Accountability KEYWORDS: Bloom's: Comprehension 44. SOX is the shorthand for the Sarbanes-Oxley business crime legislation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Federal Laws Targeting Officers and Directors for Criminal Accountability KEYWORDS: Bloom's: Knowledge 45. Monitors are often required by the Justice Department as part of a settlement of charges of corporate violations of criminal law. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Reforming Criminal Penalties KEYWORDS: Bloom's: Knowledge 46. Monitors are not permitted to have daily access to a corporation. a. True b. False ANSWER: False POINTS: 1

DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Reforming Criminal Penalties KEYWORDS: Bloom's: Knowledge 47. Which of the following is not a requirement of mens rea? a. a specific act b. the state of mind required for the crime c. the intent to deprive d. All of the above are required for mens rea.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Elements of Business Crime KEYWORDS: Bloom's: Knowledge 48. In order to establish criminal liability of the directors of a corporation: a. a prosecutor need only establish that the corporation committed a crime. b. a prosecutor must establish that the directors had criminal intent. c. the corporation is liable for criminal acts but the directors are not liable. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Elements of Business Crime KEYWORDS: Bloom's: Application 49. Embezzlement is: a. theft by an employee. b. a crime that does not require proof of intent. c. a crime that can occur when property is borrowed. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Theft and Embezzlement KEYWORDS: Bloom's: Knowledge 50. The mens rea required for theft is:

a. intent to take the property permanently. b. intent to borrow the property. c. general intent to commit a crime. d. none - strict liability crime. e. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Theft and Embezzlement KEYWORDS: Bloom's: Comprehension 51. What is the distinction between theft and embezzlement? a. the mens rea is different b. the amount taken c. the entrustment of the property d. They are the same crime.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Theft and Embezzlement KEYWORDS: Bloom's: Comprehension 52. RICO applies to: a. only organized crime. b. only physical force crimes. c. racketeering activity. d. only obstruction of justice. e. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Racketeer Influenced and Corrupt Organization Act (RICO) KEYWORDS: Bloom's: Application 53. Racketeering acts under RICO include: a. pension fund fraud. b. bribery. c. extortion. d. a and c only e. all of the above

ANSWER: e POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Racketeer Influenced and Corrupt Organization Act (RICO) KEYWORDS: Bloom's: Comprehension 54. The Fourth Amendment: a. is the privacy protection amendment. b. provides the right for a jury trial. c. provides the protection against self-incrimination. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Comprehension 55. Exceptions to the warrant requirement include: a. RICO violations. b. plain view doctrine. c. no available magistrate. d. records under the FCPA. ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Comprehension 56. The Fifth Amendment: a. affords protection against self-incrimination. b. can be used by a corporation. c. can be used by officers to prevent disclosure of corporate records. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Comprehension

57. The Miranda warnings: a. must be given or the case is dismissed. b. are based on Fifth Amendment rights. c. are based on Fourth Amendment rights. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Comprehension 58. In criminal procedure, the initial appearance: a. is the preliminary hearing. b. is where bail is set. c. follows the grand jury proceedings. d. is where a plea is entered.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Comprehension 59. An indictment is: a. a document issued by the grand jury. b. issued after a preliminary hearing. c. followed by an information. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Comprehension 60. The omnibus hearing is: a. the same as the preliminary hearing. b. held before trial to determine evidentiary issues. c. held after trial. d. none of the above ANSWER: b

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Comprehension 61. The purpose of an omnibus hearing is to: a. issue an indictment. b. issue an information. c. hear evidentiary challenges. d. have the defendant enter a plea.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Comprehension 62. Most RICO charges involve: a. mail fraud, wire fraud or securities fraud. b. organized crime. c. wage tax violations. d. individuals and not companies.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Racketeer Influenced and Corrupt Organization Act (RICO) KEYWORDS: Bloom's: Application 63. Which of the following is not an element of the crime of embezzlement? a. intent to take property b. taking property permanently c. no authorization to take the property d. All of the above are elements of embezzlement.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Theft and Embezzlement KEYWORDS: Bloom's: Comprehension

64. Which of the following is not an element of criminal fraud? a. a false material statement b. reliance by the buyer c. a mistake by the seller d. All of the above are elements.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Criminal Fraud KEYWORDS: Bloom's: Comprehension 65. The Fourth Amendment protections: a. apply to individuals. b. do not apply to corporations. c. do not apply to corporate officers. d. all of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Comprehension 66. The Fifth Amendment protections: a. apply to corporations. b. can be used by officers of a corporation to prevent disclosure of corporate records. c. can be used by officers of a corporation to prevent disclosure of corporate records that incriminate them. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Comprehension 67. The failure to give the Miranda warnings: a. is a problem only if the defendant is in jail. b. will result in a dismissal of all charges. c. is a problem only if the defendant is in custody. d. none of the above ANSWER: c POINTS: 1

DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Comprehension 68. The purpose of the initial appearance is to: a. issue an indictment against the defendant. b. set the terms of release (if any). c. allow the judge to issue an information. d. provide the defendant with the opportunity to appear before the grand jury.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Comprehension 69. The purpose of an arraignment is to: a. issue an indictment against the defendant. b. set the trial date. c. provide the defendant with the opportunity to appear before the grand jury. d. ensure that the Miranda warnings are given.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Comprehension 70. Which of the following would mitigate an officer's or corporation's sentence under the corporate sentencing guidelines? a. officer had no direct knowledge; he/she was only the supervising manager b. the company had an ethics training program c. subordinates failed to follow orders d. subordinates were demoted for questioning decisions ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Reforming Criminal Penalties KEYWORDS: Bloom's: Application

71. Which of the following is not an exception to the Fourth Amendment search warrant requirement? a. a search of a burning building b. a search of an area in plain view c. an inspection of a factory for safety violations d. All of the above are exceptions to the warrant requirement.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Application 72. "Taking the Fifth" means: a. refusing to allow a search of your office. b. refusing to turn over corporate documents. c. refusing to testify to prevent self-incrimination. d. demanding a search warrant.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Application 73. At which of the following procedures may a defendant present evidence? a. initial appearance b. trial c. grand jury d. appeal ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Comprehension 74. The FBI has developed new technology that enables it to listen to conversations in homes from vans parked in the street outside the homes. While listening to conversations in one neighborhood, the FBI uncovers a meth lab. Agents move in and arrest those in the home without a warrant. Under the Kyllo case: a. the FBI is not required to have a warrant because the information was uncovered without invading the house. b. the FBI is not required to have a warrant because the information was uncovered from outside the private property of the individuals involved. c. the FBI is required to have a warrant in order to listen to the conversations.

d. the FBI needs a warrant to listen only if it is going to arrest someone. e. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Analysis 75. The Money Laundering Control Act: a. applied only to financial institutions. b. prohibited concealing or disguising sources of funds. c. both a and b d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Business Crime and the USA Patriot Act KEYWORDS: Bloom's: Comprehension 76. The USA Patriot Act: a. has been declared unconstitutional. b. expanded the Money Laundering Control Act. c. applies only to banks. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Business Crime and the USA Patriot Act KEYWORDS: Bloom's: Comprehension 77. Which of the following would be the crime of obstruction of justice? a. making a false entry b. certification of financial statements c. destroying e-mails d. both a and c ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal

TOPICS: KEYWORDS:

Obstruction of Justice Bloom's: Application

78. Mens rea is: a. the actual criminal act. b. not required for proof of a crime. c. only required for common-law crimes. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Elements of Business Crime KEYWORDS: Bloom's: Comprehension 79. Joan owns a citrus tree farm near Mesa, Arizona. Joan and her family have fertilized the trees each spring for 52 years.

The irrigation for the trees carries the fertilizer remnants into the Salt River. When EPA investigators discover the fertilizer in the Salt River and trace the unique brand to Joan, they indict her for violation of the Clean Water Act, for the discharge of a substance into a waterway. Joan responds, “I didn’t know there was fertilizer. I was just letting water flow.” a. Joan has sufficient mens rea for the crime. b. Joan can rely on the Ahmad case and escape criminal liability. c. Joan can be held criminally liable for negligence. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Elements of Business Crime KEYWORDS: Bloom's: Analysis 80. According to Arizona v. Gant, police officers: a. may not search a vehicle when the owner is present. b. may search a vehicle with the driver’s permission or with a warrant. c. may search a vehicle only with a warrant. d. may no longer search vehicles because it is an invasion of privacy.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Analysis 81. Which of the following will reduce a corporation’s sentence under the U.S. Sentencing Guidelines?

a. having a code of ethics b. having ethics training c. having ethics hotline d. All of these can reduce a corporation’s sentence.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Reforming Criminal Penalties KEYWORDS: Bloom's: Application 82. Which is the new crime created by Sarbanes-Oxley? a. mail fraud b. obstruction of justice c. certification of false financial statements d. both a and b ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Federal Laws Targeting Officers and Directors for Criminal Accountability KEYWORDS: Bloom's: Application 83. The penalty for document destruction under Sarbanes-Oxley is: a. five years. b. ten years. c. fifteen years. d. twenty years.

ANSWER: d POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Penalties for Business Crime KEYWORDS: Bloom's: Knowledge 84. Bernie Ebbers, the former CEO of WorldCom, on trial for securities fraud and other crimes, offered as his defense that he did not know what his officers were doing. a. Ebbers’ defense is a valid one because there is no intent. b. Ebbers’ defense is a valid one because there is no actus reus. c. Ebbers can be held liable for the actions of employees. d. both a and b ANSWER: c POINTS: 1

DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Who is Liable for Business Crime?

KEYWORDS: Bloom's: Comprehension 85. Penalties for corporate officers under Sarbanes-Oxley include: a. 20 years for mail and wire fraud. b. 10 years for violation of fiduciary duties. c. a maximum penalty of $5,000. d. both a and b ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Federal Laws Targeting Officers and Directors for Criminal Accountability KEYWORDS: Bloom's: Knowledge 86. Dennis Kozlowski was the former CEO of Tyco who was charged with larceny, otherwise known as embezzlement.

During his trial, Mr. Kozlowski offered testimony that all of his loans from the company that were not repaid were authorized loans that had been forgiven by the board of directors. The testimony about the board’s approval: a. shows a lack of mens rea on Kozlowski’s part. b. shows he did not have the actus reus of taking something that did not belong to him. c. is irrelevant because the money belonged to the corporation. d. both a and b ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Elements of Business Crime KEYWORDS: Bloom's: Analysis 87. Under Sarbanes-Oxley, auditors must retain their work papers: a. for one year. b. for three years. c. for five years. d. until they no longer represent a client.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Obstruction of Justice KEYWORDS: Bloom's: Knowledge

88. Ann McMillan is a CPA with a public accounting firm. A client of Ann’s has called to tell her that the SEC is investigating the company for possible misrepresentations in the company’s financial reports. Ann is worried that she may have pushed the envelope in allowing some of the revenues of the client to be reported as they were. Ann shreds several sets of notes from her meetings with the client on revenue recognition. Ann a. is probably guilty of obstruction of justice. b. has done nothing wrong because the notes are privileged communication the SEC is not entitled to have. c. has not committed obstruction of justice because the SEC has not contacted her. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Obstruction of Justice KEYWORDS: Bloom's: Knowledge 89. What is usually the basis of RICO civil suits? a. criminal fraud or wire fraud b. prostitution c. gambling d. illegal drug sales or transportation ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Racketeer Influenced and Corrupt Organization Act (RICO) KEYWORDS: Bloom's: Knowledge 90. Which of the following laws require businesses to report cash transactions involving $10,000 or more? a. Bank Secrecy Act b. USA Patriot Act c. Money Laundering Control Act d. all of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Business Crime and the USA Patriot Act KEYWORDS: Bloom's: Comprehension 91. The “Know They Customer” program: a. is a federal program directed at commercial bribery prevention. b. is a federal program related to detecting money laundering.

c. is an unconstitutional federal program. d. both a and c ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Business Crime and the USA Patriot Act KEYWORDS: Bloom's: Comprehension 92. Officer Muldoon is on foot patrol in Tempe, Arizona when he looks inside a garage (the garage door is open) and sees a statute that he knows is a rare art work that was stolen the night before from a building downtown. Officer Muldoon: a. cannot use the sighting as a basis for a warrant. b. cannot enter the premises to recover the statute. c. is not permitted to look inside the garage from the street even when the door is open. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Analysis 93. Jason Ormand was arrested on suspicion of sexual assault. The arresting officers did not give Jason his Miranda warnings. Jason confesses to the assault. The DNA evidence taken from the victim shows with 99% certainty that Jason was her attacker. a. Because of the violation of Jason’s rights in the officers’ failure to give the Miranda warnings, the case must be dismissed. b. The case can still proceed with the DNA evidence. c. The case can proceed but only with the victim’s testimony. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Analysis 94. Schmuck was involved in the sale of used automobiles. He engaged in the practice of rolling back odometers and then selling the vehicles. What crime(s) has been committed?

ANSWER: U.S. v. Schmuck, 776 F.2d 1368 (7th Cir.1985). Fraud.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking

TOPICS: KEYWORDS:

Criminal Fraud Bloom's: Analysis

95. Pedro Moreno and Rolando Cue-Baiza brought their boat from Nassau to Miami. They re-entered the Miami port without going through customs. They docked the boat and began unloading it. Miami customs officials had observed the boat re-enter (by helicopter). When Moreno and Cue-Baiza began unloading the boat, customs officials sent in a team of officers to search the boat (no warrant). The officers discovered numerous bales of marijuana during the search and Moreno and Cue-Baiza were charged with drug possession and trafficking. They are now challenging the validity of the warrantless search. Discuss its validity.

ANSWER: The search met the emergency exception. Failing to go through customs was already a crime.

Agents saw unloading and acted because "fruits of the crime" were being eliminated. U.S. v.

Moreno, 778 F.2d 719 (11th Cir.1985).

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Analysis 96. McGuire was an employee of First National Bank of Grayson (FNBG). FNBG participated in a Kentucky Housing Corporation (KHC) program in which KHC loaned money to financial institutions. The institutions would then make lowinterest loans to low-income individuals who qualified for purchase of a home. FNBG received the funds and produced bogus paperwork for 80 loans but never loaned the money. Instead, they invested the money at a high rate of interest.

Eventually the money was returned to KHC, but McGuire was charged with making false records and fraud. Can McGuire, as an employee, be held liable?

ANSWER: The court held yes because he did all the work and knew the purposes of the paperwork and the investment. The scheme defrauded the government agency of funds that could have been used for low-income housing. U.S. v. McGuire, 744 F.2d 1197 (11th Cir. 1984).

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Who is Liable for Business Crime?

KEYWORDS: Bloom's: Analysis 97. Ann McEachron is an administrative assistant at a large international accounting firm. Her supervisor has asked her to destroy boxes of documents from an audit the firm conducted 2 years ago. The firm generally keeps records for 7 years, because of potential tax liability and issues, but it has destroyed documents earlier in cases in which the amount of paperwork becomes overwhelming. Ann wonders about the request, but complies with her supervisor's order.

The company that was the subject of the audit is currently under criminal investigation and the partner in the accounting firm who conducted the audit is aware of that investigation.

It is a federal crime to destroy documents that are involved in or could potentially be involved in either a civil or criminal investigation. Evaluate the criminal liability of Ann, her supervisor and the partner for the destruction of the documents.

Would your answer be different if Ann had read in the newspaper about the criminal investigation of the company?

ANSWER: The issue is whether Ann and her supervisor had intent. It is clear that the audit partner had intent, however. The fact that he did not perform the physical act of destruction does not shield him from liability under the criminal statute. Supervisors, officers and directors can be held criminally liable for the conduct of those who report to them. If it can be shown that Ann was aware of the investigation of the company, then she develops the requisite intent. Her

lack of knowledge of the law is not a defense to the destruction.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Elements of Business Crime KEYWORDS: Bloom's: Analysis 98. Discuss the procedural changes made as a result of Arizona v. Gant.

ANSWER: The Supreme Court held that when the police searched Gant’s (the driver’s) car when he was handcuffed in a police car, that violated his rights. The police may only search a vehicle with the driver’s consent or with a warrant. The procedural changes because of this is police officers may not detain the driver while searching the driver’s vehicle; this may allow the driver to flee, try to hide the evidence, or attack an officer.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Comprehension 99. Explain the changes Sarbanes-Oxley made to criminal laws.

ANSWER: Additional penalties for white collar crimes.

New crimes, including financial certification fraud.

New sentencing guidelines and new requirements for programs and carrots-and-sticks.

New records retention requirements.

More expansive standards for obstruction of justice conduct and greater penalties.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Federal Laws Targeting Officers and Directors for Criminal Accountability Reforming Criminal Penalties KEYWORDS: Bloom's: Knowledge 100. Glen Albanese was arrested after federal authorities conducted an investigation that indicated the funds that he had raised for relief efforts for Hurricane Katrina victims had been used to purchase landscaping for his home, acquire a Labradoodle pedigree dog, and buy tickets to DisneyWorld and Six Flags. Mr. Albanese had raised funds for his charity by advertising that the funds raised would be used to rebuild homes and provide scholarships for the children of victims.

Instead, he met individuals who sold him the dog and furnished the landscaping in odd locations and paid them in cash in envelopes. Which of the following crimes would be applicable for the federal authorities to charge? a. Criminal fraud b. Embezzlement c. A violation of SOX d. a and b only e. all of the above ANSWER: d POINTS: 1

DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Theft and Embezzlement Criminal Fraud KEYWORDS: Bloom's: Application Stewart Parnell, the former CEO of the now-bankrupt Peanut Corporation of America, was charged with falsifying food safety reports required by the FDA. The reports certified that his peanut base product was salmonella free. In some cases, the tests were not yet complete when the certification was done and in other cases the tests indicated the presence of salmonella.

101. Mr. Parnell and others formerly with the company had their charges issued through a grand jury. Which of the following would have been issued? a. indictment b. information c. subpoena d. warrant ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Analysis 102. Part of the case came from federal agents’ examination of e-mails Mr. Parnell sent to his managers and employees.

Which of the following is correct about the agents’ access to those e-mails? a. Because employees e-mails are not private, the agents did not need a warrant. b. The agents would have been required to obtain a warrant. c. Mr. Parnell could successfully object to the use of the e-mails because of his Fifth Amendment rights. d. both b and c ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Synthesis 103. Mr. Parnell entered a not guilty plea to the charges. Which of the following would have been the forum for entering that plea? a. grand jury b. preliminary hearing c. arraignment d. initial appearance

ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Procedural Rights for Business Criminals KEYWORDS: Bloom's: Comprehension 104. The crime Mr. Parnell is charged with is shipping contaminated food. What would the federal government have to show in its case to establish the crime? a. That Mr. Parnell did the actual shipping of the product. b. That Mr. Parnell saw the actual product before it was shipped. c. That Mr. Parnell knew that the product was contaminated before shipment occurred. d. all of the above ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Elements of Business Crime KEYWORDS: Bloom's: Synthesis 105. Who else would be criminally responsible for the shipment of contaminated product? a. board members b. managers who shipped the product knowing it was contaminated c. clerks who paid the shipping expenses d. shippers who handled the goods ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Who is Liable for Business Crime?

KEYWORDS: Bloom's: Synthesis 106. The U.S. Justice Department has entered into a deferred prosecution agreement with several U.S. banks on charges of mortgage fraud. The agreements provide that if the banks stay out of legal difficulties for five years then the charges will be dropped. The banks agreed to have monitors in place during the five years and pay a fine. Which of the following best describes what has been done by these arrangements with the banks? a. A guilty plea has been entered. b. A nolo contendere plea has been entered. c. There has been a finding of innocence. d. The parties have a corporate integrity agreement.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging

NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Reforming Criminal Penalties KEYWORDS: Bloom's: Synthesis 107. Which of the following crimes has been curbed back by appellate court decisions on corporate financial misstatements and officer liability? a. honest services fraud b. SOX financial certification provisions c. obstruction of justice d. criminal fraud ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Federal Laws Targeting Officers and Directors for Criminal Accountability KEYWORDS: Bloom's: Synthesis

1. A tort is a private wrong carrying criminal penalties. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What is a Tort? Roots of Law and Commerce KEYWORDS: Bloom's: Comprehension 2. Slander is oral defamation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Defamation KEYWORDS: Bloom's: Knowledge 3. A false statement that impeaches someone's honesty is defamatory. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Defamation KEYWORDS: Bloom's: Knowledge 4. Non-public figures need not prove publication in their suits for defamation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Defamation KEYWORDS: Bloom's: Comprehension 5. Only libel requires proof of publication. a. True

b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Defamation KEYWORDS: Bloom's: Comprehension 6. Public figures must prove malice to establish a case of defamation against a newspaper. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Defamation KEYWORDS: Bloom's: Comprehension 7. In most states, letters of reference are exempt from liability for defamation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Defamation KEYWORDS: Bloom's: Knowledge 8. "Car dealers are crooked" is an example of actionable defamation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Defamation KEYWORDS: Bloom's: Application 9. Members of Congress enjoy an absolute privilege for their speech while on the floor. a. True b. False ANSWER: True

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Defamation KEYWORDS: Bloom's: Comprehension 10. The media have a qualified privilege in defamation cases. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Defamation KEYWORDS: Bloom's: Comprehension 11. Testimony in a court room is not privileged for purposes of defamation actions. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Defamation KEYWORDS: Bloom's: Knowledge 12. The tort of contract interference requires knowledge of an existing contract between two parties. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Interference KEYWORDS: Bloom's: Knowledge 13. Contract interference is remedied by a suit for breach of contract. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Interference KEYWORDS: Bloom's: Comprehension 14. Qualified privilege statutes protect those with a moral obligation to speak. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Defamation KEYWORDS: Bloom's: Comprehension 15. The tort of false imprisonment requires proof of some actual injury. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: False Imprisonment KEYWORDS: Bloom's: Knowledge 16. The shopkeeper's privilege is a defense to false imprisonment if the detention is reasonable. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: False Imprisonment KEYWORDS: Bloom's: Knowledge 17. Malice is a required element in all defamation cases. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal

TOPICS: KEYWORDS:

Defamation Bloom's: Knowledge

18. Newspapers have an absolute privilege with respect to defamation suits. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Defamation KEYWORDS: Bloom's: Comprehension 19. It is possible that those who write letters of recommendation could have liability for the content of those letters. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Defamation KEYWORDS: Bloom's: Comprehension 20. Some damages other than emotional damages must be established for the tort of intentional infliction of emotional distress. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Intentional Infliction of Emotional Distress KEYWORDS: Bloom's: Knowledge 21. The disclosure of private but true facts is not an invasion of privacy. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Invasion of Privacy

KEYWORDS:

Bloom's: Knowledge

22. Negligence is available as a tort remedy only when the breach of duty is a statutory violation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Negligence KEYWORDS: Bloom's: Application 23. For public figures the media has a qualified privilege. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Defamation KEYWORDS: Bloom's: Knowledge 24. Invasion of privacy is a tort of negligence. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Invastion of Privacy KEYWORDS: Bloom's: Comprehension 25. All states provide some form of immunity for people who stop and help but make mistakes in offering their assistance. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Negligence KEYWORDS: Bloom's: Knowledge

26. Asking buyers to break their existing contracts with other suppliers is tortious interference. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Interference KEYWORDS: Bloom's: Knowledge 27. To establish the tort of false imprisonment, there must have been some physical harm. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: False Imprisonment KEYWORDS: Bloom's: Knowledge 28. There are three invasion of privacy torts. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Invasion of Privacy KEYWORDS: Bloom's: Knowledge 29. The use of someone's voice for commercial purposes without their permission is appropriation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Invasion of Privacy KEYWORDS: Bloom's: Knowledge 30. The use of someone's photo for commercial purposes without their permission is appropriation. a. True

b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Invasion of Privacy KEYWORDS: Bloom's: Knowledge 31. The use of someone's photo for commercial purposes without their permission is invasion of privacy. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Invasion of Privacy KEYWORDS: Bloom's: Knowledge 32. A newspaper photographer entering a delivery room and taking a picture of Julia Roberts delivering her twins has invaded her privacy. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Invasion of Privacy KEYWORDS: Bloom's: Application 33. A newspaper running a picture of Julia Roberts’ twins has invaded her privacy. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Invasion of Privacy KEYWORDS: Bloom's: Application 34. Speeding is a breach of duty for negligence purposes. a. True b. False

ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Negligence KEYWORDS: Bloom's: Comprehension 35. The failure to follow industry code is a breach of duty. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Negligence KEYWORDS: Bloom's: Application 36. Running a red light is a breach of duty for negligence purposes. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Negligence KEYWORDS: Bloom's: Application 37. Driving with brakes in need of replacement is not a breach of duty. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Negligence KEYWORDS: Bloom's: Application 38. A breach of duty can still be established for negligence cases even when the defendant has complied with the law. a. True b. False ANSWER: True POINTS: 1

DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Negligence KEYWORDS: Bloom's: Analysis 39. Proximate cause is the same thing as causation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Negligence KEYWORDS: Bloom's: Comprehension 40. The purpose of causation is to tie the breach of duty to the resulting injury. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Negligence KEYWORDS: Bloom's: Comprehension 41. Contributory negligence, if established, is a complete defense to negligence. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Negligence KEYWORDS: Bloom's: Comprehension 42. Comparative negligence, if established, is a complete defense to negligence. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal Negligence Bloom's: Comprehension

43. Assumption of risk is a complete defense to negligence. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Negligence KEYWORDS: Bloom's: Comprehension 44. The Palsgraf case expanded the notion of causation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Negligence KEYWORDS: Bloom's: Analysis 45. "Negligence in the air" is the standard of liability the Palsgraf case established. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Negligence KEYWORDS: Bloom's: Analysis 46. Businesses are never liable for criminal activity on their premises. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Negligence

KEYWORDS:

Bloom's: Analysis

47. Assumption of risk is not a defense unless there was full information prior to the risk being assumed. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Negligence KEYWORDS: Bloom's: Comprehension 48. Comparative negligence reduces the plaintiff's recovery. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Negligence KEYWORDS: Bloom's: Comprehension 49. The reasonable and prudent person standard is not used for establishing contributory negligence. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Negligence KEYWORDS: Bloom's: Comprehension 50. Proximate cause need not be established in negligence cases. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Negligence KEYWORDS: Bloom's: Comprehension

51. Comparative negligence and contributory negligence are the same thing. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Negligence KEYWORDS: Bloom's: Synthesis 52. Contributory negligence cannot be raised if there is causation proved against the tort feasor. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Negligence KEYWORDS: Bloom's: Analysis 53. Few states follow the doctrine of contributory negligence. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Negligence KEYWORDS: Bloom's: Knowledge 54. Employer privilege statutes are those that provide employers with defenses to defamation suits when they have shared information on former employees with prospective employers. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Defamation KEYWORDS: Bloom's: Knowledge 55. Employer privilege statutes apply even when there is intentional misrepresentation.

a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Defamation KEYWORDS: Bloom's: Comprehension 56. The duty of a reasonable person extends beyond statutory duties. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Negligence KEYWORDS: Bloom's: Comprehension 57. To establish assumption of risk, the defendant must show that the plaintiff was aware of the risk and accepted it voluntarily. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Negligence KEYWORDS: Bloom's: Comprehension 58. When skiing, those participating assume the risk of poorly marked trails. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Negligence KEYWORDS: Bloom's: Application 59. Writing a glowing letter of recommendation for someone in your organization who was accused of misconduct without mention of the charges can result in liability.

a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Defamation KEYWORDS: Bloom's: Comprehension 60. The “bystander effect” is an exception to contributory negligence liability. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Negligence KEYWORDS: Bloom's: Comprehension 61. HIPAA is a federal law for medical privacy. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Invasion of Privacy KEYWORDS: Bloom's: Knowledge 62. Britney Spears is an example of a public figure for purposes of proving malice. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Defamation KEYWORDS: Bloom's: Application 63. Opinion commentary is not defamation. a. True b. False

ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Defamation KEYWORDS: Bloom's: Application 64. The employer privilege statutes provide employers with some defenses for candor in references. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Defamation KEYWORDS: Bloom's: Knowledge 65. The reasonable person standard is the standard of duty for purposes of establishing negligence. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Negligence KEYWORDS: Bloom's: Knowledge 66. A witness in a high profile criminal trial is a public figure. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Defamation KEYWORDS: Bloom's: Application 67. Posting false information about a person to an Internet blog would be publication. a. True b. False ANSWER: True POINTS: 1

DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Defamation KEYWORDS: Bloom's: Application 68. Opinion and analysis of a person’s conduct are not defamation if the underlying facts are correct. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Defamation KEYWORDS: Bloom's: Application 69. A screensaver program that uses the likeness of a person is commercial appropriation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Invasion of Privacy KEYWORDS: Bloom's: Application 70. Posting false information in a chat room is not sufficient to establish defamation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Defamation KEYWORDS: Bloom's: Application 71. Defamation cannot exist in cyberspace because there is no evidence that someone heard or understood the statements. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal Defamation Bloom's: Application

72. Which of the following statements would qualify for a defamation action (assuming the statement is false)? a. "All corporate types are selfish." b. "Accountants will sign off on anything." c. "Jones pled guilty to a violation of campaign contribution laws." d. All of the above qualify for a defamation action.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Defamation KEYWORDS: Bloom's: Application 73. How many people must have heard or read a statement for there to be publication for purposes of defamation? a. one b. at least two c. there must be widespread community knowledge d. it must be heard simultaneously by at least two people ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Defamation KEYWORDS: Bloom's: Application 74. Which of the following would not be classified as libel? a. a newspaper article with untrue statements b. a letter with untrue statements sent to only one person c. a true statement d. a speech at a Veteran's Day parade ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Defamation KEYWORDS: Bloom's: Application 75. Public figures: a. can never have an action in defamation. b. lose their defamation action rights if the remark or information is part of a story.

c. can seek a retraction, but can never recover damages for defamation. d. must establish malice in order to recover damages for defamation.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Defamation KEYWORDS: Bloom's: Application 76. Contract interference: a. requires involvement by more than one third party. b. requires proof of intent to interfere. c. is a federal crime. d. requires proof of misappropriation.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Interference KEYWORDS: Bloom's: Comprehension 77. Galley, Inc. has a contract for operating the kitchen at the Palm Crest Hotel in Miami, Florida. Mealco has approached Palm Crest's director of operations and stated, "Look, sign with us. We'll take care of whatever damages you owe Galley."

Mealco's statements: a. are defamatory. b. constitute the tort of contract interference. c. constitute the tort of negligence. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Contract Interference KEYWORDS: Bloom's: Application 78. Galley, Inc. has a contract for operating the kitchen at the Palm Crest Hotel in Miami, Florida. Mealco has approached Palm Crest's director of operations and stated, "Look, sign with us. We'll take care of whatever damages you owe Galley."

Suppose Mealco added the following phrase, "Galley is going under fast. They haven't paid rent in five months and their rent is $15,000 per month." Galley is current on its rent, and its rent is $5000 per month. Mealco's statements: a. are defamatory. b. constitute the tort of negligence. c. are covered under the shopkeeper's privilege. d. none of the above ANSWER: a

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Defamation KEYWORDS: Bloom's: Application 79. Jane Mitchell, age 16, was shopping at her neighborhood Osco Drug Store. She had been looking at magazines as she waited for a friend. She decided to purchase a Tiger Beat magazine and then wait for her friend outside the store. She paid for the magazine, but as she headed for the door, the store manager used the store's loudspeaker system to announce, "You, with the green hair and the maroon Doc Marten's on. Yes, you, by the front of the store. I saw you take that magazine. Stop right there. I have a gun pointed at you." The manager's actions: a. are protected by the shopkeeper's privilege. b. constitute defamation. c. were excessive but will not result in any liability. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: False Imprisonment KEYWORDS: Bloom's: Application 80. A-Plus Linens sent the following notice to John C. Lincoln Hospital: "We'll pay you. Drop your current linen service and we'll give you $5 for every 100 pounds of linen you send our way." The notice sent by A-plus: a. is contract interference. b. is defamatory. c. is invasion of privacy. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Contract Interference KEYWORDS: Bloom's: Application 81. Suppose A-Plus Linens sent the following notice to John C. Lincoln Hospital: "On your next call for bids, call us.

We'll give you a $5 discount for every 100 pounds of linen we clean for you." The notice sent by A-Plus: a. is contract interference. b. is defamatory. c. is invasion of privacy. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Challenging

NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Contract Interference KEYWORDS: Bloom's: Application 82. If a defendant in a defamation suit holds a qualified privilege: a. the defendant has a complete defense to the suit. b. the defendant cannot be sued if he/she retracts the statement. c. the plaintiff will be required to prove additional elements to recover. d. the defendant enjoys higher protection than the absolute privilege.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Defamation KEYWORDS: Bloom's: Knowledge 83. The tort of false imprisonment: a. requires proof of some actual damage to the plaintiff. b. is also known as the "shopkeeper's tort." c. requires proof of emotional distress. d. no longer exists in states that have adopted the shopkeeper's privilege.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: False Imprisonment KEYWORDS: Bloom's: Comprehension 84. The tort of intentional infliction of emotional distress: a. requires proof of some physical harm before there can be recovery. b. is the same as the tort of false imprisonment. c. is a property tort. d. requires proof of conduct that exceeds all bounds of decency.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Intentional Infliction of Emotional Distress KEYWORDS: Bloom's: Comprehension 85. Which of the following is not an element of negligence? a. duty

b. breach of duty c. reckless disregard d. causation ANSWER: c POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Negligence KEYWORDS: Bloom's: Knowledge 86. Which of the following defenses to negligence serves as a complete bar to recovery? a. comparative negligence b. contributory negligence c. both a and b d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Negligence KEYWORDS: Bloom's: Comprehension 87. Troy Nolan, age 17, was in a Games and Stuff store browsing. Troy frequented Games and Stuff but did not always make a purchase. After 45 minutes of looking, Troy picked up his skateboard, put his hand in his pocket, and headed toward the door. The day manager yelled from the back of the store to the cashier at the front of the store, "Stop the kid with the skateboard. He's stolen two games." There were 22 people in the store who heard the statement. Troy had not taken the games. Troy: a. will be successful in a defamation suit against Tower. b. has no course of action because of the shopkeeper's privilege. c. has no basis for recovery. d. could recover only for false imprisonment.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Defamation KEYWORDS: Bloom's: Application 88. Which of the following statements best describes the property protection given a singer's voice? a. No protection is given since it is intangible. b. No protection is given because many people legitimately sound like famous singers. c. The voice is given the same protection as the face or likeness. d. none of the above

ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Invasion of Privacy KEYWORDS: Bloom's: Application 89. The distinguishing element between intentional torts and negligent torts is: a. intent. b. level of damages. c. causation. d. All of the above are distinctions.

ANSWER: a POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What is a Tort? Roots of Law and Commerce KEYWORDS: Bloom's: Comprehension 90. Hamburger Hamlets, Inc. is a chain of fast-food restaurants. Its major competitor is Sam's Sandwiches, Inc. Sam's Sandwiches' public relations vice president issued the following statement, "We have documented proof that Hamburger Hamlets uses horse meat in its burgers." Which of the following statements is true? a. Sam's is liable for defamation. b. Sam's is liable for public disclosure of private facts. c. Sam's is liable for negligence. d. Sam's has not committed a tort.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Defamation KEYWORDS: Bloom's: Application 91. The statement "All used-car dealers are crooks" is: a. defamation because it meets the requirement that the statement reflect on the honesty of the business. b. defamation because the businesses are sufficiently identified. c. not defamation. d. defamation so long as there was publication.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking

TOPICS: KEYWORDS:

Defamation Bloom's: Application

92. Which of the following does not enjoy an absolute privilege to charges of defamation? a. members of Congress while speaking on the floor b. witnesses in a court hearing c. newspaper reporting witness testimony from a trial d. All of the above carry absolute privileges.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Defamation KEYWORDS: Bloom's: Application 93. The shopkeeper's privilege applies: a. regardless of the amount of time the shopper is detained. b. even if the shopkeeper made a good-faith mistake. c. only if a security guard is used by the store. d. all of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: False Imprisonment KEYWORDS: Bloom's: Application 94. A local liquor store posts the checks of customers that are returned from the bank. The store manager says the public display of the checks is a good way to deter other bad-check writers. The display of the checks is: a. an invasion of privacy. b. defamation. c. protected by a qualified privilege. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Invasion of Privacy KEYWORDS: Bloom's: Application 95. This term is given to witnesses who do nothing while a crime is being committed out of fear, apathy, or a mistaken belief that someone else will help the victim. a. Watcher effect

b. Stockholm effect c. Bystander effect d. Richmond effect ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Negligence KEYWORDS: Bloom's: Knowledge 96. Punitive damages are: a. generally not available in tort cases. b. often awarded in cases of contract interference. c. only available in negligence actions. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Interference KEYWORDS: Bloom's: Knowledge 97. Which of the following is not an intentional tort? a. battery b. false imprisonment c. invasion of privacy d. negligence ANSWER: d POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What is a Tort? Roots of Law and Commerce The Intentional Torts KEYWORDS: Bloom's: Knowledge 98. In Van Horn v. Watson, the court concluded that in California the Good Samaritan laws: a. do not exist. b. apply to anyone helping another injured person. c. apply to anyone offering medical care in good faith at the scene of a medical emergency. d. apply to anyone offering medical care to another person.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging

NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Negligence KEYWORDS: Bloom's: Application 99. Proximate cause: a. is the same as causation. b. need not be proved in every negligence case. c. was established in the Palsgraf case. d. is no longer an element of negligence.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Negligence KEYWORDS: Bloom's: Knowledge 100. The "But for" test: a. is the test for causation. b. is the test for proximate cause. c. has been eliminated as the causation test in negligence cases. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Negligence KEYWORDS: Bloom's: Comprehension 101. ____ states provide a qualified privilege for letters of recommendation. a. All b. No c. A few d. Nearly all ANSWER: d POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Defamation KEYWORDS: Bloom's: Knowledge 102. Which of the following constitutes a defamatory statement (assuming the statements are untrue)? a. "I don't think you'll be happy with their work."

b. "He was dismissed for embezzlement from his last job." c. "I don't care for him at all." d. "All people from Kentucky are stupid."

ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Defamation KEYWORDS: Bloom's: Application 103. A retail store: a. has no duty to protect customers from criminal conduct by third parties. b. owes its customers duties as licensees. c. owes its customers duties as invitees. d. need not protect its customers against problems it has knowledge of.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Negligence KEYWORDS: Bloom's: Knowledge James Keller was an employee at Radical Boards, Inc. Radical Boards is a surf and skateboard shop that also sells clothing. While employed there, Radical Board's principal shareholder discovered that Keller had created peep holes in the shop's dressing rooms. When confronted with the peep holes, Keller denied every using them and indicated that they were there to prevent shoplifting. The shop manager was told to fire Keller. Shortly after Keller left, a 16-year-old and her mother filed suit because the teen learned, through conversations with Keller, that he had seen her in the dressing room while she was trying on swimming suits. Keller was able to describe her not-generally-seen birthmarks to her.

104. Radical Boards: a. cannot be held liable to the teen and her mother because it did engage in the conduct. b. could be held liable under a theory of negligent failure to supervise. c. is no longer liable because it terminated Keller. d. has not committed any tort because watching customers in dressing rooms in part of a merchant's right. e. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Negligence KEYWORDS: Bloom's: Application 105. Keller has applied for a position at a summer camp for girls, ages 14-18. The camp director had called Radical Board's manager and asked for a reference on Keller.

a. Radical Board has no liability if it simply verifies Keller's employment there. b. Radical Board has liability for its failure to prosecute Keller. c. Radical Board has no liability for the actions of employees beyond their job description. d. Radical Board enjoys a privilege against defamation if it discloses the peep hole story. e. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Defamation KEYWORDS: Bloom's: Application 106. Suppose that Radical Board's manager simply verifies employment for the camp director. During Keller's first month at the camp, he is able to gain access to the girls at night and sexually assaults three of them. The girls' parents have brought suit against the camp as well as Radical Boards. The camp: a. is not liable for the criminal conduct of employees that was not authorized. b. might be liable for negligent hiring. c. has no liability for conduct of employees after hours. d. both a and b e. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Defamation KEYWORDS: Bloom's: Application 107. Radical Boards: a. has no liability to the girls or their parents. b. enjoys an employer privilege and immunity against such litigation. c. might be held liable for the negligent failure to disclose Keller's history. d. has no liability for the subsequent acts of terminated employees. e. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Defamation KEYWORDS: Bloom's: Application 108. Which of the following is/are HIPAA requirements? a. No computer use for health care information transmittal. b. Patient right of access to records.

c. Use only of postcards for communication. d. a, b and c ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Invasion of Privacy KEYWORDS: Bloom's: Knowledge 109. Which of the following is prohibited under HIPAA? a. Patients’ right to restrict disclosure and discussion of a hospital stay. b. A computer screen in a doctor’s office turned toward the waiting room. c. Calling a patient at work who has requested no calls there. d. all of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Invasion of Privacy KEYWORDS: Bloom's: Knowledge 110. On a radio talk show, the host said, “That no-good felon, O.J. Simpson.” Mr. Simpson has been convicted of a felony. a. The talk show host has defamed Mr. Simpson. b. Because most people believe Mr. Simpson to be a murderer, there is no defamation. c. The talk show host enjoys the media qualified privilege. d. both a and c ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Defamation KEYWORDS: Bloom's: Application 111. Which of the following have an absolute privilege against defamation for their speech? a. a senator while speaking on the floor of the Senate b. a newspaper c. neither a nor b d. both a and b ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Critical Thinking Defamation Bloom's: Application

112. Whistle-blowers may have some statutory protection by receiving a(n): a. qualified privilege. b. absolute privilege. c. absolute immunity. d. unqualified privilege.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Defamation KEYWORDS: Bloom's: Knowledge 113. The Arizona Daily Desert View carried a story on a recent E-Coli problem in a Phoenix fast food restaurant. The story included a history of Arizona E-Coli incidents and indicated that the Saguaro Grill had an E-Coli problem in 1999 that resulted in the hospitalization of seven customers. Suppose that the restaurant that had the E-Coli outbreak in 1999 was Saguaro Buffet, not the Saguaro Grill. The Arizona Daily Desert View: a. is liable to the Saguaro Grill for libel. b. is liable to the Saguaro Grill for defamation. c. is liable to the Saguaro Grill for invasion of privacy. d. none of the above.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Defamation KEYWORDS: Bloom's: Application 114. Representative Pete Stark said the following in a speech on the floor of the U.S. House of Representatives, “You’re going to spend it to blow up innocent people if we can get enough kids to grow old enough for you to send to Iraq to get their heads blown off for the president’s amusement.” Representative Stark: a. is protected from defamation liability because of the privilege for elected officials. b. is liable to the president for defamation because the statement was not related to government issues. c. is not liable for defamation because of the public figure privilege. d. both a and c ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Defamation KEYWORDS: Bloom's: Application

115. In an opinion column published in wallstreetbuzz.com, a columnist wrote, “James Jackson, CEO of Blain Investments, now posting an $8 billion write-down, has robbed shareholders blind through his accounting slights of hand.

Jackson insists that he has scruples. I don’t know about that but if he does have scruples you can bet they belong to somebody else.” The columnist: a. has committed the tort of libel. b. is protected from defamation liability under the opinion/analysis quasi-privilege. c. cannot be protected from defamation liability by the opinion/analysis privilege if the statement was published. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Defamation KEYWORDS: Bloom's: Application 116. John Reisen posted the following message in a chat room, "MIC Corporation will have to restate its earnings for the past three years. Its CEO will resign in disgrace because he is responsible." The message is false and MIC Corporation's shares lose 45% of their value before the company can stop the rumor. a. Reisen has committed the tort of defamation. b. Reisen has not committed the tort of defamation because there is no publication. c. Reisen has not committed defamation because there are no damages to the company, only the shareholders. d. both b and c e. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Defamation KEYWORDS: Bloom's: Application 117. Rex Crim is an International Harvester dealer from Henderson, Texas. At the request and expense of International Harvester, Crim traveled to Phoenix, Arizona, for purposes of the demonstration of a new vehicle called the International Scout, designed to compete against the Jeep. Crim went to the proving grounds in the desert around Phoenix and spent a day watching the vehicle demonstrations. Crim and other dealers drove the vehicles and much dust resulted from their driving. A few weeks later Crim became ill with flu-like symptoms. He was finally diagnosed as having coccidioidomycosis or "Valley Fever." Valley Fever is a disease well known to Arizona residents and most have had it if they have lived there over ten years. Newcomers are particularly vulnerable to the disease since the exposure to dust seems to build up immunity among the residents.

Crim became quite ill and brought suit against International Harvester for its failure to warn him about the Valley Fever phenomenon before he came out to the testing grounds. Was International Harvester responsible for warning Crim? Is there negligence in the failure of International Harvester to warn Crim?

ANSWER: In Crim v. International Harvester Co., 646 F.2d 161 (5th Cir. 1981), the court held IH was liable since it had peculiar knowledge and Crim did not. IH did not exercise reasonable care in discovering the danger and then warning of that danger.

POINTS: 1

DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Negligence KEYWORDS: Bloom's: Application 118. Kirk Daly, a 36-year-old attorney, was killed when his Buick Opel collided with some metal fence on the Harbor Freeway in Los Angeles. He was traveling at a speed between 50 and 70 mph. After the collision, the car spun and the driver's door flew open. Daly was ejected from the car and sustained fatal head injuries. Had the door stayed closed, his injuries would have been relatively minor. Daly was not wearing his seat belt. Discuss the negligence theory for recovery in the suit Daly's widow has brought against General Motors, the makers of the Buick Opel. Also discuss any defenses General Motors might have.

ANSWER: In Daly v. General Motors, 575 P.2d 1162 (Cal. 1978) the California court allowed the seat belt issue to be introduced as a comparative negligence defense to the suit.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Negligence KEYWORDS: Bloom's: Application 119. Cynthia Fromm and Delores Rankin left after their fall semester finals for a four-day skiing trip in Northern Arizona.

During their return drive, they hit a severe snowstorm and were having difficulty with directions. They took a wrong turn onto a road that is closed during the winter months and is not plowed. The winter barricades for the road were not yet in place. Fromm and Rankin were soon stuck in the snow. They remained in their vehicle for 11 days until they were rescued by snowmobilers. Both had severe frostbite. Fromm lost both feet. Rankin lost all of her toes. Both filed suit against the state of Arizona for its failure to put up barricades in a timely fashion. Should the state be held liable?

ANSWER: In the trial, the state of Arizona was held only partially liable because of the negligence of the women.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Negligence KEYWORDS: Bloom's: Application 120. Discuss why whistle-blowers should receive some kind of protection from defamation claims.

ANSWER: Assuming the information publicized is true, a whistle-blower is attmepting to make the correct ethical and legal decisions. The person then can receive a qualified privilege which will protect them for defamation lawsuits from the target of the publicized information. Since the privilege is qualified, the person’s statements should be verfied as true and limited in scope to receive it..

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Defamation KEYWORDS: Bloom's: Synthesis

121. First Fidelity Insurance received a call from Second Fifth Bank regarding Margaret Gessner, a former Fidelity employee. Gessner had been fired for embezzlement. Can First Fidelity disclose such information? Must First Fidelity disclose it?

ANSWER: Students should discuss the issues of defamation as well as negligence if Fidelity fails to reveal the information to a potential employer, particularly a bank.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Defamation Negligence KEYWORDS: Bloom's: Synthesis 122. Discuss why there may be liability for writers of letters of recommendation that fail to include relevant employmentrelated information ANSWER: From fear of defamation- and other - lawsuits, many employers have been willing to only provide verification of employment and dates of employment. The omission of important information may lead to the hiring of an employee that causes legal problems for the employer and endangers others. The case involving Robert Gadams held school districts liable for not including complaints against Gadams for sexual harm he caused in its letters of recommendation. By not notifiying potential future employers about it, it put other children at risk; from that risk creation comes the legal liability.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Defamation KEYWORDS: Bloom's: Synthesis 123. Three boys were leaving Wal-Mart when they were stopped by plain clothes security officers. One officer said, “Those shirts that you have on were stolen.” One boy said, “You can’t be serious.” The officer responded, “Yes, I am.

Come with me.” The boys then went with the officers to a side door and into an office. The boys’ parents have filed suit against Wal-Mart. Discuss what their suit might be for and what defenses Wal-Mart has.

ANSWER: False imprisonment and defamation; Wal-Mart’s defense: shopkeeper’s privilege The issue is whether Wal-Mart acted reasonably in its detention and confrontation of the boys. How loud? Where were customers? Etc. POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: False Imprisonment KEYWORDS: Bloom's: Application 124. Anne Argent runs a Water ‘n Ice store located near a thrift store in a strip mall that has only Ann’s store and the thrift store as tenants. The remaining stores in the strip mall are vacant. Anne’s customers are largely junior high and high school students who ride their bikes to her store from the neighborhoods surrounding the strip mall. They park their bikes outside Anne’s store while they are inside buying drinks, ice cream, and candy. In the past 10 months, 12 bikes have been stolen from outside Anne’s store. Discuss any liability Anne might have and why.

ANSWER: Students should discuss that landowners are not generally responsible for insuring customers against the criminal conduct of third parties. However, when the landowner becomes aware of

high levels of criminal activity, it has a duty to warn and even a duty to provide protection.

Anne has reached a point where warnings and alternative storage mechanisms are needed because of the ongoing and regular nature of the crime. Once you know, the obligation of protection kicks in.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Negligence KEYWORDS: Bloom's: Application Ms. Leitch was having a glass of champagne in the outdoor section of a restaurant in Delray Beach, Florida on New Year’s Eve. She was hit by a stray bullet and injured. There had been stray bullet injuries in the past on the streets of Delray on New Year’s Eve, but the city did not issue any warnings to revelers prior to New Year’s Eve. Ms. Leitch has filed suit against the city of Delray Beach to recover for her medical costs, lost wages, and physical pain and suffering.

125. What will Ms. Leitch use to establish duty in her negligence case against the city? a. That the city was aware of the stray bullet problem but did not issue warnings. b. That the city did not control stray gun fire. c. That the city allowed outdoor areas in restaurants there. d. That the city did not prohibit guns in the streets.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Negligence KEYWORDS: Bloom's: Analysis 126. What will the city use as a defense in the case? a. That the stray bullet incidents were remote and isolated. b. That Ms. Leitch was contributorily negligent for being in an outside area of a restaurant on New Year’s Eve in Delray Beach. c. That you cannot be held liable for the criminal activities of third parties. d. That there is strict liability for wounds from guns within city limits.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Negligence KEYWORDS: Bloom's: Analysis 127. What might explain why the restaurant isn’t named in the lawsuit? a. The restaurant owes no duty of safety to customers. b. Restaurants are never liable for the criminal activities of third parties.

c. There had never been an injury in the outside area of the restaurant. d. That there was assumption of risk on Ms. Leitch’s part.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Negligence KEYWORDS: Bloom's: Synthesis 128. Singer Courtney Love tweeted several posts on her Twitter feed as well as her MySpace page that a clothing designer “bullied victims, stole, sold drugs, drank three bottles of vodka,” and “is a danger to society.” The designer sued Ms. Love for defamation. Which of the following would be a defense for Ms. Love? a. That the statements were made on social media. b. That she is a public figure and enjoys a privilege for her communications. c. That there is no publication because Tweets and MySpace communications are not permanent. d. That the statements are true.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Defamation KEYWORDS: Bloom's: Synthesis 129. A magazine ad features a photo of the head of Albert Einstein placed atop the photo of a young, muscular torso with loads of tattoos and the top of his underwear showing. The ad is one for General Motors and features the line, “Ideas are sexy, too.” The Hebrew University of Jerusalem was given the rights to Mr. Einstein’s works and names by his family when he died. GM says that it purchased the rights to use the Einstein photo from a reputable licensing firm. What would be the basis of a suit by the University against General Motors? a. Defamation b. Intrusion into private affairs c. Appropriation d. Strict liability ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Invasion of Privacy KEYWORDS: Bloom's: Synthesis

1. The Computer Fraud and Abuse Act (CFA) applies only to federal employees. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: User Issues in Cyberspace KEYWORDS: Bloom's: Knowledge 2. Under the Computer Fraud and Abuse Act (CFA), access to institutional financial information is not a violation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: User Issues in Cyberspace KEYWORDS: Bloom's: Knowledge 3. The Economic Espionage Act makes it a crime to take trade secrets by computer. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Appropriation and Other Forms of Unfair Competition in Cyberspace KEYWORDS: Bloom's: Comprehension 4. The Economic Espionage Act only applies in international transactions. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Appropriation and Other Forms of Unfair Competition in Cyberspace KEYWORDS: Bloom's: Comprehension 5. The transfer of copyrighted material worth over $1000 over the Internet is a crime. a. True

b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Appropriation and Other Forms of Unfair Competition in Cyberspace KEYWORDS: Bloom's: Knowledge 6. There are state laws, but no federal laws, concerning cyberbullying. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: User Issues in Cyberspace KEYWORDS: Bloom's: Knowledge 7. The Anti-Spam Technical Alliance is an industry group working to fight spam. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Appropriation and Other Forms of Unfair Competition in Cyberspace KEYWORDS: Bloom's: Knowledge 8. State anti-spamming statutes are tied to the volume of messages. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Appropriation and Other Forms of Unfair Competition in Cyberspace KEYWORDS: Bloom's: Comprehension 9. Tapping into federal income tax returns to get information is a violation of the Computer Fraud and Abuse Act. a. True b. False ANSWER: True

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: User Issues in Cyberspace KEYWORDS: Bloom's: Knowledge 10. Under the Federal Computer Fraud and Abuse Act, unauthorized access to government computers is a felony. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: User Issues in Cyberspace KEYWORDS: Bloom's: Knowledge 11. Warrants are not required in cyberspace. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: User Issues in Cyberspace KEYWORDS: Bloom's: Knowledge 12. Fourth Amendment rights still apply on the Internet. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: User Issues in Cyberspace KEYWORDS: Bloom's: Knowledge 13. Servers are always required to reveal the identity of their customers and users. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: User Issues in Cyberspace KEYWORDS: Bloom's: Comprehension 14. Which of the following is not a computer crime? a. unauthorized use of computer equipment b. alteration or destruction of computer files c. entering fraudulent data d. using computers to convert data e. All of the above are computer crimes.

ANSWER: e POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: User Issues in Cyberspace KEYWORDS: Bloom's: Comprehension 15. Which is not covered under the Computer Fraud and Abuse Act (CFA)? a. unauthorized use of federal computers b. typewriters c. use in excess of authority by a federal employee d. consumer financial records e. All of the above are covered.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: User Issues in Cyberspace KEYWORDS: Bloom's: Application 16. The Economic Espionage Act covers: a. only international commercial transactions. b. the copying, downloading or electronic transfer of trade secrets. c. bribes to obtain government contracts. d. only national stock exchange companies.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Appropriation and Other Forms of Unfair Competition in Cyberspace KEYWORDS: Bloom's: Comprehension

17. The No Electronic Theft Act: a. prohibits the use of the Internet for personal e-mail on company time. b. prohibits the transfer of copyrighted material worth over $1,000 over the Internet. c. prohibits economic espionage. d. resulted from the Volkswagen/GM espionage case.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Appropriation and Other Forms of Unfair Competition in Cyberspace KEYWORDS: Bloom's: Comprehension 18. Which of the following would be a federal crime? a. copying FDIC data without authorization b. changing figures on military invoices without authorization c. placing a virus on a federal computer system d. All of the above are federal crimes.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: User Issues in Cyberspace KEYWORDS: Bloom's: Application 19. The No Electronic Theft Act: a. makes it a crime to use the Internet to pass along copyrighted material even when there is no profit. b. applies only when copyrighted material is used for profit. c. does not apply to written materials. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Appropriation and Other Forms of Unfair Competition in Cyberspace KEYWORDS: Bloom's: Comprehension 20. Which act did federal prosecutors use for acts of cyberbullying? a. Anti-Cyberbullying Act of 2009 b. Computer Fraud and Abuse Act c. Computer Fraud and Bullying Act d. Computer Stalking and Bullying Act of 2008 ANSWER: b POINTS: 1

DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: User Issues in Cyberspace KEYWORDS: Bloom's: Comprehension 21. The CAN-SPAM Act: a. is part of Sarbanes-Oxley. b. allows companies to bring suit against spammers for their unauthorized use of their servers. c. has been declared unconstitutional. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Appropriation and Other Forms of Unfair Competition in Cyberspace KEYWORDS: Bloom's: Comprehension 22. Which of the following is a violation of the Economic Espionage Act? a. Downloading your employer’s website program to take to your new job. b. Sketching your employer’s new trademark to register first. c. Photographing customer lists of a competitor. d. All of the above are EEA violations.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Appropriation and Other Forms of Unfair Competition in Cyberspace KEYWORDS: Bloom's: Application 23. The FBI wants to conduct a search of your work computer. To do so: a. the FBI needs your permission. b. the FBI needs a warrant. c. either a or b d. both a and b ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: User Issues in Cyberspace KEYWORDS: Bloom's: Comprehension 24. Which act makes it a crime to willfully infringe copyrighted materials via electronic means that worth more than

$1,000? a. The Digital Millennium Copyright Act b. The No Electronic Theft Act c. The Economic Espionage Act d. There is no criminal statute for electronic infringement; it is a civil matter only.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Appropriation and Other Forms of Unfair Competition in Cyberspace KEYWORDS: Bloom's: Application 25. Answer the following: Bruce King is a computer whiz who works at the county complex where all records for criminal cases are kept. He has developed a means for deleting criminal records from the files and has a. contacted defendants to offer them the deletion in exchange for a substantial fee. Has King committed any crimes with his actions?

What if King worked for a credit reporting firm and offered the deletion service to folks with bad b. credit ratings? Would the result be the same?

ANSWER: a. Fraud, extortion. Perhaps some specific crimes such as destruction of public records. b. Fraud. Obtaining credit under false pretenses.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Employers, Employees, and Cyberlaw KEYWORDS: Bloom's: Analysis 26. Janet Walker is a computer information systems major who has been able to tap into an ice cream manufacturer's computer system. As a practical joke, Walker changes the manufacturer's ice cream formula so that an entire day's production has a bitter taste to it. Has Walker committed any crime?

ANSWER: Theft (converted property by making it useless); vandalism; conversion (resources used).

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: User Issues in Cyberspace KEYWORDS: Bloom's: Analysis 27. Jan Lesh was able to gain access to the federal government's records on student loans and loan repayments. Lesh changed his loan balance from $8200.00 to $2800.00. Lesh then repaid the $2800.00 and received his notice of payment in full. Has Lesh committed any crimes?

ANSWER: Lesh has violated the Counterfeit Access Device and Computer Fraud and Abuse Act. He accessed the information on student loans without authorization and then changed the amount of his loan balance. In addition, the repayment of only $2800 as opposed to $8200 and the receipt of the "payment in full" statement was a form of theft. Lesh took funds from the government that did not belong to him. He accomplished the embezzlement in a peculiar way, but he did take government funds.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: User Issues in Cyberspace KEYWORDS: Bloom's: Analysis 28. Bradley Harrison was hired by Billiards, Inc. Before leaving his current employer, Pool Party, Inc., he downloaded Pool Party's contract forms and customer lists to take with him to his new job. Has Bradley broken any laws?

ANSWER: Economic Espionage Act - appropriating trade secrets by download.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Appropriation and Other Forms of Unfair Competition in Cyberspace KEYWORDS: Bloom's: Analysis 29. Evaluate the following statement: "Warrants are not required for searches in cyberspace."

ANSWER: The statement is not entirely correct. There are still rights of privacy on the Internet. For example, the FBI and other government agencies could not have access to your private account e-mail without a warrant. However, there are some aspects of the Internet that are more public in nature, such as the visits to sites and the use of information from sites because of the records that are maintained by companies. The key is the expectation of privacy.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Employers, Employees, and Cyberlaw KEYWORDS: Bloom's: Comprehension 30. Cyberspace companies are exempt from the consumer privacy rules on use of consumer information and sale of consumer lists. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: User Issues in Cyberspace KEYWORDS: Bloom's: Knowledge 31. E-merchants need not follow the same FTC rules that apply to catalog merchants. a. True b. False ANSWER: False POINTS: 1

DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: User Issues in Cyberspace KEYWORDS: Bloom's: Knowledge 32. Which agency is responsible for consumer complaints about e-merchants? a. The Federal Trade Commission. b. There is no federal agency responsible because the federal government has no jurisdiction in cyberspace. c. The Social Security Administration. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: User Issues in Cyberspace KEYWORDS: Bloom's: Knowledge 33. Employers are responsible for the content of employee e-mails. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Employers, Employees, and Cyberlaw KEYWORDS: Bloom's: Knowledge 34. Employers are responsible when employees use their computers to infringe on others’ intellectual property rights. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Employers, Employees, and Cyberlaw KEYWORDS: Bloom's: Knowledge 35. Employee e-mails cannot be obtained through discovery processes in litigation against the company because of Fifth Amendment protections. a. True b. False ANSWER: False

POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Employers, Employees, and Cyberlaw KEYWORDS: Bloom's: Knowledge 36. The Electronic Communications Privacy Act applies to all forms of electronic communication. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Employers, Employees, and Cyberlaw KEYWORDS: Bloom's: Knowledge 37. Employees are not required to give consent to employer access to their e-mails under the Stored Communications Act. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Employer, Employees, and Cyberlaw KEYWORDS: Bloom's: Knowledge 38. An employee who uses his or her company e-mail system to communicate privately with his or her lawyer has waived the privilege and the content can be used in court. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Employers, Employees, and Cyberlaw KEYWORDS: Bloom's: Knowledge 39. The employer practice of “Googling” job applicants is not prohibited by federal law. a. True b. False ANSWER: True

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Employers, Employees, and Cyberlaw KEYWORDS: Bloom's: Knowledge 40. Employers are permitted to monitor employee Tweets about company issues. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Employers, Employees, and Cyberlaw KEYWORDS: Bloom's: Knowledge 41. An employee can be prosecuted for giving his or her company user name and password to hackers. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Employers, Employees, and Cyberlaw KEYWORDS: Bloom's: Knowledge 42. Employee e-mails can be used to establish criminal intent in prosecution of companies. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Employers, Employees, and Cyberlaw KEYWORDS: Bloom's: Knowledge 43. Internet companies are permitted to collect information about users’ purchasing habits without advance disclosure. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: User Issues in Cyberspace KEYWORDS: Bloom's: Knowledge 44. Under federal law, ISPs are not permitted to disclose your identity when someone asks for the actual name behind a user name. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: User Issues in Cyberspace KEYWORDS: Bloom's: Knowledge 45. Users do have some First Amendment protections from identity disclosure. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: User Issues in Cyberspace KEYWORDS: Bloom's: Knowledge 46. The privacy rights of cloud customers are clearly established. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: User Issues in Cyberspace KEYWORDS: Bloom's: Knowledge 47. At least one court has held that the placement of cookies on an individual’s computer without consent is a form of unauthorized access. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: User Issues in Cyberspace KEYWORDS: Bloom's: Knowledge 48. There are both federal and state anti-cyberstalking laws. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: User Issues in Cyberspace KEYWORDS: Bloom's: Knowledge 49. COPPA is a federal law that controls the posting of pornographic images online. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: User Issues in Cyberspace KEYWORDS: Bloom's: Knowledge 50. Craigslist is liable for criminal acts that occur because of connections made between buyers and sellers using its service. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: User Issues in Cyberspace KEYWORDS: Bloom's: Knowledge 51. Jane Erroll has applied for a position with Lakes Distribution Company. When Jane arrives for her interview she is asked several questions about events and photos that were posted on her Facebook page. Jane has an open setting on her Facebook page so that it is publicly available. Jane apparently did not provide sufficient explanations for what was posted on her Facebook page and does not get the job despite being qualified for the position. Which of the following statements is correct about Jane’s experience? a. The employer’s conduct violated federal law. b. As long as the employer looked at all the job candidates’ Facebook pages, the employer has not violated any federal laws.

c. Jane must give her consent before the employer can look at her Facebook page. d. The employer has violated the Stored Communications Act. ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Employers, Employees, and Cyberlaw KEYWORDS: Bloom's: Knowledge Lakes Distribution Company has its employees sign a policy that discloses the following:    

Lakes can monitor text messages sent using company cell phones.

Lakes can monitor all e-mails sent by employees, regardless of which e-mail account used (company e-mail system or private, such as gmail or aol.com).

Lakes requires that employees furnish access to their Facebook pages as a precondition of employment.

Lakes monitors all Tweets and blog posts by employees.

52. Which of the following is correct about Lakes’ policy on text messages? a. The monitoring is overly broad and will not be permitted under federal law. b. The monitoring must be restricted to business messages and not personal messages. c. The monitoring policy fits within current legal standards. d. The monitoring is not permitted.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Employers, Employees, and Cyberlaw KEYWORDS: Bloom's: Comprehension 53. Which of the following is correct about Lakes’ policy on e-mails? a. The monitoring is overly broad and will not be permitted under federal law. b. The monitoring is limited to company e-mail messages, but personal email messages are discoverable. c. The monitoring policy fits within current legal standards. d. The monitoring is not permitted.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Employers, Employees, and Cyberlaw KEYWORDS: Bloom's: Comprehension 54. Which of the following is correct about Lakes’ policy on Facebook access?

a. The monitoring may be overly broad. b. The monitoring may be prohibited in certain states. c. The monitoring policy may not fit within current legal standards. d. The monitoring is not permitted. e. a, b, and c ANSWER: e POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Employers, Employees, and Cyberlaw KEYWORDS: Bloom's: Comprehension 55. Which of the following is correct about Lakes’ policy on Tweets? a. The monitoring is overly broad and will not be permitted under federal law. b. The monitoring is limited to company e-mail messages, but personal email messages are discoverable. c. The monitoring policy fits within current legal standards. d. The monitoring is not permitted. e. a, b, and c ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Employers, Employees, and Cyberlaw KEYWORDS: Bloom's: Comprehension 56. IFRACK is the user name of an individual who has been posting information about fracking on blogs, in chat rooms, and in cyber letters to newspapers. Several environmental groups wish to stop the comments IFRACK makes, believe that IFRACK may be affiliated with the oil industry, and believe that information should be disclosed. Which of the following is correct in analyzing this situation? a. The environmental groups will be able to obtain IFRACK’s identity from the ISP because they have a good reason. b. The environmental groups are not entitled to know IFRACK’s identity because of First Amendment protections. c. Until IFRACK violates the law, his or her identity cannot be disclosed by the ISP. d. There is never identity disclosure allowed in civil matters.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: User Issues in Cyberspace KEYWORDS: Bloom's: Comprehension 57. With what area of the law is there tension as the courts deal with cyberbullying issues? a. Privacy

b. First Amendment rights c. Interstate commerce d. all of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: User Issues in Cyberspace KEYWORDS: Bloom's: Comprehension 58. Which federal law controls websites that collect information from children? a. The CFAA b. The ECPA c. The NSA d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: User Issues in Cyberspace KEYWORDS: Bloom's: Comprehension 59. The COPPA act: a. applies to only retailers selling online. b. applies only to interstate businesses. c. applies to websites that collect information from children. d. applies to websites that have pornography posted.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: User Issues in Cyberspace KEYWORDS: Bloom's: Comprehension 60. Rune Rutledge was looking for a mercenary to kill his business partner. He found a listing on Craigslist that indicated the following: “Former IRAQ War solider. Protection services and other types of services available for those who need to send a message to others.” Rune made contact with the soldier and the two entered into a contract for the solider to kill Rune’s partner. Rune’s partner was killed and his partner’s family has sued Craigslist. Which of the following is an accurate summary of the legal issues in this situation? a. Craigslist is liable for not properly screening the ads. b. Craigslist is not liable because of First Amendment protections. c. Craigslist is not liable unless it was aware of the ad and the soldier’s intentions. d. none of the above

ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: User Issues in Cyberspace KEYWORDS: Bloom's: Comprehension 61. Explain what customers of cloud services should understand prior to entering into a cloud agreement.

ANSWER: The information in the clouds is completely within the hands of a third party. Trust, service levels, and technological flaws are all issues in these relationships. One of the benefits of cloud computing is that companies have instantaneous access to computer processing services for a fee, something that does not require substantial capital expense and allows for rapid growth. However, legal rights, in terms of ready customer access to information in the cloud, privacy rights with respect to the cloud companies’ use and examination of the information, and glitches in information retrieval remain unresolved. Customers of cloud services should iron out all of these issues before any information is deposited with a third party.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: User Issues in Cyberspace KEYWORDS: Bloom's: Analysis 62. Consumer information obtained over the Internet cannot be used without their permission. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: User Issues in Cyberspace KEYWORDS: Bloom's: Knowledge 63. Employers have no right of access to employees’ e-mails if they promised the employees privacy. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Employers, Employees, and Cyberlaw KEYWORDS: Bloom's: Knowledge 64. Employer monitoring of employee e-mail is illegal.

a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Employers, Employees, and Cyberlaw KEYWORDS: Bloom's: Knowledge 65. Sheila Rumsford sent an e-mail to her co-workers. The e-mail was entitled, "Ten Reasons Cookie Dough is Better Than Men." Her supervisor, in a routine review of employee e-mails, found the e-mail and fired Sheila. The supervisor pointed to a provision in the employee handbook that prohibits the use of company e-mail for jokes and personal correspondence. a. Sheila's right to privacy has been violated and she cannot be terminated. b. Sheila could be fired only if one of the recipients of the e-mail sent it to the supervisor. c. Sheila's e-mail was properly monitored and she can be fired. d. Sheila has a right of recovery for defamation. e. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Employers, Employees, and Cyberlaw KEYWORDS: Bloom's: Application

1. SIPs are state plans for implementation of air quality standards. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Air Pollution Regulation KEYWORDS: Bloom's: Knowledge 2. SIPs must be approved by the EPA. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Air Pollution Regulation KEYWORDS: Bloom's: Knowledge 3. The Clean Air Act requires plants to use the maximum achievable control technology. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Air Pollution Regulation KEYWORDS: Bloom's: Knowledge 4. The bubble concept applies to nonattainment areas. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Air Pollution Regulation KEYWORDS: Bloom's: Knowledge 5. Sulfur dioxide emission permits can be sold under the 1990 Act. a. True

b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Air Pollution Regulation KEYWORDS: Bloom's: Knowledge 6. The Rivers and Harbors Act was used, at one time, to control water pollution. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Water Pollution Regulation KEYWORDS: Bloom's: Knowledge 7. The 1970 amendments to the Clean Air Act were technology-forcing provisions. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Air Pollution Regulation KEYWORDS: Bloom's: Knowledge 8. An NPDES permit is required for point sources. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Water Pollution Regulation KEYWORDS: Bloom's: Knowledge 9. An NPDES permit is issued only with EPA approval. a. True b. False ANSWER: False

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Water Pollution Regulation KEYWORDS: Bloom's: Knowledge 10. The Superfund is available to private citizens through the filing of a lawsuit. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Solid Waste Disposal Regulation KEYWORDS: Bloom's: Knowledge 11. Violations of federal environmental laws carry both civil and criminal penalties. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Enforcement of Environmental Laws KEYWORDS: Bloom's: Knowledge 12. An EIS must be filed for both private and governmental projects. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Environmental Quality Regulation KEYWORDS: Bloom's: Knowledge 13. Nuisance is a common law anti-pollution doctrine. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Common Law Remedies and the Environment KEYWORDS: Bloom's: Comprehension 14. A due diligence review should be done before property is purchased. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Solid Waste Disposal Regulation KEYWORDS: Bloom's: Application 15. Mortgage lenders are exempt from liability under CERCLA. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Solid Waste Disposal Regulation KEYWORDS: Bloom's: Comprehension 16. The "bubble concept" examines pollution in one area as if it came from a single source. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Air Pollution Regulation KEYWORDS: Bloom's: Comprehension 17. Nonattainment areas are exempt from the Clean Air Act. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal

TOPICS: KEYWORDS:

Air Pollution Regulation Bloom's: Knowledge

18. The Oil Pollution Act applies to cleanups in all navigable waters up to 200 miles offshore. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Other Water Legislation KEYWORDS: Bloom's: Knowledge 19. The Oil Pollution Act carries both corporate and officer penalties. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Other Water Legislation KEYWORDS: Bloom's: Knowledge 20. Only current landowners are liable for Superfund cleanups. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Solid Waste Disposal Regulation KEYWORDS: Bloom's: Application 21. Private citizens may not bring suit under federal environmental legislation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Enforcement of Environmental Laws KEYWORDS: Bloom's: Comprehension

22. The Oil Pollution Act creates a trust fund for oil spill cleanup. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Other Water Legislation KEYWORDS: Bloom's: Knowledge 23. Many dry cleaners now charge an environmental surcharge to cover their costs on emissions compliance. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Air Pollution Regulation KEYWORDS: Bloom's: Application 24. States are primarily responsible for the enforcement of the Safe Drinking Water Act. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Other Water Legislation KEYWORDS: Bloom's: Knowledge 25. The EU has the most extensive and active emissions permit trading market. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: International Environmental Issues KEYWORDS: Bloom's: Knowledge 26. Only current property owners are liable under CERCLA.

a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Solid Waste Disposal Regulation KEYWORDS: Bloom's: Application 27. For purposes of CERCLA, the definition of owner/operator does not include a lender with just a security interest. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Solid Waste Disposal Regulation KEYWORDS: Bloom's: Application 28. The EPA has developed three categories of water pollutants: conventional, international, and toxic pollutants. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Water Pollution Regulation KEYWORDS: Bloom's: Knowledge 29. Insurance companies are not liable for CERCLA clean-up. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Solid Waste Disposal Regulation KEYWORDS: Bloom's: Application 30. A nuisance must be a public nuisance to be actionable. a. True b. False

ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Common Law Remedies and the Environment KEYWORDS: Bloom's: Comprehension 31. Those who transport and those who arrange for the transport of hazardous materials are liable under CERCLA. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Solid Waste Disposal Regulation KEYWORDS: Bloom's: Application 32. The Endangered Species Act permits those desiring to protect a species as well as landowners affected by such protection to challenge a determination of protection for a species. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Other Federal Environmental Regulations KEYWORDS: Bloom's: Comprehension 33. The Clean Air Act is applicable only to businesses with 15 or more employees. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Air Pollution Regulation KEYWORDS: Bloom's: Knowledge 34. Lenders who repossess Superfund property can never be held liable for its cleanup. a. True b. False ANSWER: False

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Solid Waste Disposal Regulation KEYWORDS: Bloom's: Application 35. Only actions taken by federal agents and agencies require the filing of an EIS. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Environmental Quality Regulation KEYWORDS: Bloom's: Comprehension 36. State environmental laws are always superceded by the federal environmental laws. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: State Environmental Laws KEYWORDS: Bloom's: Comprehension 37. A self-audit will increase EPA penalties for a company that conducts it. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Solid Waste Disposal Regulation KEYWORDS: Bloom's: Comprehension 38. A NIMBY is a property owner who opposes development or certain land uses. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy

NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Common Law Remedies and the Environment KEYWORDS: Bloom's: Knowledge 39. The parent corporation could have CERCLA liability for a subsidiary. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Solid Waste Disposal Regulation KEYWORDS: Bloom's: Application 40. When there is a brownfield, no one is liable for the costs of clean-up. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Solid Waste Disposal Regulation KEYWORDS: Bloom's: Comprehension 41. The EPA provides incentives for both self-reporting and self-audits. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Solid Waste Disposal Regulation KEYWORDS: Bloom's: Knowledge 42. The Federal Partnership Action Agenda provides funding for brownfield projects. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal

TOPICS: KEYWORDS:

Solid Waste Disposal Regulation Bloom's: Knowledge

43. Most insurers now include an exclusion policy on CERCLA exposure, but coverage is available as a policy rider. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Solid Waste Disposal Regulation KEYWORDS: Bloom's: Knowledge 44. Which of the following federal acts does not permit initial private citizen suits? a. Resource Conservation and Recovery Act b. Clean Air Act c. Clean Water Act d. All of the above permit private suits.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Enforcement of Environmental Laws KEYWORDS: Bloom's: Comprehension 45. Which of the following acts controls point sources? a. Clean Air Act b. Toxic Substances Control Act c. Clean Water Act d. all of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Water Pollution Regulation KEYWORDS: Bloom's: Synthesis 46. Which of the following parties would be liable for the clean-up costs at an EPA-designated Superfund site? a. current owner b. immediate past owner c. owner responsible for the toxic waste disposal d. all of the above ANSWER: d

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Solid Waste Disposal Regulation KEYWORDS: Bloom's: Application 47. How was the Rivers and Harbors Act of 1899 used in the pollution battle? a. to prevent dumping into waterways b. to prevent the transportation of toxic substances without a permit c. to prevent all discharges d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Water Pollution Regulation KEYWORDS: Bloom's: Knowledge 48. Under which act was the EIS developed? a. Clean Air Act b. National Environmental Policy Act c. Clean Water Act d. Toxic Substances Control Act e. all of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Environmental Quality Regulation KEYWORDS: Bloom's: Synthesis 49. Effluent guidelines are: a. part of the Clean Air Act. b. part of the National Environmental Policy Act. c. part of the Clean Water Act. d. developed by the states. e. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Water Pollution Regulation

KEYWORDS:

Bloom's: Synthesis

50. A public nuisance: a. cannot be enjoined by a private citizen suit. b. prevents recovery of damages by individual citizens. c. is eliminated by federal environmental regulations. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Common Law Remedies and the Environment KEYWORDS: Bloom's: Synthesis 51. The Superfund is: a. tapped by Congress for surplus spending. b. used for air pollution problems. c. available by private citizen suit. d. a trust fund. e. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Solid Waste Disposal Regulation KEYWORDS: Bloom's: Comprehension 52. SIPs: a. are state implementation plans for air quality standards. b. are enforced by the state governments. c. need not have EPA approval. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Air Pollution Regulation KEYWORDS: Bloom's: Comprehension 53. Industrial groups are: a. the basis for EPA effluent guidelines. b. irrelevant in pollution standards. c. relevant at state levels only.

d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Water Pollution Regulation KEYWORDS: Bloom's: Comprehension 54. Data barn litigation cases have used which of these legal theories? a. trespass b. battery c. nuisance d. a and c ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Common Law Remedies and the Environment KEYWORDS: Bloom's: Knowledge 55. What is the standard for pollution control equipment under the 1990 Clean Air Act amendments? a. best available technology b. maximum achievable control technology c. current available technology d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Air Pollution Regulation KEYWORDS: Bloom's: Comprehension 56. The EPA's emissions offset policy: a. is used in water pollution issues. b. does not include the "bubble concept." c. is not technology-forcing. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Air Pollution Regulation

KEYWORDS:

Bloom's: Comprehension

57. Environmental impact statements (EIS) must: a. be written by all developers. b. discuss the economic impact of the proposed action. c. be written only when there is an air pollution concern. d. contain alternate courses of action.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Environmental Quality Regulation KEYWORDS: Bloom's: Comprehension 58. Basa Industries, Inc., because of processing changes, has "0" emissions from its plant in New Mexico. However, Basa holds a permit for emissions from the EPA. Basa: a. must return the permit to the EPA. b. can sell the permit privately. c. can sell the permit only through the EPA. d. must use the permit or forfeit it in six months.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Air Pollution Regulation KEYWORDS: Bloom's: Application 59. The University of Arizona has developed plans for the construction of a set of telescopes on Mount Graham in southern Arizona. The project is a joint one with NASA and a French consortium. Mount Graham is the home for the red mountain squirrel - a species near extinction. The University of Arizona: a. need not file an EIS since it is not a federal agency. b. need not file an EIS since there will be no air pollution. c. need not file an EIS because of the lack of jurisdiction over the French participants. d. must file an EIS. ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Environmental Quality Regulation KEYWORDS: Bloom's: Application 60. Violations of the Clean Air Act: a. carry civil and criminal penalties.

b. carry only civil penalties. c. can be remedied only by a suit brought by another citizen. d. are handled by the Justice Department.

ANSWER: a POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Air Pollution Regulation KEYWORDS: Bloom's: Knowledge 61. If the EPA cleans up a toxic waste site, the cost of a cleanup can be recovered from the: a. owner. b. party who dumped the waste. c. Superfund. d. all of the above ANSWER: d POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Solid Waste Disposal Regulation KEYWORDS: Bloom's: Comprehension 62. A National Pollution Discharge Elimination Permit: a. permits the holder to discharge pollutants at its point source. b. permits the holder to discharge toxic pollutants. c. permits the holder to discharge pollutants after pretreatment. d. permits the discharge of smoke from utility plants equipped with scrubbers.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Water Pollution Regulation KEYWORDS: Bloom's: Knowledge 63. In nonattainment areas the EPA: a. defers to state regulation. b. can impose construction moratoriums. c. must honor the SIP. d. can cut off all forms of federal funding.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal Air Pollution Regulation Bloom's: Knowledge

64. Ralph Watkins owns a large home on a two-acre lot in Tempe, Arizona. Watkins has much of the lot covered with tiff grass and is meticulous about mowing the lawn. Watkins piles the grass clippings near his back fence and removes them on a semiannual basis. The clippings attract crickets, rodents, scorpions, and other forms of desert life. Watkins' neighbor, Vern Brown, has noted that the various forms of desert life scale the wall and invade his property. Brown has worked with his exterminator but his exterminator has told him that the grass clippings must go before the bugs will go. Brown: a. could clean up the pile and recover from Watkins under CERCLA. b. could report Watkins for violating the Solid Waste Disposal Act. c. could seek an injunction against Watkins on the basis of nuisance. d. would not have a nuisance claim since he is the only one who is affected.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Common Law Remedies and the Environment KEYWORDS: Bloom's: Application 65. What is the name given to groups who oppose specific placement of land usages using nuisance theories and local zoning laws? a. BANANAs b. NIMBYs c. NUTs d. BAMBIs ANSWER: b POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Common Law Remedies and the Environment KEYWORDS: Bloom's: Knowledge 66. An EIS is filed with the: a. Council on Environmental Quality. b. NPDES. c. EPA. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Environmental Quality Regulation KEYWORDS: Bloom's: Knowledge

67. The Army Corps of Engineers has proposed the construction of a dam that will be of substantial benefit in Tennessee in terms of economic development. The dam will also destroy the natural habitat of an endangered species: the snail darter. The project: a. does not require an EIS since the EPA is not involved in the project. b. will require an EIS since the Army is involved. c. cannot be completed under the Environmental Protection Act. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Environmental Quality Regulation KEYWORDS: Bloom's: Application 68. In nonattainment areas, the EPA has the authority to: a. impose construction moratoriums. b. require NPDES permits. c. halt all federal funds. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Air Pollution Regulation KEYWORDS: Bloom's: Knowledge 69. Which of the following acts established the NPDES system? a. Water Pollution Control Act of 1948 b. Water Quality Act c. Rivers and Harbors Act d. Federal Water Pollution Control Act of 1972 ANSWER: d POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Water Pollution Regulation KEYWORDS: Bloom's: Knowledge 70. Which of the following acts established the Superfund? a. Solid Waste Disposal Act b. Resource Recovery Act c. Toxic Substances Control Act

d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Solid Waste Disposal Regulation KEYWORDS: Bloom's: Knowledge 71. Which of the following is not regulated by the EPA? a. water pollution b. nuisance c. drinking water d. toxic waste ANSWER: b POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Statutory Environmental Laws KEYWORDS: Bloom's: Knowledge 72. The Oil Pollution Act of 1990: a. covers the construction of domestic pipelines. b. covers oil spills up to 200 miles offshore. c. was repealed. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Other Water Legislation KEYWORDS: Bloom's: Knowledge 73. First Banc loaned money to Best Batteries for the purchase of its factory. First Banc took a mortgage on the factory and land. Best Batteries, because the price of its lifetime battery was so high, went out of business within 18 months. Best deeded the title to the factory and land back to First Banc. When First Banc sent in a clean-up firm, it discovered that there were old and new batteries stacked everywhere on the property. First Banc: a. has no responsibility for cleanup of the batteries. b. can sell the property and disclaim liability in the purchase contracts and thus pass along the cleanup to the buyer. c. enjoys a lender's exemption from CERCLA liability. d. none of the above ANSWER: c POINTS: 1

DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Solid Waste Disposal Regulation KEYWORDS: Bloom's: Application 74. Which of the following parties could the EPA hold liable for toxic leaks from an underground storage tank? a. current owner b. past owner c. current operator d. all of the above ANSWER: d POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Solid Waste Disposal Regulation KEYWORDS: Bloom's: Comprehension 75. What new businesses were affected by the Clean Air Act amendments of 1990? a. bakeries b. dry cleaners c. paint shops d. all of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Air Pollution Regulation KEYWORDS: Bloom's: Comprehension 76. The Endangered Species Act: a. requires only that an EIS be prepared. b. applies only to government land. c. applies to private and public lands. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Other Federal Environmental Regulations KEYWORDS: Bloom's: Comprehension 77. Ralph Waters owns forested land. The Department of the Interior has declared that a small fruitfly on his property is

an endangered species and prevented the harvesting of trees there. Ralph: a. cannot harvest trees. b. is entitled to compensation for a taking. c. can challenge the determination in court. d. None of the above.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Other Federal Environmental Regulations KEYWORDS: Bloom's: Application 78. Ace Hauling, Inc., has been transporting industrial tailings for companies around the Minneapolis/St. Paul area for the past decade. The site at which the tailing were dumped has been designated at a CERCLA Superfund site. Ace Hauling's board of directors voted to sell Ace to a new corporation created by legal counsel for Ace. All of Ace's assets, liabilities and contracts will be transferred to the new corporation whose owners are unaware of Ace's history. By creating the new corporation and transferring the assets: a. Ace can avoid liability under CERCLA. b. Ace has done nothing to change its CERCLA liability. c. Ace can avoid any contractual liability under CERCLA. d. Ace eliminates its liability if its directors have no say in running the new corporation. e. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Solid Waste Disposal Regulation KEYWORDS: Bloom's: Application 79. Which of the following actions would require the company to obtain a permit for discharge from the EPA? a. Releasing water back into a stream after it was used in production with the only change being its temperature. b. Releasing water back into a stream after it was used in production, but in a state cleaner than it entered the factory. c. Releasing water into a pond on company property. d. Releasing water from a power plant cooling tower into the ocean. e. All of the above would require an EPA permit.

ANSWER: e POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Water Pollution Regulation KEYWORDS: Bloom's: Application 80. Which of the following remedies are available to remedy environmental hazards?

a. an EPA complaint b. private citizen suit under federal environmental law c. suit for nuisance d. suit under state law e. All of the above are available remedies.

ANSWER: e POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Enforcement of Environmental Laws KEYWORDS: Bloom's: Knowledge 81. "Moving to the nuisance": a. means that the nuisance activity must still be stopped. b. means that there must be compensation for the nuisance-producing party to relocate. c. means there are no remedies available for the nuisance. d. is not permitted without an EIS. e. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Common Law Remedies and the Environment KEYWORDS: Bloom's: Comprehension 82. The Mega Borg had an oil spill in the Gulf of Mexico. What is the potential liability of the corporate owners of the ship under the OPA? a. $25,000/day or $1,000/barrel spilled. b. There is no corporate liability under the OPA; only individual liability. c. $250,000/day. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Enforcement of Environmental Laws KEYWORDS: Bloom's: Application 83. First National has just foreclosed on the mortgage of one of its debtors, Rayon Chemical. It will be six months before Rayon can sell the property. What can First National do with the property without risking CERCLA liability? a. Inspect the property. b. It is too late; foreclosure results in CERCLA liability. c. Operate the plant.

d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Solid Waste Disposal Regulation KEYWORDS: Bloom's: Application 84. Which of the following would require the filing of an EIS? a. expansion of an airport in a national park b. allowing snowmobiles in a national park c. erecting a research telescope facility in a national park d. All of the above would require an EIS. ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Environmental Quality Regulation KEYWORDS: Bloom's: Application 85. Brownfields: a. are former Superfund sites that have been cleaned up. b. are Superfund sites that are lying fallow. c. cannot be sold or transferred. d. both b and c ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Solid Waste Disposal Regulation KEYWORDS: Bloom's: Comprehension 86. The U.S. Supreme Court ruled that the EPA has a mandate under the Clean Air Act to act on greenhouse gases and global warming in which case? a. Environmental Defense v. Duke Energy b. Massachusetts v. EPA c. Summers v. Earthland Institute d. Union Electric v. EPA ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking

TOPICS: KEYWORDS:

Air Pollution Regulation Bloom's: Application

87. An “innocent landowner”: a. is one who owned a Superfund site but did not contribute to its contamination. b. is one whose land value is affected by a Superfund site. c. Is someone who wants to develop a brownfield. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Solid Waste Disposal Regulation KEYWORDS: Bloom's: Comprehension 88. The federal government is required to build a border fence along the U.S. and Mexican border. As construction began, several environmental groups brought suit because the Army Corps of Engineers and the Department of Homeland Security had not complied with federal law. Which of the following federal laws would the two agencies have to comply with before constructing the wall? a. They would need to do due diligence on the land before building the fence. b. They would need to do an EIS. c. They would need to designate any area where the fence is located as a brownfield. d. both b and c ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Environmental Quality Regulation KEYWORDS: Bloom's: Application 89. Ergonomics operates a plant that manufactures plastic furniture. Residents complain that the smell from the plant is like inhaling chlorine bleach. Ergonomics located its plant in the area in 1967. Residential development near the plant began in 1999. The houses have grown closer and closer to the plant. The owners and the developer of the residential projects near Ergonomics have filed suit against Ergonomics for creating a public nuisance. a. Ergonomics was there first and there cannot be any finding of a nuisance as a result. b. The residential property owner and developer have moved to the nuisance and remedies vary. c. The residential property use and safety always take priority; Ergonomics must be closed down. d. A smell does not rise to the level of a nuisance.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Common Law Remedies and the Environment KEYWORDS: Bloom's: Application

90. A homeowner is plagued with smells and dirt from a nearby factory. Suggest appropriate remedies.

ANSWER: Violation of federal air pollution laws; nuisance; could seek injunction and/or damages; could complain to EPA for criminal sanctions.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Air Pollution Regulation Common Law Remedies and the Environment KEYWORDS: Bloom's: Synthesis 91. What penalties exist for violation of federal environmental regulations?

ANSWER: One year and/or $25,000 per day for violation.

POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Enforcement of Environmental Laws KEYWORDS: Bloom's: Knowledge 92. What agencies are responsible for enforcement of regulations on the environment?

ANSWER: Primarily EPA, but also Department of the Interior, Commerce, AEC, EPC, FAA, and so on.

POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Enforcement of Environmental Laws KEYWORDS: Bloom's: Knowledge 93. What environmental issues exist for a developer?

ANSWER: Use of land; discharges; obtaining permits; limitations on manufacturing and discharges.

POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Statutory Environmental Laws KEYWORDS: Bloom's: Knowledge 94. Explain how the EPA uses the "bubble concept."

ANSWER: The bubble concept is employed by the EPA in dealing with the proposed construction of plants in nonattainment areas. In these areas, all pollution is treated as coming from one source and to have a new plant, there must be a corresponding reduction in pollution somewhere in the area. This is also known as the EPA's emissions offset policy.

POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal Air Pollution Regulation Bloom's: Knowledge

95. Discuss how data barn problems can affect property values.

ANSWER: Data barns can decrease the value of property by making it less attractive to purchasers because of the nusiance factor and the potential costs of mitigation of the damages from the data barns. Like other examples in the nuisance area, the nuisance acts as a depressant on land values.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Common Law Remedies and the Environment KEYWORDS: Bloom's: Comprehension 96. Discuss the scope of the Endangered Species Act. ANSWER: The Endangered Species Act with the Babbitt v. Sweet Home case has been greatly expanded to provide protection not just for the destruction of the animals, but for the interference or destruction of their habitats, whether those habitats are located on private or public lands. In some cases, the ruling will mean that landowners will not be permitted to develop their properties.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Other Federal Environmental Regulations KEYWORDS: Bloom's: Knowledge 97. Explain the steps in due diligence.

ANSWER: Trace EPA history, soil tests, clean-up; all done prior to purchase.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Solid Waste Disposal Regulation KEYWORDS: Bloom's: Knowledge 98. Why are so many service stations replacing their underground storage tanks?

ANSWER: Because of potential CERCLA liability from tank leakage.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Solid Waste Disposal Regulation KEYWORDS: Bloom's: Application

99. Explain whether each of the following would require an EIS and why. a. The creation of a heliport in a national park. b. The construction of a new central post office clearing facility. c. The placement of a federal research laboratory at the top of a mountain.

ANSWER: All three would require EISs because they are actions taken by a federal agency or agents and affect the surrounding areas.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Environmental Quality Regulation KEYWORDS: Bloom's: Application 100. Explain the economic incentives under the Clean Air Act of 1990 for companies to have fewer emissions.

ANSWER: If companies reduce emissions below permit levels, they can sell that right to emit up to their maximum. There is an open market for sale of permits or partial sales.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Air Pollution Regulation KEYWORDS: Bloom's: Synthesis 101. Describe what brownfields are and what the federal government had been doing to help manage them.

ANSWER: Brownfields are pieces of property that were Superfund sites that have not been cleaned up and are lying fallow because no one wants to use them, no one wants to buy them because of their designation, and the result is that there are vacant and abandoned sites that are an eyesore and limit economic development. The EPA and other agencies, through federal funding, are providing grants to partnerships among and between businesses and local governments in order to develop brownfields through clean-up and rebuilding.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Solid Waste Disposal Regulation KEYWORDS: Bloom's: Synthesis In June 1985, Joseph Marcantuone and Robert Gieson purchased property located in East Orange, New Jersey. At the time of purchase, the property was partly occupied and leased to Carriage Trade Cleaners, a dry cleaning establishment. A number of dry cleaners continuously operated on this site since 1930. Marcantuone and Gieson owned and operated a grocery store on another section of the property. They have never personally owned or operated a dry cleaning establishment on the property. JRM, LLC, and Sang Hak Shin were tenants on the property and the last operators of the dry cleaning establishment that utilized the hazardous substance tetrachloroethylene, or perchloroethylene (PCE), during the time Marcantuone and Gieson owned the property. The city of East Orange acquired the property through condemnation for the purpose of building a school on the property. But, the PCE was discovered on the property and out of the $629,407 given to Marcantuone and Gieson as compensation for the taking, the city held back $182,035.20 for the cost of the PCE clean-up. It cost the city a total of $212,000 to complete the clean-up of the property.

102. How would the city have discovered the PCE on the property prior to its valuation for condemnation?

a. Through inspection of the property and the presence of a dry-cleaning establishment. b. Through land records tracing ownership of the dry-cleaning establishment. c. Through soil tests. d. all of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Solid Waste Disposal Regulation KEYWORDS: Bloom's: Application 103. What is the process of evaluating property prior to purchase called? a. An EIS b. Due diligence c. Nuisance abatement d. BAT or MACT ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Solid Waste Disposal Regulation KEYWORDS: Bloom's: Application 104. Who is liable for the remaining amount due for the clean-up? a. Marcantuone and Gieson b. Lessees of the dry-cleaning establishment c. Previous owners of the property d. all of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Solid Waste Disposal Regulation KEYWORDS: Bloom's: Application 105. Classify Marcantuone and Gieson. a. Users b. Lessees c. Owners d. Lenders ANSWER: c POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Solid Waste Disposal Regulation KEYWORDS: Bloom's: Application 106. Classify JRM, LLC, and Sang Hak Shin. a. Users b. Lessees c. Owners d. Lenders ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Solid Waste Disposal Regulation KEYWORDS: Bloom's: Application 107. The U.S. Department of Agriculture (USDA) approved an application from Monsanto to plant genetically engineered alfalfa seeds that resist Monsanto’s Roundup herbicide. Several environmental groups brought suit to stop the planting because the USDA did not complete an EIS in carving out an exception for genetically engineered crops. The fear is that the crops contain a bacterial gene that allows farmers to spray their fields for weeds without harming the alfalfa or other crops because the bacteria allows the crops to resist the weed spray. When is an EIS required? a. When a federal agency is taking action that could impact the environment. b. When an EIS is demanded by environmental groups. c. When a federal agency takes any action. d. When animal life is affected by federal agency action.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Environomental Quality Regulation KEYWORDS: Bloom's: Application 108. Who can bring suit to stop action by a federal agency? a. Another federal agency b. Citizen and environmental groups c. Only the company or individual affected by the agency action d. Only the Justice Department ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Enforcement of Environmental Laws

KEYWORDS:

Bloom's: Application

109. The U.S. Department of Agriculture (USDA) approved an application from Monsanto to plant genetically engineered alfalfa seeds that resist Monsanto’s Roundup herbicide. Several environmental groups brought suit to stop the planting because the USDA did not complete an EIS in carving out an exception for genetically engineered crops. The fear is that the crops contain a bacterial gene that allows farmers to spray their fields for weeds without harming the alfalfa or other crops because the bacteria allows the crops to resist the weed spray. How do you think the court ruled in this case?

ANSWER: The court held that an EIS was not required when a federal agency made one decision to make an exception to an existing policy and affecting only one company. The court held that there was no evidence submitted by the environmental groups that there would be harm to the environment. Rather, there was general opposition to all genetically engineered products, a position not grounded in fact.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Environmental Quality Regulation KEYWORDS: Bloom's: Application

1. Contracts for the sale of real property are governed by the Uniform Commercial Code. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Contract Law KEYWORDS: Bloom's: Application 2. The Restatement of Contracts is another name for the UCC. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Contract Law KEYWORDS: Bloom's: Knowledge 3. Under the UCC, offers need price, subject matter, and quantity to be definite enough. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Offer KEYWORDS: Bloom's: Knowledge 4. An offer is effectively communicated upon mailing or dispatch. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Offer KEYWORDS: Bloom's: Knowledge 5. Revocation can be valid any time prior to acceptance. a. True

b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Offer KEYWORDS: Bloom's: Knowledge 6. A merchant's firm offer requires consideration to be valid. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Offer KEYWORDS: Bloom's: Knowledge 7. Options require consideration to be valid. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Offer KEYWORDS: Bloom's: Knowledge 8. Under common law, a counteroffer is also a rejection. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Offer KEYWORDS: Bloom's: Knowledge 9. The UCC Battle of the Forms provision allows additional terms in an acceptance without invalidating the acceptance. a. True b. False ANSWER: True

POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Offer KEYWORDS: Bloom's: Knowledge 10. The UCC rules on additional terms in acceptance are the same for merchants and nonmerchants. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Offer KEYWORDS: Bloom's: Knowledge 11. Contracts for services are governed by the UCC. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Contract Law KEYWORDS: Bloom's: Knowledge 12. An acceptance of a stipulated means offer by a different means is effective upon receipt. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Acceptance: The Offeree's Response KEYWORDS: Bloom's: Knowledge 13. Common law does not dictate amounts required for consideration. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy

NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Consideration KEYWORDS: Bloom's: Knowledge 14. Contracts for the sale of land must be in writing to be enforceable. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Form: When a Record is Required KEYWORDS: Bloom's: Knowledge 15. A contract for the sale of a car for $700, under the old UCC, must be in writing to be enforceable. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Form: When a Record is Required KEYWORDS: Bloom's: Knowledge 16. A contract to solicit subscribers through pop-up Internet ads is considered a good under the UCC because it is a list of names. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Contract Law KEYWORDS: Bloom's: Application 17. Implied contracts are unenforceable. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal Types of Contracts Bloom's: Knowledge

18. Quasi contracts are implied-in-law contracts. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Types of Contracts KEYWORDS: Bloom's: Knowledge 19. A UCC offer is valid with the subject matter stated even though no price is given. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Offer KEYWORDS: Bloom's: Knowledge 20. "I'll take it, but you must deliver," is a valid acceptance. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Acceptance: The Offeree's Response KEYWORDS: Bloom's: Application 21. An acceptance by a merchant in response to an offer by a merchant cannot contain any additional terms or it will be treated as a counteroffer under the UCC. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal

TOPICS: KEYWORDS:

Offer Bloom's: Comprehension

22. Parol evidence is always admissible for challenging contract terms. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Writing and E-Commerce: The Uniform Electronic Transaction Act KEYWORDS: Bloom's: Comprehension 23. "I'm thinking of selling my CD player," is an example of offer language. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Offer KEYWORDS: Bloom's: Application 24. "I'll take the bike for $75, but first I have to sell my fish tank," is an example of a valid acceptance. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Acceptance: The Offeree's Response KEYWORDS: Bloom's: Application 25. "This offer is limited to these terms," means that between merchants only immaterial terms added in the acceptance will be part of the contract. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Offer

KEYWORDS:

Bloom's: Application

26. The parol evidence rule does not apply in UCC contracts. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Writing and E-Commerce: The Uniform Electronic Transaction Act KEYWORDS: Bloom's: Comprehension 27. The CISG follows the mirror image rule in formation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Issues in Formation of International Contracts KEYWORDS: Bloom's: Comprehension 28. "Drive my car to Albuquerque, and I'll pay you $500," is not a valid offer. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Offer KEYWORDS: Bloom's: Application 29. Under the CISG, acceptance is effective only upon receipt. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Issues in Formation of International Contracts KEYWORDS: Bloom's: Comprehension

30. Under ESIGN, clicking on a tab that reads “I accept” is a valid acceptance to an offer. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Writing and E-Commerce: The Uniform Electronic Transaction Act KEYWORDS: Bloom's: Application 31. An executory contract is one that is fully performed. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Types of Contracts KEYWORDS: Bloom's: Knowledge 32. The UCC has no timing rules for acceptance. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Acceptance: The Offeree's Response KEYWORDS: Bloom's: Comprehension 33. A contract must be in a formal writing to satisfy the statute of frauds. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Form: When a Record is Required KEYWORDS: Bloom's: Knowledge 34. E-Sign requires that there be faxes or written verification of electronic contracts. a. True

b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Writing and E-Commerce: The Uniform Electronic Transaction Act KEYWORDS: Bloom's: Knowledge 35. UETA has not yet been adopted in all of the states. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Writing and E-Commerce: The Uniform Electronic Transaction Act KEYWORDS: Bloom's: Comprehension 36. UETA does not apply when there is an applicable statute of frauds. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Writing and E-Commerce: The Uniform Electronic Transaction Act KEYWORDS: Bloom's: Comprehension 37. A contract for the sale of potatoes is not governed by the UCC. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Contract Law KEYWORDS: Bloom's: Application 38. Under the UCC, an acceptance followed by additional terms is a counteroffer and a rejection. a. True b. False ANSWER: True

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Offer KEYWORDS: Bloom's: Comprehension 39. A contract for rebinding 500 books at a cost of $1.50/book is governed by the UCC. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Contract Law KEYWORDS: Bloom's: Application 40. The above book contract must be in writing to be valid. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Form: When a Record is Required KEYWORDS: Bloom's: Application 41. A record, such as an e-mail or fax, now satisfies the writing requirement under both the UCC and common law. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Writing and E-Commerce: The Uniform Electronic Transaction Act KEYWORDS: Bloom's: Application 42. Point-and-click is a valid means of forming a contract if the parties had adequate knowledge of the terms and conditions of the agreement in advance. a. True b. False ANSWER: True POINTS: 1

DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: E-Commerce and Contract Formation KEYWORDS: Bloom's: Application 43. E-Sign is a federal law that requires written signatures for electronic contracts to be valid. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Writing and E-Commerce: The Uniform Electronic Transaction Act KEYWORDS: Bloom's: Knowledge 44. Under the UCC, a contract for the sale of a car for $700 need not have a record of the contract to be enforceable. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Form: When a Record is Required KEYWORDS: Bloom's: Application 45. A contract for termite extermination at a home would be governed by the UCC. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Contract Law KEYWORDS: Bloom's: Application 46. “Point and click” is not sufficient for acceptance under UETA. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal Writing and E-Commerce: The Uniform Electronic Transaction Act Bloom's: Application

47. A three-year warranty on an oven need be evidenced by a record to be enforceable. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Form: When a Record is Required KEYWORDS: Bloom's: Application 48. A contract for the sale of a $12.2 million Lear jet would be governed by common law because a document of title is involved. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Contract Law KEYWORDS: Bloom's: Application 49. “Would you be interested in selling your Prius for $21,000?”, is not an offer. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Offer KEYWORDS: Bloom's: Application 50. Which of the following contract subject matters would not be covered under the UCC? a. a contract for the sale of a mobile home from the manufacturer b. a contract for the sale of a mobile home from a previous owner c. a contract for the sale of a mobile home plus its lot d. All of the above are under the UCC. ANSWER: c POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Contract Law KEYWORDS: Bloom's: Application 51. Which of the following is not required for a valid UCC offer? a. quantity b. payment terms c. subject matter d. both b and c e. a, b, and c ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Offer KEYWORDS: Bloom's: Comprehension 52. Which of the following is effective upon mailing or dispatch? a. offers b. rejections c. counteroffers d. revocation e. none of the above ANSWER: e POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Acceptance: The Offeree's Response KEYWORDS: Bloom's: Comprehension 53. To be valid, a UCC merchant's firm offer: a. must be supported by consideration. b. must be evidenced by a record. c. must be signed by both parties. d. all of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Offer KEYWORDS: Bloom's: Comprehension

54. Under both UCC and common law, a counteroffer: a. must be accepted by the original offeror. b. is effective upon mailing or dispatch. c. is also a rejection. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Offer KEYWORDS: Bloom's: Comprehension 55. Under the UCC and between nonmerchants, additional terms in acceptance: a. constitute a counteroffer. b. are part of the contract. c. result in rejection or the original offer. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Offer KEYWORDS: Bloom's: Comprehension 56. Under the UCC and between merchants, additional terms in acceptance: a. are part of the contract unless they are material. b. are part of the contract unless the offer was limited. c. result in rejection of the original offer. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Offer KEYWORDS: Bloom's: Comprehension 57. The mailbox rule applies to: a. all acceptances. b. acceptances communicated through the offer's stipulated means. c. acceptances under UCC only. d. revocations and acceptances. e. none of the above ANSWER: b

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Acceptance: The Offeree's Response KEYWORDS: Bloom's: Comprehension 58. Which is not a requirement for a merchant's confirmation memorandum? a. evidenced by a record b. signed by both parties c. underlying oral agreement d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Writing and E-Commerce: The Uniform Electronic Transaction Act KEYWORDS: Bloom's: Comprehension 59. Which of the following contracts would not have to be in writing under the old UCC? a. a contract for the sale of an easement for $450 b. a contract for consulting services for $10,000 over the next 90 days c. a three-year advertising contract d. a contract for the sale of furniture for $700 e. All of the above must be in writing.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Contract Form: When a Record is Required KEYWORDS: Bloom's: Application 60. The following series of events occurred between Bull's Meat Market and The Butcher: May 1 - The Butcher faxes Bull's and offers to buy 200 lbs. of T-bone steak at $3.29 per lb.

May 2 - Bull's faxes back: "Price is okay. Payment prior to delivery."

Bull's and The Butcher: a. have a contract on May 2 with the payment term. b. have a contract on May 2 without the payment term. c. do not have a contract. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Critical Thinking Offer Bloom's: Application

61. Jane Linden is negotiating with James Paul to buy his 1987 Toyota MR5. The following excerpts from letters have occurred so far: Jane: "I would be interested in purchasing your MR5."

James: "I am thinking of selling my MR5."

Jane: "I am considering selling my diamond tennis bracelet to buy your MR5."

Which of the following statements is true? a. James and Jane have a contract to sell the MR5. b. James and Jane do not have a contract to sell the MR5.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Offer KEYWORDS: Bloom's: Application 62. John Freeden is negotiating with Bill Murray to buy Bill's mountain bicycle. The following conversation has taken place: John: "I will buy your mountain bike for $325.00."

Bill: "I couldn't sell it for less than $375.00."

John: "I'll take it for $375.00."

Which of the following statements is true? a. Bill and John have a contract for the sale of the bike at $375.00. b. Bill and John have a contract for the sale of the bike at $325.00. c. Bill and John do not have a contract. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Offer KEYWORDS: Bloom's: Application 63. Jerry Montray is negotiating with Pamela Barnes for the purchase of her mountain bike. The following conversation has taken place: Jerry: "I will buy your mountain bike for $375.00."

Pamela: "I will sell it to you."

Jerry: "Good. The tire pump is included."

Which of the following statements is true? a. Jerry and Pamela have a contract for the bike at $375.00. b. Jerry and Pamela do not have a contract for the bike at $375.00. c. Jerry and Pamela have a contract for the bike at $375.00 with the tire pump. d. none of the above ANSWER: a

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Offer KEYWORDS: Bloom's: Application 64. Which of the following is not a risk associated with international contracting? a. Currency exchange rates b. Transportation costs c. Fee collection d. None of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Issues in Formation of International Contracts KEYWORDS: Bloom's: Application 65. Ann Frazer has just purchased a new Maserati. Ann will be borrowing the money from her bank. Ann signed the contract at 8:00 PM at the dealership and her bank will not be open until 10:00 AM the following day. Ann: a. has a contract regardless of whether her bank approves her loan. b. has made a conditional acceptance and has no contract. c. will be excused from her contract if the bank does not approve her loan. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Formation of Contracts KEYWORDS: Bloom's: Application 66. The language "I offer to sell you my 1974 White Ford Torino" is: a. a valid offer. b. not a valid offer because it lacks a definite price. c. not a valid offer because there are no terms for payment. d. not a valid offer because it is oral.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Offer KEYWORDS: Bloom's: Application

67. Day 1: Mike sends Tina a letter offer to sell his fish tank to her for $125.

Day 2: Tina faxes Mike an acceptance.

Day 2: Mike receives Tina's fax.

Day 3: Mike calls Tina to revoke his offer.

Mike and Tina: a. do not have a contract since Tina used the wrong means of acceptance. b. do not have a contract because Mike revoked his offer before Tina accepted properly. c. have a contract as of the receipt of the fax. d. have a contract as of when the fax was sent.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Acceptance: The Offeree's Response KEYWORDS: Bloom's: Application 68. Walt's Pool World's fax to Pat's Pumps: "I'll take 10 4 hp pool pumps @ $175 each."

Pat's Pumps' return fax: "Ok. Will deliver tomorrow AM." Pat and Walt: a. do not have a contract because the faxes will not satisfy the statute of frauds. b. do not have a contract because of the mirror image rule. c. had a contract when Pat's fax was sent. d. had a contract when Pat's fax was received.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Acceptance: The Offeree's Response KEYWORDS: Bloom's: Application 69. Which of the following contract subject matters must be evidenced by a writing to be enforceable under the statute of frauds? a. a contract for the sale of an easement for $75 b. a contract for the sale of a computer monitor for $220 c. a contract for consulting for 6 months @ $10,000 per month plus expenses d. All of the above must be in writing.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Contract Form: When a Record is Required KEYWORDS: Bloom's: Application

70. Jane: "I'll pay you $50 if you will clean my windows."

Al: "I'll do it for $75."

Jane: "$65 and it's a deal."

Al: "No way."

Jane: "Too late. We have a contract."

Which of the following statements is true? a. Jane is correct, there is a contract. b. There is no contract. c. There is a contract to clean the windows for $65. d. There is a contract to clean the windows for $75.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Offer KEYWORDS: Bloom's: Application 71. Which of the following contracts must be in writing to be enforceable? a. A contract for the sale of an easement for $250. b. A contract for the sale of a bike for $175. c. A six-month marketing consulting contract. d. All of the above must be in writing to be enforceable.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Contract Form: When a Record is Required KEYWORDS: Bloom's: Application 72. Abe and Gabriel entered into a contract for Abe to furnish landscaping services for Gabriel's office complex. The contract provides the fee will be $75 per month. At the time Gabriel signs the agreement, the two discuss the fact that the services required in the winter will be less and the fee will be reduced to $50 per month. Abe adds as Gabriel is signing, "I just forgot to put that sliding scale in this contract. Don't worry - I'll take care of it because we understand each other."

Gabriel: a. will be permitted to introduce evidence about the winter fee reduction. b. will only need to pay $50 during the winter months. c. will pay $75 per month every month because of parol evidence. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Writing and E-Commerce: The Uniform Electronic Transaction Act KEYWORDS: Bloom's: Application

73. Andy: "This is to confirm our telephone conversation of earlier today. 200 lbs. of T-bone at $2.89 per pound."

Barb: "Yes, but that's 100 pounds at $2.99."

Andy: "Too late, we already reached agreement by phone."

Barb: "Too bad, it wasn't in writing."

Which of the following statements is true? a. Barb is incorrect. The phone conversation was a contract. b. Barb is correct. The agreement must be in writing to be enforceable. c. Andy can enforce the agreement with the parol evidence rule. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Contract Form: When a Record is Required KEYWORDS: Bloom's: Application 74. Day 1: A wires an offer to B Day 2: B receives the offer Day 3: B phones an acceptance A states, "Too late. I changed my mind."

Which of the following statements is true? a. A and B do not have a contract b. A and B have a contract under common law only c. A and B have a contract d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Offer KEYWORDS: Bloom's: Application 75. Melanie: "I'll buy that armoire for $775."

Judith: "It's not for sale."

Melanie: "How about $875?"

Judith: "I don't know. It's been in my family for 130 years."

Melanie: "How about $1000?"

Judith: "I'll think about it." a. There is an option contract. b. There is no contract. c. There is a reliance case. d. There is a quasi contract.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Critical Thinking Acceptance: The Offeree's Response Bloom's: Application

76. Which of the following contracts would not be governed by the UCC? a. a contract for dentures b. a contract for the purchase of an Arabian horse c. a contract for the purchase of an oil painting for $550 d. a contract for the purchase of an ATR jet e. All of the above are governed by the UCC. ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Sources of Contract Law KEYWORDS: Bloom's: Application 77. Which of these is an example of a bank’s commitment to pay? a. Bill of lading b. Fee arbitration agreement c. Letter of credit d. A warrant ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Issues in Formation of International Contracts KEYWORDS: Bloom's: Comprehension 78. John: "I will sell you my laptop computer for $330."

Mary: "Will you include the carrying case"?

John: "Sold." a. There is a contract for the sale of the computer with the carrying case. b. There is a contract for the sale of the computer but the carrying case is not included. c. There is no contract for the sale of the laptop computer. d. There is a contract but it is unenforceable because it must be in writing. e. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Offer KEYWORDS: Bloom's: Application

79. Alpha Enterprises sent an offer to Omega Enterprises. The offer read as follows: AVAILABLE FOR IMMEDIATE SHIPMENT: 600 WIRELESS NOKIA PHONES - MODEL HCG5321 (THE PHONE FROM "CHARLIE'S ANGELS").

PRICE IS $10 EACH. 30 DAYS, SAME AS CASH. ALL WARRANTIES IN EFFECT. THIS OFFER EXPIRES ON TUESDAY, MARCH 15, 2016. Omega sent the following letter in response on March 14, 2016, via overnight delivery: HAPPY TO ACCEPT YOUR OFFER ON THE NOKIA PHONES. SHIP IMMEDIATELY. There was a major snowstorm that hit the east coast on March 14, 2016, and Omega's letter did not arrive at Alpha's headquarters until March 18, 2016. Alpha had sold the phones to another company. Omega demanded the 600 phones for $10 each claiming that it had accepted the offer in time. a. Omega is correct; it had valid and timely acceptance and had a contract. b. Omega is incorrect; the acceptance must arrive for it to be effective. c. Omega is incorrect; the offeree assumes the risk of the delivery means chosen. d. Omega is correct, but any damages must be recovered from the overnight shipping company. e. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Acceptance: The Offeree's Response KEYWORDS: Bloom's: Application An ad in a newspaper reads: "AVAILABLE TODAY ONLY. FRIENDLY'S APPLIANCES. CLEARANCE SALE FOR ALL FLOOR ITEMS. 75% OFF RETAIL PRICES." Joan Ludwig arrived at Friendly's about one hour after it opened and there were no appliances left.

80. The issues in the situation are governed by: a. The Uniform Commercial Code b. UETA c. common law d. restatement of contracts e. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Sources of Contract Law KEYWORDS: Bloom's: Application 81. The newspaper ad: a. is an offer. b. is not an offer. c. is a merchant's firm offer. d. cannot be revoked. e. none of the above ANSWER: b POINTS: 1

DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Offer KEYWORDS: Bloom's: Application 82. Which of the following is true? a. Friendly's has breached a contract and owes damages to Joan. b. There is no breach of contract. c. Joan has no rights of recovery because the contract was required to be in writing. d. There was no contract, but Joan can recover on the basis of quasi contract. e. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Offer KEYWORDS: Bloom's: Application 83. Which of the following eliminates the effect of the mailbox rule? a. The UCC eliminates the mailbox rule. b. Common law eliminates the mailbox rule. c. An offer that includes, "Acceptance is effective upon receipt only." d. Any attempt to eliminate the mailbox rule is void. e. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Acceptance: The Offeree's Response KEYWORDS: Bloom's: Knowledge 84. Day 1 - School teacher sends superintendent letter of resignation.

Day 4 - Superintendent mails letter accepting resignation.

Day 5 - School teacher hand delivers letter withdrawing resignation.

Day 6 - Teacher receives superintendent’s letter. a. The above negotiations are governed by the UCC. b. The resignation was accepted and the withdrawal is too late. c. both a and b d. The resignation offer was revoked.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Critical Thinking Acceptance: The Offeree's Response Bloom's: Application

85. Buyer on fax: “Will take house for $587,500 if front lawn is fixed.”

Seller on fax in response: “Price is $589,000 and no front lawn.”

Buyer on fax in response: “$588,000 plus the front lawn.”

Seller on fax in response: $589,000 plus the front lawn.” a. There is a contract for the sale of the house at $588,000 plus the lawn. b. There is a contract for the sale of the house at $589,000 plus the lawn. c. There is no contract. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Offer KEYWORDS: Bloom's: Application 86. Which of the following is/are governed by the UCC? a. a contract for the sale of water b. a contract for the sale of extracted oil c. a contract for the sale of barges d. All of the above are governed by the UCC. ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Sources of Contract Law KEYWORDS: Bloom's: Application 87. Which of these can be a valid contract agreement under ESIGN? a. A fax b. A PDF file c. An online click or check on an “I accept” button d. All of the above ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Writing and E-Commerce: The Uniform Electronic Transaction Act KEYWORDS: Bloom's: Application

88. "Point and click" refers to: a. the right of the FBI to search web sites. b. the formation of contracts via the Internet. c. the registration of domain names under ICANN. d. pornographic web sites. e. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: E-Commerce and Contract Formation KEYWORDS: Bloom's: Knowledge 89. E-Sign: a. applies only to interstate transactions. b. must still be adopted by the states to be effective. c. does not apply to contracts for the sale of goods. d. applies in all 50 states. e. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Writing and E-Commerce: The Uniform Electronic Transaction Act KEYWORDS: Bloom's: Knowledge 90. The Uniform Electronic Transaction Act (UETA): a. has been adopted in all 50 states. b. has been declared unconstitutional. c. is the same as E-sign. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Writing and E-Commerce: The Uniform Electronic Transaction Act KEYWORDS: Bloom's: Knowledge 91. The following exchange took place in a series of e-mails between Mitchell Raines and Leslie Carroll: Mitchell: I am looking at the Trek bike advertised on your website for $650.00. Would you take $600.00?

Leslie: I would take $600 if there were no delivery required.

Mitchell: Well, I have to have it delivered because you are two states away.

Leslie: Well, then if there has to be delivery, I could do it for $630.00.

Mitchell: Is that cash?

Leslie: Yes. a. Mitchell and Leslie have a contract for the sale and purchase of the bike for $630.00 with delivery. b. Mitchell and Leslie have a contract for the sale and purchase of the bike for $630.00 without delivery. c. Mitchell and Leslie have an offer on the table of $600 with no delivery. d. Mitchell and Leslie do not have a contract.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Offer KEYWORDS: Bloom's: Application 92. Julia Pitt runs a boutique that specializes in luggage and travel items. Julia contacts Tumi Luggage about carrying its line of messenger satchels. The Tumi representative tells Julia that Tumi would be happy to sell her 100 Tumi Black Messenger bags for $318 each. Julia is happy with the price and asks Tumi to send the bags. The Tumi representative then faxes a confirmation of the shipment of the 100 bags at $318 each. Julia receives the fax. When the bags arrive, Julia contacts Tumi and says there is a business downturn and that she does not want the bags and that there was no contract anyway. a. Julia is correct; the contract requires some type of authentication from Julia to be enforceable. b. Julia is correct; the contract required more than a fax to have a sufficient record. c. Julia is incorrect; she and Tumi have a valid and enforceable contract. d. both a and b ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Acceptance: The Offeree's Response KEYWORDS: Bloom's: Application 93. Fred Twain sends the following e-mail to Ralph Barnes: “Will sell you my 2010 Audi A4 for $23,500, will carry or take cash. This offer to remain open until November 11, 2016.” Ralph responds, “I know how much you love that car. I’ll think about it.” On November 12, 2016, Ralph e-mails Fred and writes, “Fred, I am ready to buy your car.” Fred responds, “Ralph, I sold the car this morning because I didn’t hear from you.” a. Fred has breached a contract because Ralph accepted. b. Fred was required to notify Ralph before he sold the car to someone else. c. Ralph no longer had the power of acceptance. d. both a and b ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Acceptance: The Offeree's Response KEYWORDS: Bloom's: Application

94. On Monday, Sam's Computer Company wires Bob's Computer Mart, "I have two IBM XT's for sale for $1700 each.

You pay cost of shipping." Bob received the offer on Monday afternoon and wired back, "You have a deal. 30 days same as cash." On Tuesday morning Sam called to revoke the offer. On Tuesday afternoon Sam received the wire. Sam says there is no contract and Bob says there is. Who is correct?

ANSWER: Mailbox rule applies. There was a contract on Monday afternoon when the wire was sent.

Between the two merchants, the "30 days" additional terms will become part of the contract.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Acceptance: The Offeree's Response KEYWORDS: Bloom's: Application 95. List the types of contracts required to be in writing.

ANSWER: UCC - goods $500 or more; real estate; promises to pay the debt of another; contracts that cannot be performed in one year.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Contract Form: When a Record is Required KEYWORDS: Bloom's: Application 96. H2O Plumbing has been working on a residential subdivision project for Paradise Builders. H2O agreed to do all plumbing work on each of the houses for a fee of $5200 per house. H2O has reviewed the market and decided that most plumbers are getting between $5500 and $6000 for houses of comparable size. H2O has done the initial work on all of the houses and has told Paradise it will stop work unless the price is increased to $5500 per house. Paradise is on a tight schedule with its construction lender and with home buyers and succumbs to the demand. Later, when the houses are constructed, Paradise refuses to pay any more than $5200 per house. Explain H2O's rights to them.

ANSWER: H2O cannot get more money for what it was already obligated to do - it could only get $5500 if it agreed to do more on each house. Further, H2O used duress to get Paradise to agree to the transaction. There are at least two contract defenses - lack of consideration and duress - that could be used by Paradise.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Consideration KEYWORDS: Bloom's: Application 97. Trevor Jones accepted a summer internship with Hailey & Thomas, a management consulting firm. The negotiations and offer were all oral. Hailey & Thomas' managing partner did send a letter with the following language: Welcome to Hailey & Thomas. We are looking forward to working with you. When you arrive in New York, please call me so that we may help you locate lodging for the summer.

Discuss whether Trevor has a contract and if he has sufficient proof of its existence. Also discuss whether the agreement needed to be in writing.

ANSWER: The agreement did not need to be in writing since it was a contract for less than one year.

Even if the contract did need to be in writing, Trevor probably has sufficient evidence with

the letter from the managing partner.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Contract Form: When a Record is Required KEYWORDS: Bloom's: Application Barnes & Noble faxes to Woodchip Publishing Company on May 1, 2002 the following: Please ship immediately six copies of NOBODY FIXES REAL CARROT STICKS ANYMORE. Price: $6.00 Shipping: $2/book Woodchip ships six books with an invoice as follows: Six NOBODY FIXES REAL CARROT STICKS ANYMORE @ $6.00 = $36.00 Shipping and Handling = $6.00

98. Is there a contract?

ANSWER:

Yes, under the UCC, the shipment was acceptance. Woodchip gave a break on shipping which it is free to do.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Acceptance: The Offeree's Response KEYWORDS: Bloom's: Application 99. Suppose that the fax from Barnes & Noble read: Please ship immediately via priority mail - 10 Copies of NOBODY FIXES REAL CARROT STICKS ANYMORE. Price: $6.00 per book Shipping: $3.95 total Woodchip ships the books at the $6 price but ships them via two-day UPS at a price of $5.95. Is there a contract?

ANSWER: You have two merchants and Woodchip accepted by shipping, but used a different carrier that made a difference in price. It was an acceptance and breach at the same time because Barnes & Noble specified shipping and Woodchip used a different means for shipment. At a minimum, Barnes & Noble is permitted to not pay the extra shipping even if it chooses to accept the books. The acceptance on the different shipping terms is really not an acceptance, but a counteroffer that Barnes & Noble is free to accept or reject.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Acceptance: The Offeree's Response

KEYWORDS:

Bloom's: Application

100. Name the statutes that affect contract formation in cyberspace.

ANSWER: E-sign - The Electronic Signatures in Global and National Commerce Act Uniform Electronic Transactions Act (UETA) Uniform Computer Information Transactions Act POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Writing and E-Commerce: The Uniform Electronic Transaction Act KEYWORDS: Bloom's: Knowledge 101. Discuss whether a contract to solicit names of potential subscribers using pop-up Internet ads for a newspaper is considered goods or services under the UCC. ANSWER: According to Wall Street Network, Ltd. v. New York Times Company, such a list of names is a service under the UCC and not a good. While the end result is a list of names - potential subscribers - the process of obtaining those names is a service. The essence of the contract calls for services not the sale of goods.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Sources of Contract Law KEYWORDS: Bloom's: Application 102. The Equal Credit Opportunity Act was passed to ensure equal credit opportunity regardless of past credit history. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Consumer Credit Contracts KEYWORDS: Bloom's: Knowledge 103. A negative credit decision cannot be based on an applicant's plans for having children. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Consumer Credit Contracts KEYWORDS: Bloom's: Knowledge

104. The Truth-in-Lending Act applies to all credit transactions. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Consumer Credit Contracts KEYWORDS: Bloom's: Knowledge 105. The solicitation of credit card customers is not regulated by the federal government. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Consumer Credit Contracts KEYWORDS: Bloom's: Knowledge 106. The liability limitation for credit card holders who report a loss or theft is $50. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Consumer Credit Contracts KEYWORDS: Bloom's: Knowledge 107. A credit card applicant can be solicited without disclosure of the card's terms. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Consumer Credit Contracts KEYWORDS: Bloom's: Knowledge 108. Under CARD, credit terms must last for at least two years.

a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: CPA Exam KEYWORDS: Bloom's: Knowledge 109. Leases of consumer goods are not subject to disclosure requirements. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: CPA Exam KEYWORDS: Bloom's: Knowledge 110. The Equal Credit Opportunity Act applies only to consumer transactions. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Consumer Credit Contracts KEYWORDS: Bloom's: Knowledge 111. A spouse cannot apply for credit without the signature of his/her spouse. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Consumer Credit Contracts KEYWORDS: Bloom's: Knowledge 112. Asking a couple's plans for having children is a violation of the ECOA. a. True b. False

ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Consumer Credit Contracts KEYWORDS: Bloom's: Knowledge 113. Requiring credit references for members of one race but not for another is a violation of the ECOA. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Consumer Credit Contracts KEYWORDS: Bloom's: Knowledge 114. Asking that all sources of income be revealed on a credit application is prohibited by the ECOA. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Consumer Credit Contracts KEYWORDS: Bloom's: Knowledge 115. The subprime lending market uses title loans. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Consumer Credit Contracts KEYWORDS: Bloom's: Knowledge 116. Predatory lending involves high interest rates and title loans. a. True b. False ANSWER: True POINTS: 1

DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Consumer Credit Contracts KEYWORDS: Bloom's: Knowledge 117. The Fair Credit and Charge Card Disclosure Act prohibits issuing credit cards without the consumer’s consent. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Consumer Credit Contracts KEYWORDS: Bloom's: Knowledge 118. The subprime lending market is also called the predatory lending market. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Consumer Credit Contracts KEYWORDS: Bloom's: Knowledge 119. Many states have imposed additional steps for making loans in the subprime lending market. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Consumer Credit Contracts KEYWORDS: Bloom's: Knowledge 120. The subprime lending market collapse in 2008 led to other credit crunches and business impacts. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal Consumer Credit Contracts Bloom's: Knowledge

121. An applicant for credit need not disclose spousal support income if he is not relying on it as an income source. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Consumer Credit Contracts KEYWORDS: Bloom's: Knowledge 122. The spouse of a credit applicant must disclose his or her credit information if the credit application is for the applicant’s business operations. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Consumer Credit Contracts KEYWORDS: Bloom's: Knowledge 123. A credit application that asks for criminal convictions from the last five years violates the ECOA. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Consumer Credit Contracts KEYWORDS: Bloom's: Knowledge 124. The Equal Credit Opportunity Act prohibits which of the following? a. Basing the credit decision on the receipt of public assistance income. b. Basing the credit decision on a bankruptcy of five years ago. c. Basing the credit decision on the fact that the applicant was in prison for a felony three years ago. d. Basing the credit decision on unemployment.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Diversity STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Consumer Credit Contracts KEYWORDS: Bloom's: Application 125. Which of the following questions on a credit application would be a violation of ECOA? a. asking about felony convictions b. asking address and length of residence c. asking whether the applicant is pregnant d. All of the above are violations.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Diversity STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Consumer Credit Contracts KEYWORDS: Bloom's: Application 126. The maximum liability for a credit card holder whose card is lost or stolen is: a. $50. b. $50 if the cardholder notifies the creditor. c. $0. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Consumer Credit Contracts KEYWORDS: Bloom's: Knowledge 127. Which of the following is not required to be disclosed in the solicitation of a credit card customer? a. fees for issuing the card b. what your credit limit will be c. APR for the card d. All of the above must be disclosed.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Consumer Credit Contracts KEYWORDS: Bloom's: Knowledge 128. Janet Kennedy has received a letter in the mail from BISA International, a credit card firm. The letter describes the card as follows:

"This card is yours for only a small annual fee that is billed to your account. There is an annual percentage rate finance charge of 16.5%. There may be other charges for some transactions. There are no late fees, but there will be a charge for going over your credit limit."

Which of the following statements is true? a. The letter includes all the necessary disclosures for credit card solicitation under Regulation Z. b. The finance charge is usurious. c. The letter is missing several items of disclosure required under Regulation Z for credit card solicitation. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Consumer Credit Contracts KEYWORDS: Bloom's: Analysis 129. Which of the following questions on a credit application violates the ECOA? a. "List your place of employment." b. "Other sources of income - if you wish to have them considered in your credit evaluation." c. "Length of time in current residence." d. "Monthly child support income."

ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Consumer Credit Contracts KEYWORDS: Bloom's: Analysis 130. Under CARD, the terms of the credit card must be: a. sent to the customers. b. printed on paper. c. posted on the Internet. d. all of the above.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Consumer Credit Contracts KEYWORDS: Bloom's: Comprehension 131. Stan James carelessly left his wallet in the restroom of a gas station while on a business trip. He did not realize his wallet was gone until eight hours later when he went to check into his hotel. Stan called the credit card companies immediately, only to learn that the thief had charged $2000 on his American Express card, $450 on his MasterCard, and

$75 on his gas credit card. Stan James' maximum liability on the cards is: a. $0. b. $50 per card. c. $50. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Consumer Credit Contracts KEYWORDS: Bloom's: Application 132. Which of the following questions is prohibited under the ECOA? a. "Will your husband approve of you getting this credit card?" b. "Are you now pregnant or are you planning to be?" c. "We don't count public assistance income." d. All of the above are ECOA violations.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Diversity STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Consumer Credit Contracts KEYWORDS: Bloom's: Application 133. Which of the following is not a violation of the ECOA? a. requiring a husband's signature when his wife applies for a credit card b. requiring disclosure of pregnancy c. requiring disclosure of length of time at current job d. requiring disclosure of marital status e. All of the above are violations of the ECOA. ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Diversity STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Consumer Credit Contracts KEYWORDS: Bloom's: Application 134. Which of the following question(s) on a credit application would be a violation of the Equal Credit Opportunity Act? a. “Do you plan on getting pregnant within the next two years?” b. “Have you ever declared bankruptcy?” c. “Have you ever been convicted of a crime?” d. All of the above are violations.

ANSWER: a

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Diversity STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Consumer Credit Contracts KEYWORDS: Bloom's: Application 135. Under CARD, colleges and universities must: a. disclose financial relationships with the credit card companies. b. provide debt counseling for students. c. limit locations for student solicitation for credit cards. d. do all of these.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Consumer Credit Contracts KEYWORDS: Bloom's: Comprehension 136. List the federal laws regulating credit contracts and give a brief description of each.

ANSWER: ECOA - prohibits race, color, sex, and national origin from being used as the basis for a decision. TILA - full disclosure provisions of Consumer Credit Protection Act. Fair Credit Billing Act - regular disclosures; full disclosures of open-end credit. FCRA - disclosure of reports and right to correct. Consumer Leasing Act - disclosure in leasing goods. FDCPA regulates collection tactics.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Consumer Credit Contracts KEYWORDS: Bloom's: Comprehension 137. Discuss what colleges and universities must do under CARD for their students.

ANSWER: CARD requires the schools to limit the locations of solicitation of credit cards for students, to disclose all financial relationships with the credit card companies, and to provide debt counseling for students. These items will help protect and educate the students about the uses and misuses of credit cards.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Consumer Credit Contracts KEYWORDS: Bloom's: Knowledge 138. What additional disclosures must be made in credit transactions in which the debtor's home will serve as security for the loan?

ANSWER:

Under the amendments to TILA covering home mortgages, the loan documents must make clear the fact that default could lead to foreclosure and loss of the home.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: CPA Exam KEYWORDS: Bloom's: Knowledge 139. Using what you have learned about consumer credit, develop a credit application that would comply with all federal statutes and regulations.

ANSWER: Cannot ask for extra sources of income unless the consumer wants to reveal them. Cannot ask about marriage, pregnancy, welfare income. Cannot discriminate on the basis of race, gender, national origin.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Consumer Credit Contracts KEYWORDS: Bloom's: Synthesis 140. Which of the following contracts would have to have some form or writing or record to be enforced? a. A contract for the sale of a painting for $1,000. b. A contract for employment for nine months. c. A contract for advertising a house for sale for $50. d. All of the above contracts would need to be in writing to be enforceable.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Form: When a Record is Required KEYWORDS: Bloom's: Application Evaluate the following facts and then answer the next two questions.

Day 1 S sends a letter to B with the following: “I will sell you my Play Station 3 for $150 when I get my new Play Station.”

Day 2 B receives the letter and responds, “I will take the Play Station for $150.”

141. S has made a valid offer to B. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking

TOPICS: KEYWORDS:

Offer Bloom's: Application

142. The communication between S and B must be evidenced by a record if any rights related to the exchange can be enforced. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Offer KEYWORDS: Bloom's: Application Evaluate the following facts and then answer the next two questions.

Day 1 Day 2

S sends a letter to B with the following: “I will sell you my Play Station 3 for $150.”

B receives the letter and responds, “I will take the Play Station for $150, but include 3 games.”

143. S has made a valid offer to B. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Offer KEYWORDS: Bloom's: Application 144. B has made a valid acceptance. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Acceptance: The Offeree's Response KEYWORDS: Bloom's: Application 145. Which of the following is not part of the CARD provisions on transfer of credit card balances? a. Limits on how quickly credit terms can be changed following the transfer. b. Additional disclosures on transfer fees. c. Limits on transfer fees.

d. Prohibitions on additional transfers by the card holder.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Consumer Credit Contracts KEYWORDS: Bloom's: Application 146. Stamps.com offers at-home postage and mailing for a monthly fee. Customers are able to carry a balance on their accounts that allows them to mail packages and letters as long as there is a balance in their account. Stamps.com has a button on its program that carries this logo, “To purchase postage, click here.” Following that click, another window pops up that reads, “You are about to purchase postage. Once you click 'Okay' below, you cannot change this transaction."

Why does Stamps.com have the second pop-up button? a. The pop-up button is simply a courtesy for its customers. b. The pop-up button is necessary to show acceptance of the terms. c. The pop-up button is required under the UCC. d. The pop-up button is required under common law.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: E-Commerce and Contract Formation KEYWORDS: Bloom's: Application 147. A bilateral contract is one in which one side promises to perform in exchange for the other side's actions. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Types of Contracts KEYWORDS: Bloom's: Knowledge 148. Void and voidable contracts are one and the same. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Types of Contracts

KEYWORDS:

Bloom's: Knowledge

1. A contract with a minor is voidable at the minor's option. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Capacity KEYWORDS: Bloom's: Knowledge 2. A contract with a party who has been declared incompetent is voidable. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Capacity KEYWORDS: Bloom's: Knowledge 3. The contracts of a person who has been declared legally incompetent are void. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Capacity KEYWORDS: Bloom's: Knowledge 4. Minors are liable for the reasonable value of necessaries. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Capacity KEYWORDS: Bloom's: Knowledge 5. Material information is something that would affect the decision to buy or sell. a. True

b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Misrepresentation KEYWORDS: Bloom's: Knowledge 6. Misrepresentation must be fraudulent before rescission can be permitted. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Misrepresentation KEYWORDS: Bloom's: Knowledge 7. Puffing is sufficient grounds for setting aside a contract on the basis of misrepresentation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Misrepresentation KEYWORDS: Bloom's: Knowledge 8. "This shirt is 100% cotton" is a statement that is puffing. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Misrepresentation KEYWORDS: Bloom's: Application 9. Fraud is misrepresentation with intent to mislead or deceive. a. True b. False ANSWER: True

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Fraud or Fraudulent Misrepresentation KEYWORDS: Bloom's: Comprehension 10. Duress requires proof of physical force. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Duress KEYWORDS: Bloom's: Knowledge 11. Contracts by minors to enter the military are generally viewed as unenforceable. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Capacity KEYWORDS: Bloom's: Application 12. Undue influence requires proof of a confidential relationship. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Undue Influence KEYWORDS: Bloom's: Knowledge 13. Competency licensing statutes do not prevent enforcement of contracts by unlicensed parties. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy

NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Illegality and Public Policy KEYWORDS: Bloom's: Application 14. Contracts with illegal subject matter are voidable. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Illegality and Public Policy KEYWORDS: Bloom's: Comprehension 15. Unconscionability is an illegality defense. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Illegality and Public Policy KEYWORDS: Bloom's: Comprehension 16. Covenants not to compete are valid only in sales of a business. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Illegality and Public Policy KEYWORDS: Bloom's: Comprehension 17. Conditions precedent are events that must happen before contract performance is required. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal

TOPICS: KEYWORDS:

When Performance is Due Bloom's: Knowledge

18. Substantial performance is available for all types of contracts. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Standards for Performance KEYWORDS: Bloom's: Knowledge 19. A force majeure clause is one that provides excuses for nonperformance. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: When Performance is Excused KEYWORDS: Bloom's: Knowledge 20. Liquidated damages are void as penalties. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Remedies for Nonperformance KEYWORDS: Bloom's: Comprehension 21. Incidental damages are the costs of being compensated and are nonrecoverable. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Remedies for Nonperformance KEYWORDS: Bloom's: Comprehension

22. Exculpatory clauses are generally considered void as against public policy. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Illegality and Public Policy KEYWORDS: Bloom's: Application 23. Covenants not to compete are generally considered void as against public policy. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Illegality and Public Policy KEYWORDS: Bloom's: Application 24. A force majeure clause is a clause that prevents additional terms in acceptances from becoming part of the contract. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: When Performance is Excused KEYWORDS: Bloom's: Comprehension 25. Incidental and consequential damages are the same types of damages. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Remedies for Nonperformance KEYWORDS: Bloom's: Knowledge 26. A liability limitation clause is the same as an exculpatory clause.

a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Illegality and Public Policy KEYWORDS: Bloom's: Knowledge 27. A television rent-to-own contract that requires 24 payments of $30 each before the renter owns the $199 television set is unconscionable. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Illegality and Public Policy KEYWORDS: Bloom's: Knowledge 28. An architect who fails to pay her annual license renewal fee will be unable to collect fees for work done until the renewal fee is paid. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Illegality and Public Policy KEYWORDS: Bloom's: Knowledge 29. “Only those on the cutting edge of technology have this product,” is an example of puffing. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Misrepresentation KEYWORDS: Bloom's: Application 30. An accord and satisfaction is a void contract.

a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Finding Someone Else to Take Over the Contract KEYWORDS: Bloom's: Knowledge 31. The types of statements that qualify for express warranties also qualify as a basis for misrepresentation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Misrepresentation KEYWORDS: Bloom's: Comprehension 32. The difference between fraud and misrepresentation is knowledge. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Misrepresentation Fraud or Fraudulent Misrepresentation KEYWORDS: Bloom's: Comprehension 33. Silence, or the failure to disclose information, is not misrepresentation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Misrepresentation KEYWORDS: Bloom's: Comprehension 34. All contracts have conditions for performance. a. True

b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Performance KEYWORDS: Bloom's: Knowledge 35. The seller's cost of running another ad in order to sell the car that a buyer breached a contract on is an example of consequential damages. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Remedies for Nonperformance KEYWORDS: Bloom's: Application 36. The difference between fraud and misrepresentation is proof of intent. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Misrepresentation Fraud or Fraudulent Misrepresentation KEYWORDS: Bloom's: Knowledge 37. Compensatory damages can be awarded in addition to liquidated damages. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Remedies for Nonperformance KEYWORDS: Bloom's: Knowledge 38. Covenants not to compete are void only in sale-of-business contracts. a. True

b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Illegality and Public Policy KEYWORDS: Bloom's: Comprehension 39. Attorneys' fees are an example of liquidated damages. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Remedies for Nonperformance KEYWORDS: Bloom's: Knowledge 40. Compensatory damage formulas are provided under the UCC. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Remedies for Nonperformance KEYWORDS: Bloom's: Knowledge 41. In a relationship of dependence, the failure to deal fairly can result in liability for the party controlling the contract term. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Undue Influence KEYWORDS: Bloom's: Knowledge 42. There is no difference between assignments and delegation. a. True b. False

ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Third-Party Rights in Contracts KEYWORDS: Bloom's: Knowledge 43. A bill of lading is a receipt for shipment issued by the seller. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: International Issues in Contract Performance KEYWORDS: Bloom's: Knowledge 44. Goods can be transferred physically or by transfer of the bill of lading. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: International Issues in Contract Performance KEYWORDS: Bloom's: Knowledge 45. A letter of credit is issued by the buyer’s bank. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: International Issues in Contract Performance KEYWORDS: Bloom's: Knowledge 46. A lawyer/client relationship is an example of a confidential relationship. a. True b. False ANSWER: True POINTS: 1

DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Undue Influence KEYWORDS: Bloom's: Knowledge 47. An example of a condition precedent in a home purchase contract is that the buyer must qualify for financing first. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: When Performance is Due KEYWORDS: Bloom's: Application 48. An example of a condition precedent in an audit contract is access by the auditor to financial information. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: When Performance is Due KEYWORDS: Bloom's: Application 49. Parents of minors can be held liable for the reasonable value of necessaries that their minor children contracted for. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Capacity KEYWORDS: Bloom's: Knowledge 50. A multi-million dollar contract between a manufacturer and a parts supplier provides for damages of $300 per day for late delivery is void as a penalty contract. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Remedies for Nonperformance KEYWORDS: Bloom's: Application 51. A mortgage broker who sells mortgage contracts to mortgage companies has created a third party beneficiary contract. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Third-Party Rights in Contracts KEYWORDS: Bloom's: Application 52. An assignment is the transfer of benefits under a contract. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Third-Party Rights in Contracts KEYWORDS: Bloom's: Knowledge 53. A minor who has received medical care can never be responsible for payment for those services. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Capacity KEYWORDS: Bloom's: Application 54. In the iParadigms case (Turnitin case), the court ruled that the students who submitted papers to Turnitin who did not want to submit their papers were victims of duress. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal Illegality and Public Policy Bloom's: Comprehension

55. Bob, age 17, has entered into a contract to buy a car. The contract is: a. voidable. b. void. c. voidable only if Bob can return the car. d. enforceable since it is for a necessary. e. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Capacity KEYWORDS: Bloom's: Application 56. Which of the following statements would not be a basis for misrepresentation? a. "This toothpaste is the best tasting around." b. "This house is built the way they used to build houses." c. "There is no merger pending for the company." d. All of the above are sufficient bases for misrepresentation.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Misrepresentation KEYWORDS: Bloom's: Application 57. Duress requires proof of: a. physical force. b. threat of physical force. c. deprivation of a meaningful choice. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Duress KEYWORDS: Bloom's: Knowledge 58. Contracts with illegal subject matter are: a. void.

b. voidable. c. neither a nor b ANSWER: a POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Illegality and Public Policy KEYWORDS: Bloom's: Knowledge 59. A provision in a contract requiring that a buyer obtain financing before a deal can go through is an example of: a. a contract with no consideration. b. economic duress. c. a condition precedent. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: When Performance is Due KEYWORDS: Bloom's: Knowledge 60. Force majeure clauses: a. are liquidated damages clauses. b. are void. c. serve to shift the risk of unforeseen events. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: When Performance is Excused KEYWORDS: Bloom's: Application 61. A seller recovering the difference between his resale price and the buyer's original contract price is an example of: a. compensatory damages. b. incidental damages. c. liquidated damages. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal

TOPICS: KEYWORDS:

Contract Remedies for Nonperformance Bloom's: Knowledge

62. James Krieg has finished law school but has unsuccessfully taken the bar exam twice. Krieg is running low on patience and cash. He has begun writing wills to see him through this time of crisis and is charging $200 per will. Some of his will clients have refused to pay Krieg and he wishes to take them to a small claims court. Which of the following statements is true? a. Krieg could recover the fees on a quasi-contract theory. b. Krieg could recover the fees since the licensing after the bar exam is simply to raise funds. c. Krieg agreements are voidable. d. Krieg agreements are void.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Illegality and Public Policy KEYWORDS: Bloom's: Application 63. Which of the following contracts would be void? a. A contract with a person declared mentally incompetent. b. A contract with a minor. c. A contract with a force majeure clause. d. All of the above are void.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Capacity KEYWORDS: Bloom's: Application 64. The seller of a dry cleaning business has agreed not to open another dry cleaning business for two years within a onemile radius of the sold business. Such an agreement: a. is void as against public policy. b. is void as unconscionable. c. is void as usurious. d. is valid and enforceable.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Illegality and Public Policy KEYWORDS: Bloom's: Application 65. Clothing For Accountants is a popular retail store owned by I.M. Material. Material has just sold the business to Phil

Forma. Phil has asked that a covenant not to compete be inserted into the agreement. Such covenants are: a. void as against public policy. b. only valid in employment contracts. c. valid if reasonable in time and geographic scope. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Illegality and Public Policy KEYWORDS: Bloom's: Application 66. Undue influence requires the presence of: a. a fiduciary relationship. b. some threat or force. c. a lack of capacity in the contracting party. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Undue Influence KEYWORDS: Bloom's: Knowledge 67. A minor's right to disaffirm a contract is conditioned on: a. the ability to return the contract consideration. b. whether the minor misrepresented his/her age. c. a time limit of six months. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Capacity KEYWORDS: Bloom's: Comprehension 68. Which of the following statements (if later established as untrue) would constitute a misrepresentation defense to contract formation? a. "You are going to love this house as we have." b. "This farm's well is adequate for household, ranch, and crop needs." c. "The school system here is very fine." d. "Our buyers are the happiest customers around."

ANSWER: b

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Misrepresentation KEYWORDS: Bloom's: Application 69. If entered into by a minor, which of the following contractual situations may be enforceable against the minor? a. Student loan agreements b. Military obligations c. Payment for reasonable value for necessities d. All of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Capacity KEYWORDS: Bloom's: Application 70. Paddock Pools constructed a swimming pool and deck for the Jensens' home. Paddock installed the wrong trim on the pool. It would cost $2800 to change the trim - one-fifth the total cost of the pool. The Jensens refuse to pay anything for the pool. Paddock's best defense is: a. duress. b. substantial performance. c. mistake. d. failure of conditions.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Standards for Performance KEYWORDS: Bloom's: Application 71. Dana Riley purchased a home in the Brentwood area of Los Angeles. After she purchased the home, she learned that the home had been the residence of a long-time drug dealer. She experienced many late-night visitors and often noticed cars parked outside near the street curb with the drivers and passengers studying the home. The former owner has been convicted of drug charges. Dana has become uncomfortable with the visitors and the surveillance. She just wants out of the house. Which of the following statements is true? a. Dana has no grounds for rescinding her agreement. b. The information about the drug dealer was material and should have been disclosed to her. c. Withholding information about the former drug-dealer owner is not misrepresentation. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging

NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Fraud or Fraudulent Misrepresentation KEYWORDS: Bloom's: Application 72. Dana Riley purchased a home in the Brentwood area of Los Angeles. After she purchased the home, she learned that the home had been the residence of a long-time drug dealer. She experienced many late-night visitors and often noticed cars parked outside near the street curb with the drivers and passengers studying the home. The former owner has been convicted of drug charges. Dana has become uncomfortable with the visitors and the surveillance. She just wants out of the house. Suppose that the listing agent was aware of the home's history and the drug dealer's arrest and conviction. The agent told the neighbors to cooperate by not disclosing any information to Dana. "Look," the agent told them, "you can get the house sold and keep your values up or let it sit there and have the old druggies come by and destroy it." Which of the following statements is true? a. The real estate agent has committed fraud. b. The real estate agent is under no obligation to disclose the information. c. The most the real estate agent has committed is misrepresentation. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Fraud or Fraudulent Misrepresentation KEYWORDS: Bloom's: Application 73. Alice, age 17, purchased a 2005 Kia auto at the Tempe Autoplex. After driving the vehicle for three months, Alice returned to the Autoplex for her money. She did not, however, have the Kia. "It was stolen at school last week." Which of the following statements is true? a. Alice may not rescind the agreement. b. Alice may rescind the agreement only if the stolen Kia is found. c. Alice may rescind the agreement regardless of whether she has the car. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Capacity KEYWORDS: Bloom's: Application 74. The Hoffmans were having their home remodeled by All-Right Contractors. The roof had to be removed in order to build the second story the Hoffmans had contracted and designed to build. After All-Right had removed the roof, but before a covering was placed over the exposed half of the home, All-Right's foreman said the job would cost an additional $12,500. The Hoffmans refused to agree to the additional fees and All-Right's foreman said, "Suit yourselves. Looks like rain for the next day or two," and left. The Hoffmans called All-Right and agreed to pay the $12,500 extra and went in to sign the paperwork. Which of the following statements is true? a. The contract for the additional $12,500 is valid and binding. b. The contract for the additional $12,500 is invalid because of duress.

c. The contract was not valid because of duress, but the Hoffmans signed anyway - so there is a valid and enforceable agreement. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Duress KEYWORDS: Bloom's: Application 75. The court in the case involving Turnitin (iParadigms) held that: a. duress was clearly involved. b. the Clickwrap acceptance was valid. c. the owners of Turnitin have unlimited liability to the students submitting papers. d. the plaintiffs’ infancy defense was successful.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Illegality and Public Policy KEYWORDS: Bloom's: Knowledge 76. Which of the following statements would be a basis for claiming misrepresentation? a. This car is a real honey. b. This car has the finest road performance going. c. This car has the fastest zero to 60 acceleration on the planet. d. This car represents status. e. All of the above could be a basis for misrepresentation.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Misrepresentation KEYWORDS: Bloom's: Application 77. Andy Seagroves purchased a computer from Best Buy. Best Buy did not disclose to him that the computer was a return item. There was no indication of any price difference between the computer Andy bought and the unopened computers. Andy experiences significant difficulties with the computer and returns it to Best Buy. Andy indicates that he would like to have a new computer and that the price is now $150 more. Best Buy indicates that it is happy to take the return on the computer and credit Andy's account, but that it has no further liability. a. Best Buy's position is correct. b. Andy has no damages since Best Buy took back the computer. c. Andy is entitled to recover the price difference so that he can replace the computer. d. Andy is entitled to the return, but no additional damages.

e. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Contract Remedies for Nonperformance KEYWORDS: Bloom's: Application Angela, age 17, is injured in a car accident and receives $5,200 in medical treatment at the emergency room. The hospital sends a bill to Angela, who signed the admitting form in which she agreed to pay for the treatment.

78. Angela: a. is a minor and need not pay the bills. b. is liable for the bill as a necessity. c. can rescind the agreement. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Capacity KEYWORDS: Bloom's: Application 79. Suppose that Angela turned 18 between the time of the accident and when she received the bill. Angela: a. is a minor and need not pay the bills. b. is liable for the bill as a necessity. c. can rescind the agreement. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Capacity KEYWORDS: Bloom's: Application 80. Which of the following would not be a basis for misrepresentation? a. These shrubs will survive in direct sunlight. b. This lawnmower has a safety turn-off switch. c. This soft water system will add five years to the life of your washing machine. d. All of the above are a basis for misrepresentation.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging

NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Misrepresentation KEYWORDS: Bloom's: Application 81. Ralph Deuschle owned an ice sculpture company. Ralph provides ice sculptures for private weddings, parties, and receptions. The Canasta Resort was a large hotel located near Ralph that was not satisfied with its current catering company’s ice sculptures and its events manager liked Ralph’s work. The events manager approached Ralph and indicated the Canasta would like to have an ongoing supply contract but that its needs would require Ralph to expand his business, both with additional space and 3 new employees. Ralph entered into a supply contract with the Canasta and the events manager told a lending officer at the bank where Ralph got his construction mortgage for the business expansion that the Canasta would be sending all of its business to Ralph. The Canasta then began to rethink its events focus and marketing and decided to cut back on ice sculptures. Ralph could not use the additional space and the three employees had to be laid off. The Canasta: a. has no liability to Ralph for the downturn in amount of ice sculptures ordered if it did not guarantee a minimum amount to be purchased. b. may be liable to Ralph under a theory of a lack of good faith. c. is entitled to refocus its business and has not breached its contract. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: When Performance is Excused KEYWORDS: Bloom's: Application 82. Sue and Kevin Kellman signed a contract for the construction of a cabin near Pinetop. In building the $562,000 cabin, the builder discovered that it had to put the vent for the heating system in the area where the hall closet is located. The result was that the Kellman’s had a half-closet there instead of a full-length closet that was open to the floor. The Kellmans: a. need not pay for the cabin because of this material breach. b. can be compensated under the doctrine of force majeure. c. can be compensated under the doctrine of commercial impracticability. d. can be compensated under the doctrine of substantial performance.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Standards for Performance KEYWORDS: Bloom's: Application 83. RaeAnn and Rick Telford purchased an existing home in a neighborhood of multi-million-dollar homes. After moving in, the Telfords learned that the home had been owned formerly by a couple that was indicted for drug trafficking. The home had been raided by DEA agents, and there had been a shoot-out before the couple was taken into custody. The couple’s youngest child was killed in the house during the shoot-out. RaeAnn and Rick: a. have no recourse if there is nothing physically wrong with the house. b. have a remedy of damages or rescission if this information was withheld from them.

c. have no remedy because neither sellers nor brokers are required to disclose psychological issues with properties. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Misrepresentation KEYWORDS: Bloom's: Application 84. Costco, Inc. had a contract to purchase 300,000 electric mini-Mercedes from HUMBENZ Toy Co. The toy cars were to be delivered by November 1. On October 23, the Consumer Product Safety Commission announced a recall of the toy cars as well as a ban on their sales because of electrical shorts and a high risk of fire in the cars. HUMBENZ has not delivered the cars to Costco. HUMBENZ: a. has breached its contract with Costco. b. has a void contract with Costco because the subject matter is now illegal. c. must still deliver the cars because its contract predated the recall and ban. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Illegality and Public Policy KEYWORDS: Bloom's: Application 85. The Jameses were negotiating the purchase of the Smith's home but requested a termite inspection. The inspection came back clear from ABC Bug, Inc. The Jameses bought the house and immediately began to notice signs of termite infestation. They called Goodbye Bug, Inc., and their technician confirmed significant termite infestation and damage.

The technician said he had inspected the home for the Smiths just a few weeks earlier, but was never asked to repair and exterminate. The Jameses want out of the house and the contract. Do they have a basis?

ANSWER: Yes, the case appears to be one of fraudulent misrepresentation. The Smiths knew of the damage and failed to disclose it. The Jameses can rescind the contract.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Misrepresentation Fraud or Fraudulent Misrepresentation KEYWORDS: Bloom's: Application 86. Weldon Newfield was having a custom home built. He had a list of certain materials the contractor was to use in building the $270,000 home. Newfield was in Europe and the contractor could not find "Reading Copper Pipe" - one of the required materials. Since Newfield could not be reached and the contractor was under a time schedule, the decision was made to use another brand of copper pipe. When Newfield returned and learned of the problem, he refused to pay any remaining amounts due on the contract ($235,000). Can Newfield do that?

ANSWER: No, doctrine of substantial performance.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Standards for Performance KEYWORDS: Bloom's: Application 87. Ann wrote a $500 check to Art as a deposit on Art's 240Z car. The memo section of the check read: "Deposit on 1978 240Z car of Art Mole. Sale price $4500." Art initialed the memo section. When Ann returned the next day with the remaining $4000, Art said, "Sorry, I sold the car for $4,000 cash yesterday and sent your check back." The cheapest 240Z Ann can find is $5200. What are Ann's rights? Discuss the following: a. Was a contract formed? b. Are there statute of frauds problems? c. Could Ann collect damages? If so, what?

ANSWER: a. There was a contract.

b. The check and memo satisfy the statute of frauds. c. Art did Ann a big favor by returning the check. Ann's damages: $5200 -4500 $ 700 plus incidental damages POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Contract Remedies for Nonperformance KEYWORDS: Bloom's: Application 88. A weight-loss ad claims, "Lose up to five pounds per week." Is this statement a basis for misrepresentation?

ANSWER: Yes, the statement could be a basis for misrepresentation, but it is open-ended enough that there may not be any action against the company for making it. The statement does not guarantee five pounds per week - it is only "up to." If anything, the statement is only placing a maximum on weight loss.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Misrepresentation KEYWORDS: Bloom's: Application 89. Dee's Caterers contracted with Glen Allen Peanut Farms for the purchase of a one year's supply of peanuts for Dee's business. The price was $1.21 per pound. The Glen Allen Peanut Farms was hit by a frost that damaged most of its crops and left what remained with an odd taste. Because other peanut farms also fell victim to the frost, the price of peanuts rose to $3.37 per pound. Dee's demanded delivery. Glen Allen said it would cost too much to perform. Must Glen Allen perform? What damages would Dee's have?

ANSWER: Glen Allen has tried the defense of commercial impracticability. But, expense alone is not sufficient grounds for the use of this excuse. Dee's damages would be the difference between $3.37 per pound and $1.21 per pound.

POINTS: 1 DIFFICULTY: Challenging

NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Contract Remedies for Nonperformance KEYWORDS: Bloom's: Application 90. Discuss the students’ use of the infancy defense in the Turnitin (iParadigms) case.

ANSWER: The students’ use of the infancy defense was unsuccessful in this case because the students received a benefit from using Turnitin - a grade in the course - which kept them in school.

The court ruled that the students could not receive this benefit while also trying to avoid their contractual obligations of using Turnitin.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Illegality and Public Policy KEYWORDS: Bloom's: Application 91. Explain the purpose of a force majeure clause.

ANSWER: Its purpose is to excuse performance in circumstances not controlled by the parties such as political unrest, Acts of God (earthquakes, tsunamis, hurricanes), war, etc.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: When Performance is Excused KEYWORDS: Bloom's: Knowledge 92. Regulation Z provides the details of compliance with the Fair Credit Billing Act. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Making Sure the Billing is Accurate KEYWORDS: Bloom's: Knowledge 93. The three-day-cooling-off period applies to all credit transactions. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Consumer Credit Contracts and Rescission Rights

KEYWORDS:

Bloom's: Knowledge

94. Home equity loans do not carry a rescission period. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Consumer Credit Contracts and Rescission Rights KEYWORDS: Bloom's: Knowledge 95. The Fair Credit Reporting Act regulates creditors. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Is There a Cost to Breaching a Contract: Creditor Reports on Nonpaying Debtors KEYWORDS: Bloom's: Knowledge 96. There are no limitations on credit-agency disclosures, if the debtor is applying for a loan of more than $50,000. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Is There a Cost to Breaching a Contract: Creditor Reports on Nonpaying Debtors KEYWORDS: Bloom's: Knowledge 97. The FCRA does not give the debtor a right of correction. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Is There a Cost to Breaching a Contract: Creditor Reports on Nonpaying Debtors KEYWORDS: Bloom's: Knowledge

98. Under the FCRA, the 100-word statement allows debtors to clarify their past credit experiences. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Is There a Cost to Breaching a Contract: Creditor Reports on Nonpaying Debtors KEYWORDS: Bloom's: Knowledge 99. The Fair Debt Collections Practices Act applies to both commercial and consumer debt. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Collection - Fair Standards for Obtaining Payment KEYWORDS: Bloom's: Knowledge 100. The FDCPA applies to collection agencies and original creditors. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Collection - Fair Standards for Obtaining Payment KEYWORDS: Bloom's: Knowledge 101. Under the FDCPA, collectors identified as such can use postcards to contact debtors. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Collection - Fair Standards for Obtaining Payment KEYWORDS: Bloom's: Application 102. The FDCPA places time limits for the placement of calls. a. True

b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Collection - Fair Standards for Obtaining Payment KEYWORDS: Bloom's: Knowledge 103. The maximum wage garnishment for general debts is 50 percent. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Suits for Enforcement of Debts KEYWORDS: Bloom's: Knowledge 104. Garnishment is an example of judgment execution. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Suits for Enforcement of Debts KEYWORDS: Bloom's: Knowledge 105. The Consumer Credit Protection Act puts limitations on garnishments. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Suits for Enforcement of Debts KEYWORDS: Bloom's: Knowledge 106. The FDCPA is not applicable to the collection of judgments. a. True b. False ANSWER: False

POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Collection - Fair Standards for Obtaining Payment KEYWORDS: Bloom's: Knowledge 107. The FDCPA does not apply to lawyers who are collecting bills for clients. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Collection - Fair Standards for Obtaining Payment KEYWORDS: Bloom's: Knowledge 108. The FCRA prohibits the disclosure of a bankruptcy that occurred eight years ago. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Is There a Cost to Breaching a Contract: Creditor Reports on Nonpaying Debtors KEYWORDS: Bloom's: Knowledge 109. The FCRA permits the disclosure of an embezzlement for which probation was completed ten years ago. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Is There a Cost to Breaching a Contract: Creditor Reports on Nonpaying Debtors KEYWORDS: Bloom's: Knowledge 110. The failure to make a timely investigation into a consumer's question about his/her credit report is a violation of the FCRA. a. True b. False ANSWER: True POINTS: 1

DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Is There a Cost to Breaching a Contract: Creditor Reports on Nonpaying Debtors KEYWORDS: Bloom's: Knowledge 111. There is a three-day rescission period on home equity loans. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Consumer Credit Contracts and Rescession Rights KEYWORDS: Bloom's: Knowledge 112. Chapter 11 is the liquidation provision in bankruptcy. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The End of the Line on Enforcement of Debts: Bankruptcy KEYWORDS: Bloom's: Knowledge 113. Chapter 13 bankruptcy is only available to consumers. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The End of the Line on Enforcement of Debts: Bankruptcy KEYWORDS: Bloom's: Knowledge 114. A contract signed at home for the installation of a pool under a 90-days-same as cash agreement is not subject to the 3-day rescission period. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy

NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Consumer Credit Contracts and Rescission Rights KEYWORDS: Bloom's: Knowledge 115. The Fair Debt Collections Practices Act applies to attorneys only if they are doing the collection on a percentage basis. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Collection - Fair Standards for Obtaining Payment KEYWORDS: Bloom's: Knowledge 116. The Fair Debt Collections Practices Act applies only to consumer credit collection. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Collection - Fair Standards for Obtaining Payment KEYWORDS: Bloom's: Knowledge 117. The Bankruptcy Reform Act of 2005 made it easier for consumers to declare bankruptcy. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The End of the Line on Enforcement of Debts: Bankruptcy KEYWORDS: Bloom's: Knowledge 118. Under the Bankruptcy Reform Act of 2005, consumers can always file for liquidation proceedings without going through Chapter 13. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy

NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The End of the Line on Enforcement of Debts: Bankruptcy KEYWORDS: Bloom's: Knowledge 119. Chapter 11 bankruptcy is available to consumers with debts. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The End of the Line on Enforcement of Debts: Bankruptcy KEYWORDS: Bloom's: Knowledge 120. Credit repair organizations are now subject to federal law and disclosure requirements. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The End of the Line on Enforcement of Debts: Bankruptcy KEYWORDS: Bloom's: Knowledge 121. The three-day-cooling-off period applies to: a. credit contracts in which a security interest in the home is given. b. second mortgages on homes. c. both a and b d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Consumer Credit Contracts and Rescission Rights KEYWORDS: Bloom's: Knowledge 122. In order to recover damages under the Fair Credit Billing Act, the debtor must: a. make a written objection. b. file a complaint with the Federal Reserve Board. c. notify the creditor of the error within 30 days of receiving the bill. d. all of the above ANSWER: a

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Making Sure the Billing is Accurate KEYWORDS: Bloom's: Comprehension 123. The Fair Credit Reporting Act applies: a. only to consumer reporting agencies. b. to all information on consumer debtors. c. to consumer and commercial credit. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Is There a Cost to Breaching a Contract: Creditor Reports on Nonpaying Debtors KEYWORDS: Bloom's: Comprehension 124. What rights does a debtor have if he/she discovers inaccuracies in the credit report? a. can ask to have it eliminated b. can sue for libel c. can provide a separate credit report d. all of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Is There a Cost to Breaching a Contract: Creditor Reports on Nonpaying Debtors KEYWORDS: Bloom's: Comprehension 125. The Fair Debt Collections Practices Act applies to: a. collection agencies. b. all consumer credit businesses. c. the IRS. d. banks. e. all of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Collection - Fair Standards for Obtaining Payment KEYWORDS: Bloom's: Application

126. Which of the following is prohibited under the FDCPA? a. contacting third parties for current address information on the debtor b. contacting the debtor at his/her place of employment c. contacting the debtor after the debtor requests no further contact d. All of the above are prohibited.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Collection - Fair Standards for Obtaining Payment KEYWORDS: Bloom's: Application 127. Garnishments: a. are attachments of funds for executing a judgment. b. are not regulated by federal laws. c. can take up to 75 percent of the debtor's wages. d. all of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Suits for Enforcement of Debts KEYWORDS: Bloom's: Comprehension 128. If a consumer requests a credit reporting agency to correct his/her credit report: a. the agency must comply. b. the agency need only include a copy of the request in its report. c. any corrections made must be sent to all report recipients over the last two years. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Is There a Cost to Breaching a Contract: Creditor Reports on Nonpaying Debtors KEYWORDS: Bloom's: Knowledge 129. Diana and Charles Windsor are considering purchasing a swimming pool. The representatives of Fun-in-the-Sun Pool arrange a meeting at the Windsor's home to discuss the price and draw up plans. The Windsors sign a contract for the pool for a price of $12,000 with payments of $3000 each month for the next four months while the pool is under construction. The Windsors also agree to pay a carrying charge for the payments of $250.00. Two days after signing the contract, the backhoe operator arrives ready to dig the pool, but Charles tells him the contract is off. The Windsors: a. have breached their contract and will be liable to Fun-in-the-Sun for damages. b. are protected by their three-day rescission rights under Regulation Z.

c. do not have the three-day rescission rights since there are no monthly installment payments over a period of one year. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Consumer Credit Contracts and Rescission Rights KEYWORDS: Bloom's: Analysis 130. Which of the following statements in a letter from a collector to a debtor would be a violation of FDCPA? a. "We will be contacting your employer to let him know of this problem." b. "We will file suit if payment is not made within 30 days." c. "We will be calling you at your home." d. All of the above are violations.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Collection - Fair Standards for Obtaining Payment KEYWORDS: Bloom's: Application 131. Which of the following acts by a third-party collector would be a violation of the FDCPA? a. sending the debtor a postcard that reads: "Don't let this bill affect your excellent credit rating" b. calling the debtor at home at 8:30 AM to confirm the debt c. referring the account to an attorney for a lawsuit d. filing suit without first contacting the debtor ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Collection - Fair Standards for Obtaining Payment KEYWORDS: Bloom's: Application 132. Which of the following is true about a line of credit secured by the equity in the debtor's home? a. there is a three-day rescission period b. the same levels of disclosure for other types of credit are not required c. the monthly payments need not be disclosed d. All of the above are true.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal Consumer Credit Contracts and Rescission Rights Bloom's: Comprehension

133. Who is covered under the Fair Debt Collections Practices Act? a. an attorney collecting a debt for himself b. Macy's collecting a debt through its own collection subsidiary c. a hospital collecting a debt from a patient d. None of the above is covered under the FDCPA. ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Collection - Fair Standards for Obtaining Payment KEYWORDS: Bloom's: Application 134. Which of the following is not covered by the Fair Debt Collections Practices Act? a. an attorney collecting for a client b. a collection agency with one exclusive client c. a hospital using its collection department to collect fees from patients d. an attorney collecting on a contingent fee basis e. All of the above are covered under the FDCPA. ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Collection - Fair Standards for Obtaining Payment KEYWORDS: Bloom's: Application 135. Under the Fair Credit Reporting Act, consumers have which of the following rights? a. privacy and no disclosure without permission b. right to dispute information in the report c. right to correction d. right to rebuttal statement e. consumers have all of the above rights ANSWER: e POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Is There a Cost to Breaching a Contract: Creditor Reports on Nonpaying Debtors KEYWORDS: Bloom's: Application 136. Which of the following cannot be disclosed on a credit report being issued on a job applicant for a $37,000/year job

in 2015? a. a bankruptcy in 2010 b. a judgment paid in 2001 c. a criminal conviction for running a meth lab in 2008 d. All of the above can be disclosed.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Is There a Cost to Breaching a Contract: Creditor Reports on Nonpaying Debtors KEYWORDS: Bloom's: Application 137. Paula Sanford has filed a voluntary petition in bankruptcy. Paula has a job but admits that she is in over her head on credit card debt. The bankruptcy court: a. can allow Paula to declare bankruptcy because she has debts. b. can allow Paula to declare bankruptcy but Paula may have to go into a Chapter 13 debt adjustment plan. c. has no remedies for consumers with only credit card debt. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: The End of the Line on Enforcement of Debts: Bankruptcy KEYWORDS: Bloom's: Synthesis 138. Sekelow Enterprises is a debt collection agency. It uses postcards to contact consumer debtors it is attempting to collect from for its clients. The name “Sekelow Enterprises” and the company address appear on the postcards used along with: “VERY IMPORTANT: PLEASE CONTACT US ABOUT YOUR DILLARD’S DEBT.” a. Sekelow has violated the Fair Debt Collections Practices Act. b. Sekelow has not violated the Fair Debt Collections Practices Act if it follows up with a phone call and verification of debt. c. Sekelow cannot collect the debt without registering as a credit repair organization. d. both a and c ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Collection - Fair Standards for Obtaining Payment KEYWORDS: Bloom's: Synthesis 139. Which of the following is prohibited in the collection of consumer debt by the Fair Debt Collections Practices Act? a. 7 AM calls at the debtor’s place of employment. b. 7 AM calls at the debtor’s home. c. 7 AM calls at the debtor’s parents’ home.

d. all of the above ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Collection - Fair Standards for Obtaining Payment KEYWORDS: Bloom's: Synthesis 140. Which of the following sections of the federal bankruptcy laws deals with consumer debt adjustment plans? a. Chapter 7 b. Chapter 11 c. Chapter 13 d. CRO provisions ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The End of the Line on Enforcement of Debts: Bankruptcy KEYWORDS: Bloom's: Comprehension 141. Laura Walsh owed $560 to a local department store. The debt was assigned to a collection agency. The agency did the following: (a) used a postcard to contact Laura and summarize her debt, (b) called her at 7 AM to catch her before she left for work, (c) called her in spite of Laura's requests to stop, (d) contacted her employer about the debt, (e) contacted her at the hospital as she visited her ill mother. Are any of the actions improper?

ANSWER: All of them are improper and illegal under the FDCPA. (a) violation of privacy; (b) before 8 AM hour; (c) must stop if debtor asked; (d) privacy problem; (e) harassment.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Collection - Fair Standards for Obtaining Payment KEYWORDS: Bloom's: Synthesis 142. List the federal laws regulating credit contracts and give a brief description of each.

ANSWER: ECOA - prohibits race, color, sex, and national origin from being used as the basis for a decision. TILA - full disclosure provisions of Consumer Credit Protection Act. Fair Credit Billing Act - regular disclosures; full disclosures of open-end credit. FCRA - disclosure of reports and right to correct. Consumer Leasing Act - disclosure in leasing goods. FDCPA regulates collection tactics.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Nonperformance and Nonpayment - The Collection Remedies KEYWORDS: Bloom's: Comprehension

143. List what cannot be disclosed in a credit report for a $2,000 loan.

ANSWER: Bankruptcies longer than 10 years ago; judgments longer than 7 years ago; criminal convictions and arrests finally disposed of more than 7 years ago.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Is There a Cost to Breaching a Contract: Creditor Reports on Nonpaying Debtors KEYWORDS: Bloom's: Synthesis 144. Akon had an idea for a website called “Fantrace,” a site that would help celebrities connect with their fans. Akon entered into an agreement with Broomfield for his help in building the site and Khalilian to help with marketing.

Broomfield had recommended his friend, Khalilian, for the project because of his connections with celebrities. However, Broomfield did not tell Akon that he knew that Khalilian was a liar and that he had also been in prison. When things did not go well in working with the two, Akon sought to set aside the contract on the grounds of misrepresentation. Which of the following is correct? a. Withholding information is not misrepresentation. b. Broomfield had no obligation to make any disclosures about his friend. c. Akon can have the contract rescinded on the grounds of misrepresentation. d. Intent is not present, so there is no case for misrepresentation.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Misrepresentation KEYWORDS: Bloom's: Comprehension 145. Allegheny Energy Supply Co. and Monogahela Power Co., a subsidiary, filed suit against Anker West Virginia Mining Co., later acquired by International Coal Group, for breach of contract. The parties had a contract for Allegheny and Monogahela to buy all of the coal produced from a proposed "Sycamore 2" mine, located in Harrison County, W.Va. The coal promised amounted to about 1.8 million tons per year, not less than 20 million tons total. Anker has never produced the necessary amount of coal, topping out at 480,000 tons per year in total from the mine. Anker had sent a letter to Allegheny in 2006 claiming physical difficulties at the mine and a change in the enforcement of regulations relating to coal mining near gas wells hampered their ability to extract coal from the mine. As a result, Anker said it was unable to deliver the necessary coal. Which defense to performance is Anker relying on? a. Misrepresentation b. Parol evidence c. Failure of conditions d. Force majeure ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: When Performance is Excused KEYWORDS: Bloom's: Comprehension

People from the United States pledged $3.3 billion to support the rebuilding efforts in Haiti following the 2010 earthquake there. However, after 3 years, half of the money has not been dispersed, and nearly 500,000 people still live in tents. As a result, many who have made pledges have decided not to fulfill the remainder of their pledges because of the inaction on the part of the relief fund in getting the funds dispersed, the buildings rebuilt, and the housing constructed.

146. What would be their grounds for terminating the payment of their pledges? a. Misrepresentation b. Lack of performance c. Fraud d. Undue influence ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Contract Performance KEYWORDS: Bloom's: Comprehension 147. What issue is there about whether there is a contractual obligation? a. Whether a pledge to make a gift is supported by consideration. b. Whether there can be a pledge across country borders. c. The inability to enforce international contracts. d. Whether the pledges were in writing.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Contract Performance KEYWORDS: Bloom's: Comprehension

1. Caveat emptor is a Latin term meaning "let the buyer beware." a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG:Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Development of Product Liability KEYWORDS: Bloom's: Knowledge 2. Today, courts follow a policy of caveat emptor in handling product liability cases. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Development of Product Liability KEYWORDS: Bloom's: Knowledge 3. Privity of contract is a direct contractual relationship between the parties. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Product Liability Theories: Implied Warranties KEYWORDS: Bloom's: Knowledge 4. Today, courts require privity of contract for recovery in product liability cases. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Product Liability Theories: Implied Warranties KEYWORDS: Bloom's: Knowledge 5. To establish an express warranty under the UCC, the buyer must produce evidence that the seller used the term "warrant" or "guarantee."

a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Comprehension 6. The implied warranty of fitness for a particular purpose (unless disclaimed) is given in every sale of goods by a merchant. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Product Liability Theories: Implied Warranties KEYWORDS: Bloom's: Knowledge 7. The implied warranty of merchantability (unless disclaimed) is given in every sale of goods by a merchant. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Product Liability Theories: Implied Warranties KEYWORDS: Bloom's: Knowledge 8. The language "as is" disclaims both the warranty of merchantability and the warranty of fitness for a particular purpose. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Product Liability Theories: Implied Warranties KEYWORDS: Bloom's: Knowledge 9. "These dresses are 100% cotton" is an example of an express warranty. a. True

b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Application 10. "This car has the finest workmanship money can buy" is an example of an express warranty. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Application 11. A product can be defective for purposes of liability for injury if proper warnings about its use are not given. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Strict Tort Liability: Product Liability Under Section 402A KEYWORDS: Bloom's: Comprehension 12. Improper packaging that results in an injury can be a basis for product liability. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Strict Tort Liability: Product Liability Under Section 402A KEYWORDS: Bloom's: Comprehension 13. Privity is required for recovery on the basis of warranty. a. True b. False ANSWER: False

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Product Liability Theories: Implied Warranties KEYWORDS: Bloom's: Knowledge 14. When a customer tells a pet store employee that she wants two female gerbils, but receives one male and one female gerbil who later have baby gerbils, the pet store has breached the implied warranty of fitness for a particular purpose. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Contract Product Liability Theories: Implied Warranties KEYWORDS: Bloom's: Application 15. There can be no recovery on the basis of a breach of a UCC warranty by anyone other than the actual buyer. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Product Liability Theories: Implied Warranties KEYWORDS: Bloom's: Comprehension 16. A lack of adequate warnings can be a defective product. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Strict Tort Liability: Product Liability Under Section 402A KEYWORDS: Bloom's: Knowledge 17. Misuse of a product is a defense in a product liability suit. a. True b. False ANSWER: True POINTS: 1

DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Defenses to Product Liability Torts KEYWORDS: Bloom's: Application 18. Strict tort liability under Section 402A is the same as negligence. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Strict Tort Liability: Product Liability Under Section 402A KEYWORDS: Bloom's: Application 19. A sale of a toaster at a garage sale is covered by the warranty of merchantability. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Product Liability Theories: Implied Warranties KEYWORDS: Bloom's: Application 20. Section 402A permits suits only by those in privity of contract. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Strict Tort Liability: Product Liability Under Section 402A KEYWORDS: Bloom's: Comprehension 21. Proof of negligence in product design or manufacture allows recovery of punitive damages. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal Strict Tort Liability: Product Liability Under Section 402A Bloom's: Comprehension

22. Proof for a breach of the warranty of merchantability suit requires establishment of the fact that the product was in a defective and unreasonably dangerous condition. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Product Liability Theories: Implied Warranties KEYWORDS: Bloom's: Comprehension 23. Express warranties cannot be disclaimed. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Product Liability Theories: Implied Warranties KEYWORDS: Bloom's: Knowledge 24. A disclaimer of liability for personal injuries caused by a breach of warranty would be unconscionable. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Product Liability Theories: Implied Warranties KEYWORDS: Bloom's: Knowledge 25. "Stops assailants dead in their tracks," written on the package for a mace product, is an express warranty. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal

TOPICS: KEYWORDS:

Advertising as a Contract Basis for Product Liability Bloom's: Application

26. The Federal Trade Commission is responsible for the regulation of deceptive advertising. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Knowledge 27. Private parties can enforce the FTC regulations on comparative ads. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Knowledge 28. Stating a lamp is a “Tiffany lamp” and stating it is “in the Tiffany style” are both making the same kind of warranty. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Application 29. Bait and switch is not a deceptive advertising technique. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Comprehension

30. A consent decree is similar to a no-contest plea in a criminal proceeding. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Knowledge 31. Celebrity endorsements of products are deceptive unless the celebrity has used the product. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Application 32. The Federal Trade Commission does not have the authority to halt deceptive ads. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Knowledge 33. In comparative advertising, a company cannot be held liable for misrepresentations regarding products other than its own. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Comprehension

34. Ads can be a basis for an express warranty. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Knowledge 35. Toyota had no ethical obligation to issue a recall on its vehicles with sudden unintended acceleration problems because Toyota did not manufacture the parts that caused the problems. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Strict Tort Liability: Product Liability Under Section 402A KEYWORDS: Bloom's: Application 36. Corrective ads can be required only when competition is affected. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Comprehension 37. Ads by members of professional groups can be regulated by the state. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Knowledge 38. The Consumer Product Safety Improvement Act of 2008 includes rules covering the resale of goods such as in a

garage sale. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Federal Standards for Product Liability KEYWORDS: Bloom's: Knowledge 39. Federal trademark law provisions provide remedies for companies whose products are misrepresented in comparative advertising. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Comprehension 40. The foreign/natural test for food items is different from the liability issues under the reasonable expectation test. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Product Liability Theories: Implied Warranties KEYWORDS: Bloom's: Comprehension 41. The implied warranty of merchantability requires proof that the buyer was relying on some language when he or she made the purchase of the good. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Product Liability Theories: Implied Warranties KEYWORDS: Bloom's: Comprehension

42. The implied warranty of fitness for a particular purpose requires reliance by the buyer on the seller's expertise. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Product Liability Theories: Implied Warranties KEYWORDS: Bloom's: Comprehension 43. An internal memo in a company that acknowledges the risk of a product prior to the product's release without any kind of change establishes proof for punitive damages under a negligence theory of product liability. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Strict Tort Liability: Product Liability Under Section 402A KEYWORDS: Bloom's: Application 44. If there is a breach of the warranty of merchantability, there is no tort liability. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Strict Tort Liability: Product Liability Under Section 402A KEYWORDS: Bloom's: Comprehension 45. A salesperson who recommends a fertilizer to a customer for the customer’s described purposes is not making a warranty. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Product Liability Theories: Implied Warranties KEYWORDS: Bloom's: Application

46. Comparative ads are now illegal. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Comprehension 47. Under the Consumer Product Safety Improvement Act a reseller of goods cannot be liable for selling toys or other products with lead paint because the reseller did not manufacture the goods. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Federal Standards for Product Liability KEYWORDS: Bloom's: Knowledge 48. Under the foreign-natural test, restaurants have no liability for injury caused by natural items, such as bones in chicken dishes, and pits in cherry pie dishes. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Product Liability Theories: Implied Warranties KEYWORDS: Bloom's: Application 49. A purchase of a deep fryer at a sale of a bankrupt restaurant’s equipment by the bankruptcy trustee is covered by the warranty of merchantability. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Product Liability Theories: Implied Warranties KEYWORDS: Bloom's: Application

50. The FTC can issue an order to halt a comparative ad if information used in the ad is inaccurate. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Comprehension 51. Proof that a manufacturer was aware of a defect in its product but did not correct it is proof of negligence. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Strict Tort Liability: Product Liability Under Section 402A KEYWORDS: Bloom's: Comprehension 52. Product packaging stating that the line is “ideal for use on boat or dock” is mere puffery and not an express warranty. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Application 53. Passengers injured in a plane crash caused by the plane’s defective design have no rights of recovery against the airplane manufacturer. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Product Liability Theories: Implied Warranties KEYWORDS: Bloom's: Application 54. Which is a requirement for an express warranty?

a. use of the word "warrant" or "guarantee" b. a description or promise of performance c. written statement d. must be made by a merchant ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Knowledge 55. Which of the following is not an example of an express warranty? a. "This jacket is lined." b. "This water heater holds 50 gallons." c. "This toothpaste makes teeth the whitest around." d. "Preshrunk jeans."

ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Application 56. The implied warranty of fitness for a particular purpose requires: a. proof that the seller made the first contact with the buyer. b. proof that the seller used the term "warrant." c. proof that the seller is a merchant. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Product Liability Theories: Implied Warranties KEYWORDS: Bloom's: Comprehension 57. The implied warranty of merchantability requires: a. proof that the seller is a merchant. b. proof that the buyer relied on a merchant. c. proof of a defective product. d. all of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Product Liability Theories: Implied Warranties KEYWORDS: Bloom's: Comprehension 58. "As is" written in a contract: a. serves to disclaim the implied warranty of merchantability. b. serves to disclaim the implied warranty of fitness for a particular purpose. c. has no effect on warranty protection. d. both a and b e. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Product Liability Theories: Implied Warranties KEYWORDS: Bloom's: Comprehension 59. For an injured party to recover for breach of a UCC warranty under the UCC: a. there must be privity of contract. b. even under the strictest alternative, the party can be a guest. c. he/she must be a natural person. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Product Liability Theories: Implied Warranties KEYWORDS: Bloom's: Comprehension 60. "These cartons will hold up to 100 pounds of books" is an example of: a. an implied warranty of merchantability. b. an express warranty. c. misrepresentation. d. privity.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Application 61. Negligence product liability cases:

a. are the same as 402A cases. b. have no defenses. c. require proof of privity. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Strict Tort Liability: Product Liability Under Section 402A KEYWORDS: Bloom's: Synthesis 62. Which of the following would not be a basis for a negligence product liability suit? a. a highly explosive gas tank installed in a car with the manufacturer's prior knowledge of its dangers b. the continued sale of sunglasses to baseball teams knowing the sunglasses shatter c. the continued sale of gas pipelines to utilities in the Southwest after explosions caused by peculiar interactions of the pipe with the soil and heat d. All of the above would be negligence product liability suits.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Strict Tort Liability: Product Liability Under Section 402A KEYWORDS: Bloom's: Application 63. Privity in negligence product liability cases is: a. not required. b. more stringent than in UCC cases. c. determined by the relationship of the injured party to the buyer. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Product Liability Theories: Implied Warranties KEYWORDS: Bloom's: Comprehension 64. Contributory negligence: a. can be a partial defense in product liability cases for negligence. b. is the same as comparative negligence. c. is no longer permitted as evidence in suits. d. none of the above ANSWER: d POINTS: 1

DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Defenses to Product Liability Torts KEYWORDS: Bloom's: Comprehension 65. Which of the following duties could not be a basis for a negligence suit? a. hotel to guest b. physician to patient c. accountant to client d. All of the above parties have duties.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Strict Tort Liability: Product Liability Under Section 402A KEYWORDS: Bloom's: Application 66. The UCC warranty of merchantability: a. does not cover sales of food in restaurants. b. can be disclaimed by using the term "as is." c. is made in every sale of goods. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Product Liability Theories: Implied Warranties KEYWORDS: Bloom's: Application 67. Section 402A covers: a. manufacturers. b. retailers. c. those who sell products out of their home. d. all of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Strict Tort Liability: Product Liability Under Section 402A KEYWORDS: Bloom's: Comprehension 68. "With all faults" serves to disclaim:

a. an express warranty. b. liability under 402A. c. liability for negligence. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Product Liability Theories: Implied Warranties KEYWORDS: Bloom's: Application 69. Which of the following would be a "defect" for purposes of 402A? a. failure to warn not to put a hair dryer in water b. food package that permits tampering c. a missing bolt on a car steering column d. all of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Strict Tort Liability: Product Liability Under Section 402A KEYWORDS: Bloom's: Application 70. The opposite of caveat emptor is: a. negligence. b. privity requirements. c. strict tort liability. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Development of Product Liability KEYWORDS: Bloom's: Synthesis 71. Which of the following does not constitute an express warranty? a. "This computer system is accessible by a PB2400 modem." b. "This computer system is IBM-compatible." c. "This computer system has a built-in battery back-up system that gives you two minutes to save files in the event of a power interruption." d. All of the above are express warranties.

ANSWER: d POINTS: 1

DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Application 72. Which of the following does not constitute an express warranty? a. "This car will give you a great deal of satisfaction." b. "This car is equipped with Michelin radial tires." c. "This car goes from 0 to 60 mph in 10 seconds." d. All of the above are express warranties.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Application 73. Ralph Walters wanted to begin an exercise program and decided to enroll in a local aerobics class. He was told that he would need proper aerobic work-out shoes. Ralph went to an athletic shoe store and explained his needs to the sales clerk and also added that since he had never done aerobics, he was unsure what type of shoe he would need. The sales clerk recommended a shoe that Ralph purchased. When Ralph arrived at aerobics class, his instructor said his shoes were not appropriate for aerobics and that Ralph might injure himself if he used them for the workout. When Ralph returned to the store with the shoes, the store refused to exchange them, citing the three-day limitation on returns. The shoe store: a. is within its rights to refuse to take the shoes back. b. has breached the implied warranty of fitness for a particular purpose and is required to refund Ralph's money or exchange the shoes. c. has not breached any warranty since Ralph had no contract with any promises written in it. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Contract Product Liability Theories: Implied Warranties KEYWORDS: Bloom's: Application 74. Ralph Walters wanted to begin an exercise program and decided to enroll in a local aerobics class. He was told that he would need proper aerobic work-out shoes. Ralph went to an athletic shoe store and explained his needs to the sales clerk and also added that since he had never done aerobics, he was unsure what type of shoe he would need. The sales clerk recommended a shoe that Ralph purchased. When Ralph arrived at aerobics class, his instructor said his shoes were not appropriate for aerobics and that Ralph might injure himself if he used them for the workout. When Ralph returned to the store with the shoes, the store refused to exchange them, citing the three-day limitation on returns. Suppose Ralph's sales receipt had stamped on it in red letters "AS IS." The shoe store: a. has breached the implied warranty of fitness for a particular purpose and is required to refund Ralph's money or exchange the shoes. b. is within its rights to refuse to take the shoes back.

c. has not breached any warranty since Ralph had no contract with any promises written in it. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Contract Product Liability Theories: Implied Warranties KEYWORDS: Bloom's: Application 75. Which of the following would not be a breach of the warranty of merchantability? a. a piece of garden snake in a box of frozen green beans b. a caterpillar in broccoli soup purchased at a restaurant c. a milk carton that leaks d. All of the above are breaches of the implied warranty of merchantability.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Contract Product Liability Theories: Implied Warranties KEYWORDS: Bloom's: Application 76. The term "AS THEY STAND" serves to disclaim: a. the implied warranty of merchantability. b. the implied warranty of fitness for a particular purpose. c. both a and b d. none of the above unless it is in writing ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Contract Product Liability Theories: Implied Warranties KEYWORDS: Bloom's: Application 77. The 2008 act that includes some regulations on the resale of goods is the: a. Consumer Product Safety Act. b. Consumer Product Resale Safety Act. c. Consumer Product Safety Improvement Act. d. Consumer Product Resellers Inclusion Act. ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal

TOPICS: KEYWORDS:

Federal Standards for Product Liability Bloom's: Knowledge

78. Susan Hewitt is eating a bowl of cream of broccoli soup in a bistro when she notices a portion of a caterpillar on her spoon. Susan's best basis for recovery is: a. implied warranty of merchantability. b. negligence. c. implied warranty of fitness for a particular purpose. d. none, there is no privity ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Contract Product Liability Theories: Implied Warranties KEYWORDS: Bloom's: Application 79. A company is liable for a design defect in its product only if: a. it was aware of the design defect. b. the design defect has caused a previous injury. c. there was negligence in the product testing. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Strict Tort Liability: Product Liability Under Section 402A KEYWORDS: Bloom's: Comprehension 80. Susan Sandren purchased a toaster from Standard Electric. While using the toaster the day after it was purchased, Susan discovered that the toaster slots were too small for a thick piece of bread. The bread was stuck in the slot. With the toaster still plugged in, Susan used a knife to pry loose the toast and was electrocuted. In a suit by her family against Standard Electric: a. Standard will lose because the slots should have been made wider. b. Standard will win because of misuse of the product. c. Susan's family will win because of a design defect. d. Susan's family would win if there were no warnings about knives and electrocution.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Strict Tort Liability: Product Liability Under Section 402A KEYWORDS: Bloom's: Application 81. Pestro is the manufacturer of a weed killer that is used in the parks in Metroville. After the parks were sprayed, a

group of children became ill and required hospitalization. Two dogs that had been with the group died. The parents of the children and the dog owners could: a. bring suit against Pestro under 402A even though there is no privity. b. not bring suit against Pestro because of a lack of privity. c. not bring suit against the city. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Strict Tort Liability: Product Liability Under Section 402A KEYWORDS: Bloom's: Application 82. The U.S. Army purchased a large number of Bell Jet Ranger helicopters in 1963. Many of the helicopters served tours of duty in Vietnam and after the war were returned to the United States. Because of damages sustained during the war, many of the helicopters' engines were rebuilt. In 1974, one of the helicopters with a rebuilt engine crashed because of engine failure. The families of the two servicemen killed in the accident wish to recover from Bell under 402A. What defense could Bell probably successfully allege? a. misuse of the product b. product modification c. assumption of risk d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Strict Tort Liability: Product Liability Under Section 402A KEYWORDS: Bloom's: Application 83. What is the maximum civil penalty the Consumer Product Safety Commission can assess against a company for violations of the Consumer Product Safety Act? a. $2,000 b. $50,000 c. $500,000 d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Federal Standards for Product Liability KEYWORDS: Bloom's: Knowledge 84. Which of the following is not regulated by the FTC? a. content accuracy

b. celebrity endorsements c. performance claims d. express warranties e. All of the above are regulated by the FTC. ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Comprehension 85. The FTC controls on product comparisons: a. are very stringent. b. are a high regulatory priority. c. have changed dramatically with private enforcement. d. no longer exist.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Comprehension 86. Bait and switch: a. is a sales tactic of advertising a cheaper product in order to get a customer in to buy a more expensive product. b. is not based on ad content. c. is not regulated by the FTC. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Comprehension 87. Corrective advertising: a. is unconstitutional. b. is one of the FTC's many remedies. c. has never been ordered by a court. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Comprehension 88. Which of the following items can be sold now by a reseller? a. A recalled item not purchased originally by the reseller b. A product intended for children containing lead paint c. A product intended for children containing phthalates d. None of these ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Federal Standards for Product Liability KEYWORDS: Bloom's: Application 89. Which of the following issues in advertising is not regulated by the FTC? a. accuracy of ad content b. accuracy of performance claims c. celebrity endorsements d. All of the above are regulated by the FTC. ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Comprehension 90. Which of the following is not an express warranty? a. "These shelves hold up to 300 lbs. each." b. "This fingerpaint will wash out of clothes with just soap and water." c. "This sweater is made of the finest materials." d. All of the above are express warranties.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Application 91. The Wheeler-Lea Act: a. expanded the FTC's authority to regulate advertising.

b. limited the FTC's authority to regulate only ads that affected competition. c. eliminated the FTC authority to require corrective ads. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Application 92. Which of the following is not required of a celebrity who will be endorsing a product? a. verification of the claims to be presented b. actual use of the product c. disclosure of source of claims not known personally by the celebrity d. All of the above are required.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Knowledge 93. Which of the following actions cannot be taken on comparative advertising that is misleading? a. the FTC can seek an injunction b. the FTC can seek criminal penalties c. the manufacturer of the product that is compared can bring suit d. All of the above actions can be taken.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Comprehension 94. The Joneses are interested in purchasing new carpet for their family room and note an ad in the paper from Carpet World for carpet at $9.99 per square yard, with pad, fully installed. When the Joneses go to Carpet World, the salesman tells them there is a handling fee of $2.99 per square yard on the advertised special, but he can show them a better carpet for $14.99 per square yard. Which of the following statements is true? a. Since the Joneses are free to leave and buy elsewhere, there are no FTC violations by the ad. b. If the Joneses choose the $14.99 carpet, there is no violation of FTC regulations. c. Carpet World's ad and tactics constitute bait and switch. d. none of the above ANSWER: c

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Application 95. Which of the following is not a remedy available to the FTC? a. injunctions b. corrective ads c. criminal penalties d. All of the above are remedies available to the FTC. ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Knowledge 96. The sellers of "Acne-Statin," a skin cream, claim in their ads that their cream "cures acne." The American Association of Dermatologists has determined that there is no cure for acne, only creams that can curb breakouts. The ad claims: a. are simply puffery. b. breach an express warranty. c. do not violate any FTC rules. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Application 97. Which of the following is not an express warranty? a. "fireproof" b. "waterproof" c. "puncture-proof" d. All of the above are express warranties.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Application

98. Which of the following terms is not an express warranty? a. "nonskid" b. "nonbreakable" c. "shelled" d. All of the above are express warranties.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Application 99. Which of the following phrases is an express warranty? a. "boned chicken" b. "Maine's finest" c. "Best in the West" d. All of the above are express warranties.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Application 100. H.G. Ilk owned a 1965 Ford Mustang. He had replaced the front seats, the engine and the transmission. In an accident in which he was rear-ended, the front driver's seat collapsed, leaving Ilk with permanent injuries. It was discovered that the seat, manufactured by the Fisher Company, was defective in that the frame was partially missing due to a production error. Who is liable for Ilk's injuries? a. Ford Motor Company b. Fisher Company c. the other driver d. both a and b e. both b and c ANSWER: e POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Strict Tort Liability: Product Liability Under Section 402A KEYWORDS: Bloom's: Application 101. Arrion McClellan was using an underarm-aerosol deodorant one morning while smoking a cigarette. The deodorant had this warning in large letters on the side of the can: "DO NOT USE AROUND HEAT, FLAME OR WHILE SMOKING." The deodorant ignited McClellan's cigarette in her hand and the flames quickly spread to her silk robe.

McClellan was severely burned and will have permanent scarring. Who is liable for her injuries? a. the deodorant manufacturer b. the cigarette manufacturer c. the manufacturer of her silk robe d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Defenses to Product Liability Torts KEYWORDS: Bloom's: Application 102. Privity of contract: a. means a direct contractual relationship between the parties. b. is required for recovery on a UCC warranty theory. c. is required for recovery under section 402A. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Contract Product Liability Theories: Implied Warranties KEYWORDS: Bloom's: Knowledge 103. A candle has the following label: "NEVER LEAVE A BURNING CANDLE UNATTENDED." The warning: a. is not necessary to prevent liability on the part of the maker. b. would not cover a defect in the candle's manufacture. c. is an example of a warning needed to prevent liability for negligence only. d. all of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Strict Tort Liability: Product Liability Under Section 402A KEYWORDS: Bloom's: Application 104. Which of the following is an example of an express warranty? a. "Guaranteed to bring the most happiness to any home." b. "Simply the best donut you'll ever eat." c. "Brings friends running to you." d. none of the above ANSWER: d POINTS: 1

DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Application 105. Product misuse is a defense in product liability: a. unless the misuse is the result of a failure to warn. b. unless it is a negligence action. c. unless it is a warranty action. d. unless the state follows Section 402A. e. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Defenses to Product Liability Torts KEYWORDS: Bloom's: Comprehension Jill DesJardines experiences a broken leg when one of the wheels on her new in-line skates falls off as she is skating.

106. The manufacturer: a. is not liable because Jill assumed the risk of in-line skating. b. can disclaim all such liability for products such as these skates. c. is liable for a defective product. d. both a and b e. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Strict Tort Liability: Product Liability Under Section 402A KEYWORDS: Bloom's: Application 107. Suppose that Jill had been using the skates for one year when the wheel fell off. Which of the following best summarizes the manufacturer's liability? a. There is no liability because of assumption of risk. b. There is no liability because the skates are one-year old. c. There could be liability if the wheel fell off due to defective design and there is no change in the design over the course of the last year. d. There is no liability because manufacturers are excused from liability when there is passage of this much time. e. none of the above ANSWER: c POINTS: 1

DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Strict Tort Liability: Product Liability Under Section 402A KEYWORDS: Bloom's: Application 108. Which of the following is/are an express warranty(ies)? a. “This sofa is the most comfortable ever built.” b. “This grill can give you 500° F of heat. c. “This car has more pep than any other, especially on hills.” d. All of the above are express warranties.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Application 109. Lowe’s advertised a barbeque grill for $99 in its newspaper ad. When the Smith’s arrived at Lowe’s to buy the barbecue, a Lowe’s salesman said, “Oh, we don’t have any in stock. But, what you need is this model for $149.” Lowe’s had no $99 barbecues in stock, even before the ad was placed. a. Lowe’s has engaged in bait and switch. b. Lowe’s has breached an express warranty. c. Lowe’s has violated the implied warranty of merchantability. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Application 110. When Toyota delayed in issuing a recall for certain vehicles with suspected sudden unintended acceleration problems, Toyota faced a(n): a. legal but not ethical problem. b. ethical but not legal problem. c. ethical and legal problem. d. public relations problem but no ethical or legal problems.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Strict Tort Liability: Product Liability Under Section 402A

KEYWORDS:

Bloom's: Comprehension

111. Mattel, Inc. had to recall 19 million toys because it learned that its manufacturer/supplier in China had used leadbased paint on the toys, a paint that is prohibited in the United States. Mattel: a. is not liable to purchasers of the toys for any injuries resulting from the lead because it did not manufacture the toys or authorize the use of lead paint. b. is not liable to purchasers because there is no privity of contract. c. is liable to purchasers as a manufacturer/seller of toys. d. can escape any liability because it was unaware of the lead paint use.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Strict Tort Liability: Product Liability Under Section 402A KEYWORDS: Bloom's: Application 112. Tops Meat had to recall all of its frozen hamburger patties because of the presence of E-Coli in the meat. About 20 consumers who ate the Tops patties became ill and two died. The E-Coli was present in the animals Tops purchased for slaughter from various ranchers. a. Tops is not liable to its purchasers because it did not produce a defective product. b. Tops is not liable to its purchasers because it was not aware of the E-Coli when it sold its products. c. Tops is liable to its purchasers for any injuries and damages from the presence of E-Coli. d. both a and b ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Strict Tort Liability: Product Liability Under Section 402A KEYWORDS: Bloom's: Application 113. Glenda purchased new light shades for her chandelier from Shades Plus. The Internet description of the shades she purchased was, “These shades fit almost all fixtures.” When the shades arrived, they could not be placed on the chandelier because they were too narrow. Shades Plus has refused to take the shades back on a return from Glenda. a. Shades need not take back the shades because the shades did not have a quality problem. b. Shades need not take back the shades because it is not responsible for language on its Internet site. c. Shades must take back the shades for breach of an express warranty. d. both a and b ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Application

114. Personal Alarms, Inc. advertises a product for senior citizens who live alone that is a type of warning device when the individual is experiencing health or safety issues. According to Personal Alarm ads, all the user needs to do is press the button on the small Personal Alarm bracelet and through a direct contact, the police are notified immediately and able to detect location of the Personal Alarm user and dispatch assistance. The FTC has learned that the Personal Alarm only alerts a monitoring system that must then call the police. The FTC: a. can issue a cease and desist order for the Personal Alarm ads on direct police contact. b. cannot stop the ads so long as there is some police notification process. c. does not have authority to stop ads because of First Amendment commercial speech protections. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Application 115. A bike purchaser who alters the frame of a bike after the purchase and who is injured because the frame cracks: a. may not be able to recover from the manufacturer because the product was in a different condition at the time of the accident. b. can still recover from the manufacturer because the manufacturer should know that buyers would alter their bikes. c. can still recover, but not punitive damages. d. both b and c ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Strict Tort Liability: Product Liability Under Section 402A KEYWORDS: Bloom's: Application 116. Koellmer purchased a Chrysler auto. After taking delivery of his new vehicle, he discovered there were warranty disclaimers in his owner's manual. Is Koellmer bound by the warranty disclaimers?

ANSWER: No, no knowledge of them before sale. Post-sale disclaimer of too critical an item. Koellmer v. Chrysler Motors Corp., 276 A.2d 807 (Conn. 1970).

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Contract Product Liability Theories: Implied Warranties KEYWORDS: Bloom's: Application 117. Ford manufactured its Pinto auto (a subcompact car) from 1968 to 1980. The gas tank was rigidly mounted and the top of the tank was the floor of the trunk compartment. There was no shield to prevent the spread of fire into the auto. Fox sustained severe burns when his Pinto was hit from behind and exploded into flames. Discuss possible theories of recovery for Fox. ANSWER: Negligence; strict tort (402A); merchantability. Fox v. Ford Motor Co., 575 F.2d 774 (10th

Cir. 1978), Buehler v. Whalen, 374 N.E.2d 460 (Ill. 1978).

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Strict Tort Liability: Product Liability Under Section 402A Contract Product Liability Theories: Implied Warranties KEYWORDS: Bloom's: Application 118. Gillham purchased an Admiral TV and shortly thereafter read of the propensity of the TVs to overheat and burst into flames. While watching TV, his set exploded and burned. He experienced rippling burns. Can Gillham recover? Discuss various issues and defenses in the case.

ANSWER: Negligence; strict tort, merchantability. Possible defense that he knew and watched it anyway but courts tend to put responsibility on manufacturer for recall. Gillham v. Admiral Corp., 523 F.2d 102 (6th Cir. 1975).

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Strict Tort Liability: Product Liability Under Section 402A Contract Product Liability Theories: Implied Warranties KEYWORDS: Bloom's: Application 119. Chevy (General Motors) manufactured a truck called the LUV. Expert evidence has shown that the absence of a head restraint in the LUV exposes the occupants in a low-speed rear-end collision to cranial impact 16 times that which would result if head restraints were provided. Discuss the risk General Motors runs with the product as it is and possible theories owners injured in such crashes could use for recovery. Must a car be crash-proof?

ANSWER: It is a design defect - either negligence or 402A. Need not be crash-proof but cannot result in more injury. Buccery v. GM, 132 Cal. Rptr. 605 (1976).

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Strict Tort Liability: Product Liability Under Section 402A KEYWORDS: Bloom's: Application 120. Bucky Warren, Inc. manufactured a hockey helmet. The helmet had gaps in it to give it flex and movement. Everett was injured when a puck struck his head in one of the gaps. Is Bucky Warren liable?

ANSWER: Yes. Product was designed for a sport for safety use and it did not properly provide protection. Everett v. Bucky Warren, Inc., 380 N.E.2d 653 (Mass. 1976).

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Strict Tort Liability: Product Liability Under Section 402A KEYWORDS: Bloom's: Application 121. James Kaufman purchased 11 heifers from Peter Van Santen. Van Santen provided in their agreement that the cows

had "no mastitis." Mastitis is an inflammation of the milk-producing tissue in the udder that can result in infection and reduction of milk production. Shortly after taking delivery, Kaufman discovered mastitis in the cows. One had to be killed and the remainder of Kaufman's herd became infected. He lost $30,000 because of decreased milk production and spent nearly $600 in vet bills. Can Kaufman recover from Van Santen? If so, on what theories?

ANSWER: In Kaufman v. Van Santen, 35 U.C.C. 774 (8th Cir. 1983), the court found that the express warranty of "no mastitis" had been breached and that Kaufman was entitled to $33,000 in damages.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Application 122. Many school buildings constructed from 1930 to 1970 had asbestos insulation in them. Presently the schools are undertaking a massive program to replace the insulation and at substantial cost. Could the schools turn to asbestos manufacturers for recovery of the costs? What if students who were exposed to the asbestos during the time they attended the schools develop asbestosis or lung cancer? Where can the students turn?

ANSWER: Presently the liability to schools for the harmful asbestos insulation is being litigated. The students do not have to establish privity under strict tort liability and could turn to the manufacturers. The problem is the financial viability of those companies. At least one court in Illinois has held the manufacturers liable to the schools for the cost of removing the asbestos.

The additional costs will be added as claims against the trust fund established with Manville stock and funded by 25 percent of Manville's yearly profits.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Strict Tort Liability: Product Liability Under Section 402A KEYWORDS: Bloom's: Application 123. Discuss the ethics of Toyota delaying its recall on vehicles with sudden unintended acceleration problems.

ANSWER: Students may want to discuss the potential increased legal consequences for the delay in the notice, the potential harm caused by the lack of notification, and the ethical obligations owed to Toyota owners, dealers, shareholders, and potential buyers.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Strict Tort Liability: Product Liability Under Section 402A KEYWORDS: Bloom's: Application 124. Discuss why the Consumer Product Safety Improvement Act included rules for resellers of certain types of products.

ANSWER: The CPSIA prohibits the sale of certain types of products, such as lead paint and certain chemicals on products intended for children, by resellers, such as in garage sales. The Consumer Product Safety Commission does not have the resources to police all these kinds of resales so it is trying to educate consumers and sellers about the dangers of these items.

POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Federal Standards for Product Liability KEYWORDS: Bloom's: Knowledge 125. A children's Halloween make-up kit states that it is "non-toxic." Several children developed severe rashes and eye infections following use of the product on Halloween. Does the manufacturer have any liability?

ANSWER: The company has made an express warranty that the product is non-toxic. There would be liability. Plus the product is in a defective condition due to its danger to children.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Application 126. Cheryl Lileth purchased Big Eyes Mascara, a product described on its label as "Hypoallergenic." Cheryl developed a rash and swelling after one use. Can she recover? What possible theories could she use?

ANSWER: Express warranty; warranty of merchantability; strict tort liability.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Contract Product Liability Theories: Implied Warranties Strict Tort Liability: Product Liability Under Section 402A Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Application 127. Anne Twain purchased two hamsters for her children. She told the salesperson, "I want two hamsters of the same gender, now." The pet store salesperson said, "No problem. These are two males." Six weeks later, Anne's children reported the birth of thirteen tiny hamsters. What rights does Anne have?

ANSWER: Anne would have damages based on the implied warranty of fitness for a particular purpose.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Contract Product Liability Theories: Implied Warranties KEYWORDS: Bloom's: Application 128. Describe three defenses to product liability.

ANSWER: Misuse of the product, unless the misuse is caused by the failure to warn; assumption of risk product is used in inherently dangerous activities; condition of product has changed from that in which it left the manufacturer.

POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Defenses to Product Liability Torts

KEYWORDS:

Bloom's: Knowledge

129. In the Nestle case, what ethical issues existed?

ANSWER: Fairness, disclosure of cost and health issues; taking unfair advantage; giving a false impression; disregard for others’ health.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Strict Tort Liability: Product Liability Under Section 402A KEYWORDS: Bloom's: Application 130. Dam Good Adventures operates a helicopter tour business near Lake Mead, Nevada. Lake Mead is the site of Hoover Dam. Dam Good has purchased 5 helicopters over the 27 years it has been in business and its mechanic has rebuilt the engines on all of the helicopters. In addition, Dam Good’s mechanic has altered the timing mechanisms on the helicopters so that they are able to hover longer and with less noise, two features that are important for tourists. One of Dam Good’s helicopters crashed over Lake Mead, killing the pilot and the four passengers on board. Discuss liability and theories of liability.

ANSWER: Students should discuss the alteration of the helicopters as a potential bar to recovery from the manufacturer because the alteration means that the helicopters were not in the same condition when they crashed as when they left the manufacturer. Students should also discuss that neither the passengers nor the pilot were purchasers of the helicopter – product liability 402A is therefore their avenue of recovery and Dam Good might have some liability for negligence for its alteration. The manufacturer could defend on the grounds of alteration. The UCC theories might be used between Dam Good and the helicopter manufacturers, but really could not be used by the passengers and pilot – they are not purchasers or even using the product as a member of a household. The pilot might have a better chance of recovery despite no privity if he/she is an employee of Dam Good.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Strict Tort Liability: Product Liability Under Section 402A KEYWORDS: Bloom's: Application 131. Campbell’s Soup created a low sodium line of soups that had the label on the can that read “25% less sodium than regular soup.” Tests revealed that the low-sodium soups had the same amount of sodium as regular soups. Which of the following statements is true? a. Campbell’s made an express warranty that it breached. b. There is no warranty claim that can be based on a product label. c. There can be recovery for the claim only if a purchaser is harmed by the claim. d. The FTC has no jurisdiction over claims made on product labels.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Advertising as a Contract Basis for Product Liability KEYWORDS: Bloom's: Application

132. Coca-Cola found a fungicide in its Simply Orange and Minute Maid orange juices. The fungicide was the result of a spray used by Brazilian orange growers who then sold their oranges to Coca-Cola. Which best describes Coca-Cola’s liability to customers who purchase the juice? a. Coca-Cola is not liable because it did not know about the fungicide. b. The Brazilian growers are not liable because there is no privity with the juice purchasers. c. Coca-Cola is liable for a defect in its products. d. Coca-Cola is liable under tort theory but not contract.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Strict Tort Liability: Product Liability Under Section 402A KEYWORDS: Bloom's: Application 133. Brianne Kriefall died after ingesting e-coli bacteria by eating at a Sizzler Restaurant. Sizzler’s meat supplier discovered that several of its shipments of meat to Sizzler and other restaurants contained the e-coli bacteria. Which of the following is correct? a. Brianne’s estate and family can recover for wrongful death under a breach of the implied warranty of merchantability. b. Brianne’s estate and family can recover for wrongful death under a strict tort liability theory. c. Brianne’s estate and family can recover for wrongful death from both Sizzler and its supplier. d. All of the above are correct.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Contract Product Liability Theories: Implied Warranties Strict Tort Liability: Product Liability Under Section 402A KEYWORDS: Bloom's: Application 134. Stanislaus County, California awarded a contract for the construction of a water treatment plant to Black & Veatch.

Black & Veatch purchased pipe for installation to and from the plant from a supplier who worked with representatives from Black & Veatch to determine a pipe that would work for the soil and weather conditions near the plant. Black & Veatch followed the suppliers recommendations. After the plant opened, there were significant problems with the pipes’ failure rates. Which of the following statements is correct? a. The supplier has no liability to the county because it did not have a contract with the city. b. The supplier has liability for breach of implied warranty of fitness for a particular purpose. c. There is no warranty liability when there is no privity. d. Black & Veatch has no liability for the problems with the pipes.

ANSWER: b POINTS: 1 DIFFICULTY: Challeging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Contract Product Liability Theories: Implied Warranties

KEYWORDS:

Bloom's: Application

1. All WTO members follow the 20-year period of patent protection. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Patents KEYWORDS: Bloom's: Knowledge 2. Developing a process to extract new matter for other uses from existing matter is patentable. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Patents KEYWORDS: Bloom's: Knowledge 3. The only remedy available for patent infringement is damages. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Patents KEYWORDS: Bloom's: Knowledge 4. To receive a permanent injunction a patent plaintiff must satisfy an established three-prong test. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Patents KEYWORDS: Bloom's: Knowledge 5. Ideas can be copyrighted. a. True

b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Copyrights KEYWORDS: Bloom's: Comprehension 6. Software copyrights cover operation methods, such as menus. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Copyrights KEYWORDS: Bloom's: Comprehension 7. Software copyrights cover the underlying programs of the software. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Copyrights KEYWORDS: Bloom's: Comprehension 8. Transmission of an NFL game to Canada by satellite is a violation of United States copyright laws. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Copyrights KEYWORDS: Bloom's: Comprehension 9. Distributors of software that facilitate peer-to-peer file sharing cannot be liable for infringement by file sharers. a. True b. False ANSWER: False

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Copyrights KEYWORDS: Bloom's: Comprehension 10. Since it is an educational use, a college professor may reproduce any works for course packs for the students in the professor’s classes. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Copyrights KEYWORDS: Bloom's: Application 11. Once a U.S. company has a registered trademark in the United States, it can register that trademark in the 60 other countries who are signatory countries of the Madrid Protocol. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trademarks KEYWORDS: Bloom's: Comprehension 12. Most companies have its employees sign non-disclosure agreements to try to insure silence when the employee no longer works there. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trade Secrets KEYWORDS: Bloom's: Comprehension 13. Forty-nine states have adopted the Uniform Trade Secrets Act. a. True b. False

ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trade Secrets KEYWORDS: Bloom's: Knowledge 14. The Industrial Espionage Act applies to all company information taken without permission. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trade Secrets KEYWORDS: Bloom's: Knowledge 15. Misappropriation is the conversion of a trade secret. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Enforcing Business Property Rights KEYWORDS: Bloom's: Knowledge 16. Patents are a 20-year legal monopoly. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Patents KEYWORDS: Bloom's: Knowledge 17. Design patents extend for a 14-year period. a. True b. False ANSWER: True POINTS: 1

DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Patents KEYWORDS: Bloom's: Knowledge 18. There can be infringement of patents, copyrights, trademarks, trade names and trade dress. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What Can a Business Own? Intangible Property Rights KEYWORDS: Bloom's: Comprehension 19. Fair use is use of a copyrighted item with permission. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Copyrights KEYWORDS: Bloom's: Knowledge 20. The Lanham Act provides protection for trademarks, trade names, and trade dress. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trademarks KEYWORDS: Bloom's: Knowledge 21. Trademark protection lasts for 17 years. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal Trademarks Bloom's: Knowledge

22. The Federal Trademark Dilution Act permits private suit for tarnishment of a trademark. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trademarks KEYWORDS: Bloom's: Knowledge 23. Trade secrets must be registered to enjoy protection. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trade Secrets KEYWORDS: Bloom's: Knowledge 24. Trademark registration in the United States is good only in the United States. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trademarks KEYWORDS: Bloom's: Knowledge 25. WIPO administers trademarks and copyrights internationally. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: International Intellectual Property Issues

KEYWORDS:

Bloom's: Knowledge

26. The United States has opposition proceedings as part of the patent process. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: International Intellectual Property Issues KEYWORDS: Bloom's: Knowledge 27. The United States does not have working requirements as part of its patent process. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: International Intellectual Property Issues KEYWORDS: Bloom's: Knowledge 28. The Community Trademark is the European Union's one-stop registration system. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: International Intellectual Property Issues KEYWORDS: Bloom's: Knowledge 29. Gray market goods are properly trademarked goods that have entered the country without authorization from the manufacturer. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: International Intellectual Property Issues KEYWORDS: Bloom's: Knowledge

30. Knock-off goods are the same as gray market goods. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: International Intellectual Property Issues KEYWORDS: Bloom's: Knowledge 31. Palming off is a tort in which one company sells its imitation product by leading buyers to believe it is a different product or the "real thing." a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Enforcing Business Property Rights KEYWORDS: Bloom's: Knowledge 32. The Sonny Bono Copyright Extension Act does not apply to films. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Copyrights KEYWORDS: Bloom's: Knowledge 33. The Digital Millennium Copyright Act imposes liability for circumvention of encoded materials that prevent copying. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Copyrights KEYWORDS: Bloom's: Knowledge

34. The Digital Millennium Copyright Act imposes liability for the creation of programs that circumvent encoded copyrighted materials. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Copyrights KEYWORDS: Bloom's: Knowledge 35. Corporations cannot hold copyrights. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Copyrights KEYWORDS: Bloom's: Knowledge 36. Corporations' copyrights last for 50 years from the time of their creation or release, whichever is later. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Copyrights KEYWORDS: Bloom's: Knowledge 37. GATT requires patent protection for 50 years. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Patents KEYWORDS: Bloom's: Knowledge 38. Copyrights run for the life of the creator plus 50 years.

a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Copyrights KEYWORDS: Bloom's: Knowledge 39. One factor in determining fair use is commercial profit. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Copyrights KEYWORDS: Bloom's: Knowledge 40. Trade dress is not entitled to protection unless there is some form of registration under federal law. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trademarks KEYWORDS: Bloom's: Knowledge 41. Opposition proceedings are part of the patent process outside the U.S. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: International Intellectual Property Issues KEYWORDS: Bloom's: Knowledge 42. Working requirements mandate use and development of the patented product or the rights are lost. a. True b. False

ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: International Intellectual Property Issues KEYWORDS: Bloom's: Knowledge 43. Slander of title is the same tort as palming off. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Enforcing Business Property Rights KEYWORDS: Bloom's: Knowledge 44. The Digital Millennium Copyright Act exempts digital technology from copyright protections. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Copyrights KEYWORDS: Bloom's: Knowledge 45. The United States is a working requirement patent jurisdiction. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: International Intellectual Property Issues KEYWORDS: Bloom's: Knowledge 46. The failure to prevent generic use of tradenames and trademarks can result in a loss of protection. a. True b. False ANSWER: True POINTS: 1

DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trademarks KEYWORDS: Bloom's: Knowledge 47. _____ is a tort that protects a business whose trade secrets are taken without authorization. a. Palming off b. Misappropriation c. Embezzlement d. Larceny ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Enforcing Business Property Rights KEYWORDS: Bloom's: Knowledge 48. Under the Industrial Espionage Act, which of the following potential penalties is correct? a. A corporate fine of up to $1,000,000 b. A fine of up to $1,000,000 for an individual c. Imprisonment of up to 25 years for an individual d. A fine of up to $500,000 for an individual ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trade Secrets KEYWORDS: Bloom's: Knowledge 49. When the UTSA does not apply, recovery for taking a trade secret: a. does not exist. b. may exist for breach of loyalty. c. may exist for breach of due care. d. may exist for breach of accounting.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trade Secrets KEYWORDS: Bloom's: Comprehension 50. How many states have adopted the Uniform Trade Secrets Act?

a. 50 b. 17 c. 28 d. 45 ANSWER: d POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trade Secrets KEYWORDS: Bloom's: Knowledge 51. Palming off: a. is what occurs with gray market goods. b. is a tort that has no remedy. c. occurs when one seller recreates another seller's product. d. can occur only with copyrighted properties.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Enforcing Business Property Rights KEYWORDS: Bloom's: Application 52. Knockoff goods are: a. goods carrying a trademark without authorization. b. goods manufactured in excess of the permission granted by the trademark holder. c. permitted after the five-year period for trademark registration expires. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: International Intellectual Property Issues KEYWORDS: Bloom's: Application 53. Goods sold by an authorized dealer beyond the dealer's authorized territory or quantity are: a. knockoff goods. b. gray market goods. c. infringed goods. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: International Intellectual Property Issues KEYWORDS: Bloom's: Knowledge 54. Registration of a trademark in a Madrid member country is: a. effective for that country only. b. effective for all Madrid member countries. c. not effective in the United States. d. protected under the Berne convention.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trademarks KEYWORDS: Bloom's: Knowledge 55. Which of the following is not an element of disparagement? a. untrue statement b. publication c. damages d. intent to injure e. All of the above are elements.

ANSWER: e POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Enforcing Business Property Rights KEYWORDS: Bloom's: Knowledge 56. Palming off: a. is the same as trademark infringement. b. requires proof of the likelihood of confusion. c. is a statutory protection in competition. d. is a federal crime. e. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Enforcing Business Property Rights KEYWORDS: Bloom's: Knowledge

57. Trade secrets: a. are registered for 14 years. b. are good for 75 years. c. need not be registered to be protected. d. are the same as trademarks.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trade Secrets KEYWORDS: Bloom's: Comprehension 58. Misappropriation requires proof of: a. unauthorized use of a product or process. b. infringement. c. an existing copyright. d. an existing trademark.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Enforcing Business Property Rights KEYWORDS: Bloom's: Comprehension 59. The golden arches of McDonald's restaurants are an example of: a. a patent. b. a copyright. c. a license. d. trade dress.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Trademarks KEYWORDS: Bloom's: Application 60. Patents are: a. 20-year legal monopolies. b. good for the lifetime of the inventor plus 50 years. c. not protected by any federal statutes for infringement. d. none of the above ANSWER: a POINTS: 1

DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Patents KEYWORDS: Bloom's: Knowledge 61. "M & M's" brand candy is: a. an example of a trademark. b. an example of a generic label not entitled to trademark protection. c. a trademark protectable for 17 years. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Trademarks KEYWORDS: Bloom's: Application 62. Which of the following is a generic term? a. Honey Maid graham crackers b. Nintendo video games c. cola d. Jell-O brand gelatin ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Trademarks KEYWORDS: Bloom's: Application 63. Which of the following are generic terms? a. cellophane b. aspirin c. thermos d. All of the above are generic terms.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Trademarks KEYWORDS: Bloom's: Application 64. What types of remedies are available for patent infringement?

a. injunctions b. damages c. specific performance d. a and b ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Patents KEYWORDS: Bloom's: Knowledge 65. To be patentable, an idea must be which of these? a. Obvious b. Intangible c. Useful d. All of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Patents KEYWORDS: Bloom's: Knowledge 66. The Supreme Court has held that developing a method for creating something that exists in nature ___ protected by patent laws. a. is b. is not c. cannot d. should not ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Patents KEYWORDS: Bloom's: Application 67. If a major company buys one subscription to a journal for all of its employees to copy and share, the company: a. is not liable for anything under the fair use doctrine. b. is liable for infringement. c. is not liable for infringement, but is liable for a trade secret violation. d. is not liable because this is clearly an educational use.

ANSWER: b POINTS: 1

DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Copyrights KEYWORDS: Bloom's: Application 68. The Sonny Bono Copyright Extension Act: a. does not apply to individual copyright ownership. b. does not apply to corporate copyright ownership. c. does not provide protection for movies. d. extended the time for the federal copyright protection to 70 years beyond the life of the creator/author. e. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Copyrights KEYWORDS: Bloom's: Knowledge 69. The Digital Millennium Copyright Act: a. makes it a criminal offense to create programs to circumvent encoded copyrighted materials. b. does not impose liability on those who provide Internet access to employees. c. does not impose liability for circumvention of encoding of copyrighted materials for personal use. d. both b and c e. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Copyrights KEYWORDS: Bloom's: Knowledge 70. Professor Winona Wright has just read an article in Fortune magazine about issues in the Enron bankruptcy. She wishes to share it with her class that morning and makes 50 copies to distribute to them. Professor Wright: a. has infringed Fortune's copyright. b. has utilized the fair use exemption under copyright law. c. has done nothing in violation of copyright law because magazine articles are not protected under copyright law. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking

TOPICS: KEYWORDS:

Copyrights Bloom's: Application

71. Trade dress: a. can be protected if there will be confusion. b. can be protected only if there is a registered trade name or trademark. c. can be protected if it is distinct. d. both a and c ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trademarks KEYWORDS: Bloom's: Comprehension 72. What of the following could be protected as a trade secret? a. chemical formula b. supply chain management system of a company c. customer list d. All of the above are examples of trade secrets.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Trade Secrets KEYWORDS: Bloom's: Application 73. Which of the following is/are generic term(s)? a. Band-Aid b. Jell-O c. Aspirin d. All of the above are generic.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Trademarks KEYWORDS: Bloom's: Application 74. Ted’s Red Hots is a hot dog restaurant that has the shape of a hot dog in a bun, with the hot dog wearing a white chef’s hat at one end. Wally’s is a new hot dog restaurant that has a wiener dog shape with the wiener dog wearing a white chef’s hat. Ted’s probably has an infringement claim based on: a. patent appropriation.

b. trade dress appropriation. c. copyright infringement. d. any of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Trademarks KEYWORDS: Bloom's: Application 75. The Trademark Dilution Act provides a remedy for: a. commercial use of another’s trademark. b. too many trademarks being registered. c. overuse of a trademark. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trademarks KEYWORDS: Bloom's: Knowledge 76. The “likelihood of confusion” standard is used: a. in copyright cases. b. in patent cases. c. in trademark infringement cases. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trademarks KEYWORDS: Bloom's: Knowledge 77. At Anne’s Beauty Emporium, Della operates a small store-within-a-store in which she sells bags that appear to be designer Prada and Gucci handbags. The bags are priced at Della’s at between $65 and $190 each. The price for the same Prada and Gucci bags in department stores would be between $325 and $900. Della is probably selling: a. knock-off purses. b. gray market purses. c. counterfeit purses. d. all of the above ANSWER: d POINTS: 1

DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Trademarks International Intellectual Property Issues KEYWORDS: Bloom's: Application 78. Copying an article from a computer science journal that sells subscriptions and then distributing it to 25 employees at your company: a. would be fair use. b. would be copyright infringement. c. would not be copyright infringement unless you charged the employees for the copies. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Copyrights KEYWORDS: Bloom's: Application 79. Yanni’s Yachts has created a specially designed awning for its boats. Yanni’s did not patent the awning. Dream Boats purchased one of Yanni’s boats and then copied the awning from the boat it purchased from Yanni. a. Dream Boats has appropriated a trade secret. b. Dream Boats has appropriated a patent because a patent need not be registered to be valid. c. Dream Boats has misappropriated Yanni’s awnings. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Patents KEYWORDS: Bloom's: Application 80. Trade secrets: a. cannot be registered. b. do not carry remedies if they are taken by former employees. c. are not a form of property and cannot be stolen. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trade Secrets

KEYWORDS:

Bloom's: Knowledge

81. Louis Vuitton is a manufacturer of luggage, purses, wallets, and briefcases and is internationally known for its classic LV design on its products. Vuitton has authorized two U.S. importers to handle its products with the caveat that the products are to be sold only in the finer department stores and Vuitton-authorized dealers and franchises. One dealer has been selling the Vuitton products at substantial discounts to a wholesaler in the Los Angeles garment district. Discuss Vuitton's rights in this situation.

ANSWER: Vuitton is experiencing the gray market - the authorization for sales of goods is being exceeded with the resultant flooded market and reduced price. However, under current law there is little hope for Vuitton controlling the imports by the LA dealer. Vuitton may have to take the action of terminating the wholesaler.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: International Intellectual Property Issues KEYWORDS: Bloom's: Application 82. Chicago Roller Skate has purchased an inexpensive indoor rollerskate from a Taiwanese manufacturer. Brookfield Athletic Shoes alleges that its patent for its unique wheel plate is infringed by the Taiwanese model. Discuss the issues of infringement as well as the issues of international protections of patented products.

ANSWER: The patent is infringed and Chicago will be liable. Their importation from a foreign manufacturer is irrelevant.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Patents International Intellectual Property Issues KEYWORDS: Bloom's: Application 83. During the late 1980s, a number of homeowners purchased satellite dishes in order to gain access to all forms of television programming (without the additional costs of cable and cable access fees). The pay-TV channels then scrambled their signals, and the owners find that their satellite dishes offer them no more stations than regular TV. Discuss the ownership rights in this situation. Were the satellite dishes an ethical and legal issue when they were sold to the homeowners in the first place?

ANSWER: It is difficult to copy the airways. But the right of access to paid-for shows can be controlled and the companies are justified in controlling access.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Enforcing Business Property Rights KEYWORDS: Bloom's: Application 84. John W. Carson, better known as Johnny Carson, was the host and star of "The Tonight Show." His announcer used the phrase "Here's Johnny" to introduce Mr. Carson from the time the first show appeared in 1957. Carson licensed the phrase for use with a clothing line he endorsed as well as a line of men's toiletries. In 1976, a Michigan corporation began manufacturing and selling portable toilets for use at construction sites and at large outdoor events. The toilets were called, "Here's Johnny! portable toilets!" The company also used the phrase, "the world's foremost commodian" in describing its

product. Mr. Carson filed suit. What would be the basis of his lawsuit?

ANSWER: The court in Carson v. Here's Johnny Portable Toilets, 698 F.2d 831 (6th Cir. 1983), held that the use of the phrase was misappropriation.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Enforcing Business Property Rights KEYWORDS: Bloom's: Application 85. Discuss the rights of the film companies to collect royalties from the rental of their films at local video stores.

ANSWER: The royalties are covered up-front when the video outlets pay a fee up-front for the movie rights.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Copyrights KEYWORDS: Bloom's: Knowledge 86. Discuss the potential penalties under the Industrial Espionage Act. ANSWER: The penalties under the IEA for individuals are fines up to $500,000 and imprisonment for up to 15 years; for corporate violations, the fine is the greater of up to $10,000,000 or twice the value of the secret that was communicated.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Trade Secrets KEYWORDS: Bloom's: Knowledge 87. Why are the terms "cellophane," "aspirin," and "thermos" generic? What changes a tradename or trademarked item to a generic term?

ANSWER: The terms fell into common usage to refer to a type of product as opposed to a particular company product. Companies must promote "Band-Aid brand adhesive strip" so that "BandAid" does not become the term all customers use for all adhesive strips.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Trademarks KEYWORDS: Bloom's: Application 88. FluRight is a flu medicine developed by Medic, Inc. The packaging for FluRight bears an uncanny resemblance to the number one flu medicine on the market. The bottle is the same shape and the colors and type on the box are the same.

Customers note that they have to look closely to see which brand they are buying. Describe the rights of the company that has the number one brand against Medic, Inc. ANSWER: There are issues of palming off here. Also, there is perhaps an aspect of trade dress. A

company cannot design and package its product so as to make it deceptively similar to another brand and thereby capitalize on its advertising and good will.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Trademarks Enforcing Business Property Rights KEYWORDS: Bloom's: Application 89. AOL use the phrase “You’ve got mail!” to signal its customers that there is mail in their electronic accounts. AT&T began using the phrase, “You have mail!” for its customers. AOL brought suit against AT&T for trademark infringement.

Has there been infringement?

ANSWER: The students should discuss whether it is possible to have a trademark on a phrase that can be used in many different contexts and does have ordinary meaning and use. In America Online, Inc. v. AT&T Corp., 243 F.3d 812 (4th Cir 2001), the court held that AOL could not have trademark protection for something such as a phrase that had functional use and meaning.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Trademarks KEYWORDS: Bloom's: Application 90. “Jordache” was a trademark for designer jeans that were popular in the 1980s. A manufacturer that produced jeans for larger-sized women named their jean product “Lardashe” and used a smiling pig as part of its logo with its name. The Jordache Company brought suit against Lardashe for trademark infringement. Which of the following best describes how the court dealt with the issue? a. The court issued an injunction against Lardashe to stop using the name. b. The court dismissed the claim because there was not a likelihood of confusion of the brand. c. The court dismissed the action because a name cannot be a trademark. d. The court dismissed the action because clothing is not subject to trademark identification.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Trademarks KEYWORDS: Bloom's: Analysis 91. Cheong Choon Ng, the owner of Rainbow Loom, developed a rubber-band jewelery making kit that has a distinctive trade dress C-shaped clip that allows kids to connect loops of rubber bands to form bracelets. The looming technique in the kit dates back to the 1800s when the technique of looping knits was called Brunnian Links. Mr. Ng says he developed the C-Clip as he watched his daughters trying to make bracelets out of tiny rubber bands. After three years of enjoying a monopoly on a hot-selling craft item, Mr. Ng faced competition from FunLoom. Mr. Ng has filed suit against FunLoom for copying the C clip in its craft kit for the rubber band bracelets. Which of the following statements by the owner of FunLoom would be the best avenue for defense against the infringement suit by Rainbow Loom? a. “Our clip is larger.” b. “It works the same, but it isn’t the same. It just looks like it.”

c. “Is a loom something new and novel? It isn’t.” d. “This issue should be decided by competition, not the courts.”

ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Trademarks KEYWORDS: Bloom's: Analysis The book "Fort Apache" dealt with the story of a battle at a frontier fort and the film "Fort Apache: The Bronx,” was a story about the challenges of police officers in battling crime in the Bronx area of New York City. The author of “Fort Apache” has brought suit against the film makers.

92. What would be the basis of the suit? a. Trade Name b. Trademark c. Copyright d. both a and b ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Copyrights KEYWORDS: Bloom's: Analysis 93. What would be the film makers’ best defense in the suit against them by the author? a. That the idea of a Fort Apache is general in terms of the nature of a battle and not a unique idea. b. That the name of the film is different. c. That the use of an idea in a film is not an infringement of an idea in a book. d. That book names are not protected by statute.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Copyrights KEYWORDS: Bloom's: Analysis 94. The novel One Fine Day told the story of a man trapped in a repeating day, forced to live the same day over and over.

The movie "Groundhog Day," also featured a man caught in a repeating day. The novel was dark and introspective, while the film was a romantic comedy. In a suit by the author of the book against the film makers, which of the following would be important? a. That any similarities between the two works related general ideas, concepts or abstractions. b. That the film was made first.

c. That the screenwriters for the film had read the book. d. All of the above would be important.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Copyrights KEYWORDS: Bloom's: Analysis

1. Covenants not to compete are illegal per se. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What Interferes with Competition? Covenants Not to Compete KEYWORDS: Bloom's: Knowledge 2. Covenants not to compete cannot be used in agreements for the sale of businesses. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What Interferes with Competition? Covenants Not to Compete KEYWORDS: Bloom's: Knowledge 3. Section 1 of the Sherman Act covers monopolization. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Monopolization KEYWORDS: Bloom's: Knowledge 4. The Sherman Act does not apply unless sales across state lines are involved. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Monopolization KEYWORDS: Bloom's: Knowledge 5. The Clayton Act provides for treble damage recovery for all antitrust violations. a. True

b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What are the Penalties and Remedies for Anticompetitive Behavior?

KEYWORDS: Bloom's: Knowledge 6. The Sherman Act imposes fines and imprisonment for violations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What are the Penalties and Remedies for Anticompetitive Behavior?

KEYWORDS: Bloom's: Knowledge 7. Competition restraints in commercial leases are generally valid. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What Interferes with Competition? Covenants Not to Compete KEYWORDS: Bloom's: Knowledge 8. The Robinson-Patman Act deals with price discrimination. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Price Discrimination KEYWORDS: Bloom's: Knowledge 9. The Celler-Kefauver Act regulates asset acquisitions. a. True b. False ANSWER: True

POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What Interferes with Competition? An Overview of the Federal Statutory Scheme on Restraint of Trade KEYWORDS: Bloom's: Knowledge 10. The Antitrust Improvements Act gave the Justice Department broader investigative authority. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What Interferes with Competition? An Overview of the Federal Statutory Scheme on Restraint of Trade KEYWORDS: Bloom's: Knowledge 11. The interstate commerce jurisdictional standard for the Sherman Act requires proof of transactions across state lines. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What Interferes with Competition? An Overview of the Federal Statutory Scheme on Restraint of Trade KEYWORDS: Bloom's: Knowledge 12. The Clayton Act does not carry criminal penalties. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What are the Penalties and Remedies for Anticompetitive Behavior?

KEYWORDS: Bloom's: Knowledge 13. Equitable remedies are not available under the Sherman Act. a. True b. False

ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What are the Penalties and Remedies for Anticompetitive Behavior?

KEYWORDS: Bloom's: Knowledge 14. Only Clayton Act violations carry treble damages. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What are the Penalties and Remedies for Anticompetitive Behavior?

KEYWORDS: Bloom's: Knowledge 15. Generally, joint ventures among competitors in international business are per se violations of the Sherman Act. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Antitrust Issues in International Competition KEYWORDS: Bloom's: Knowledge 16. Monopoly power is the power to control prices or exclude competition. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Monopolization KEYWORDS: Bloom's: Knowledge 17. Cross-elasticity of demand is irrelevant in determining the product market. a. True b. False ANSWER: False POINTS: 1

DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Monopolization KEYWORDS: Bloom's: Knowledge 18. Predatory pricing is pricing below actual cost. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Monopolization KEYWORDS: Bloom's: Knowledge 19. Predatory pricing below cost with monopoly power is illegal. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Monopolization KEYWORDS: Bloom's: Knowledge 20. Setting minimum prices is a per se violation of the Sherman Act. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resale Price Maintenance KEYWORDS: Bloom's: Knowledge 21. An agreement among competitors for elimination of bidding is a violation of federal antitrust laws. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal Price Fixing Bloom's: Knowledge

22. Setting maximum prices is a per se violation of the Sherman Act. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Price Fixing KEYWORDS: Bloom's: Knowledge 23. Limitations on bidding are permitted in professional bids such as in architecture and service contracts. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Price Fixing KEYWORDS: Bloom's: Knowledge 24. Division of markets is a per se violation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Divvying up the Markets KEYWORDS: Bloom's: Knowledge 25. Group boycotts are per se violations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Group Boycotts and Refusals to Deal

KEYWORDS:

Bloom's: Knowledge

26. Joint ventures among competitors are per se violations. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Antitrust Issues in International Competition KEYWORDS: Bloom's: Knowledge 27. The Noerr-Pennington doctrine is an antitrust exception that originates in the First Amendment. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Free Speech and Anticompetitive Behavior KEYWORDS: Bloom's: Knowledge 28. The failing company doctrine is an exception to horizontal merger restrictions. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Merging Competitors and the Effect on Competition KEYWORDS: Bloom's: Knowledge 29. The Celler-Kefauver Act is part of the Clayton Act. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What Interferes with Competition? An Overview of the Federal Statutory Scheme on Restraint of Trade KEYWORDS: Bloom's: Knowledge

30. Private parties can bring suit under the Federal Trade Commission Act. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What are the Penalties and Remedies for Anticompetitive Behavior?

KEYWORDS: Bloom's: Knowledge 31. Monopolization is a vertical restraint of trade. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Monopolization KEYWORDS: Bloom's: Knowledge 32. Resale price maintenance is a vertical restraint of trade. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resale Price Maintenance KEYWORDS: Bloom's: Knowledge 33. Resale price maintenance is a per se violation of the Sherman Act. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resale Price Maintenance KEYWORDS: Bloom's: Knowledge 34. Conscious parallelism negates market forces.

a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Monopolization KEYWORDS: Bloom's: Knowledge 35. Price control consignments are treated as forms of resale price maintenance. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resale Price Maintenance KEYWORDS: Bloom's: Knowledge 36. Fair trade laws are still in effect in many states. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resale Price Maintenance KEYWORDS: Bloom's: Knowledge 37. Exclusive distributorships are per se antitrust violations. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sole Outlets and Exclusive Distributorships KEYWORDS: Bloom's: Knowledge 38. Customer and territorial restrictions are per se antitrust violations. a. True b. False

ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Customer and Territorial Restrictions KEYWORDS: Bloom's: Knowledge 39. Tying arrangements are per se antitrust violations. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Tying Arrangements KEYWORDS: Bloom's: Knowledge 40. The tying product is the desired product. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Tying Arrangements KEYWORDS: Bloom's: Knowledge 41. A defense to tying is quality control. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Tying Arrangements KEYWORDS: Bloom's: Knowledge 42. Sole outlets are not antitrust violations when there is interbrand competition. a. True b. False ANSWER: True POINTS: 1

DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sole Outlets and Exclusive Distributorships KEYWORDS: Bloom's: Knowledge 43. Exclusive dealing contracts are per se violations. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sole Outlets and Exclusive Distributorships KEYWORDS: Bloom's: Knowledge 44. Generic brands can carry a lesser price than brand-name products even though identical in composition without experiencing price discrimination difficulties. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Price Discrimination KEYWORDS: Bloom's: Knowledge 45. Meeting the competition is a defense to price discrimination. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Price Discrimination KEYWORDS: Bloom's: Knowledge 46. The legality of vertical mergers is determined by the relevant geographic and product markets. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Vertical Mergers KEYWORDS: Bloom's: Knowledge 47. A vertical merger that prevents market entry is illegal. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Vertical Mergers KEYWORDS: Bloom's: Knowledge 48. There is no price discrimination when lower prices are charged for generic label cans of the same product. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Price Discrimination KEYWORDS: Bloom's: Knowledge 49. A tying arrangement requires the seller to have market power in the tying product. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Tying Arrangements KEYWORDS: Bloom's: Knowledge 50. A tying arrangement requires the seller to have market power in the tied product. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal

TOPICS: KEYWORDS:

Tying Arrangements Bloom's: Knowledge

51. A covenant in the sale of a dry cleaning business that prohibits the seller from operating a dry cleaning business anywhere in that state is too restrictive to be enforced. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What Interferes with Competition? Covenants Not to Compete KEYWORDS: Bloom's: Knowledge 52. Requiring a franchisee to use trademark napkins is a per se antitrust violation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Tying Arrangements KEYWORDS: Bloom's: Knowledge 53. An agreement among competitors to control the supply of their products to the market violates the Sherman Act. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Price Fixing KEYWORDS: Bloom's: Knowledge 54. A covenant not to compete in a contract for the sale of a business protects the goodwill of the existing business for the buyer. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal

TOPICS: KEYWORDS:

What Interferes with Competition? Covenants Not to Compete Bloom's: Knowledge

55. Corporate officers are not liable for violations of the Sherman Act. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What are the Penalties and Remedies for Anticompetitive Behavior?

KEYWORDS: Bloom's: Knowledge 56. Refusals to deal are a per se violation of the Sherman Act. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Group Boycotts and Refusals to Deal KEYWORDS: Bloom's: Knowledge 57. A boycott against subcontractors who are cheaper because of safety concerns is still an illegal group boycott. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Group Boycotts and Refusals to Deal KEYWORDS: Bloom's: Knowledge 58. Interlocking directorates tend to be efficient, effective, ethical, and legal. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Subtle Anticompetitive Behavior: Interlocking Directorates KEYWORDS: Bloom's: Knowledge

59. Meeting the competition is a defense to price discrimination. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Price Discrimination KEYWORDS: Bloom's: Knowledge 60. Quantity discounts violate the Robinson-Patman Act. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Price Discrimination KEYWORDS: Bloom's: Knowledge 61. There is hardly any cross-elasticity in the gasoline market. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Monopolization KEYWORDS: Bloom's: Knowledge 62. The Antitrust Modernization Commission has proposed material changes in the antitrust laws to accommodate ecommerce market changes. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What Lies Ahead in Anticompetitive Behavior: The Antitrust Modernization Commission KEYWORDS: Bloom's: Knowledge

63. The judicial approach to antitrust cases is one of weighing benefits to competition. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What Interferes with Competition? An Overview of the Federal Statutory Scheme on Restraint of Trade KEYWORDS: Bloom's: Knowledge 64. A monopsony is the same thing as a monopoly. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Monopolization Monopsony KEYWORDS: Bloom's: Knowledge 65. The ability of a customer to control the prices of a supplier in a market is a monopsony. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Monopsony KEYWORDS: Bloom's: Knowledge 66. A monopsony is illegal per se. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Monopsony KEYWORDS: Bloom's: Knowledge

67. Manufacturers who refuse to deal with retailers who do not charge a suggested retail price have committed a per se violation of the antitrust laws. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resale Price Maintenance KEYWORDS: Bloom's: Knowledge 68. Manufacturers who refuse to deal with discount houses have committed a per se violation of the antitrust laws. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resale Price Maintenance KEYWORDS: Bloom's: Knowledge 69. Which of the following is not required for an enforceable covenant not to compete? a. sale of a business b. reasonable geographic scope c. reasonable time limits d. All of the above are required.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What Interferes with Competition? Covenants Not to Compete KEYWORDS: Bloom's: Comprehension 70. Which act contains prohibitions on monopolization? a. Sherman Act b. Clayton Act c. Robinson-Patman Act d. Celler-Kefauver Act e. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal Monopolization Bloom's: Knowledge

71. Which of the following acts prohibits unfair methods of competition? a. Sherman Act b. Federal Trade Commission Act c. Robinson-Patman Act d. Clayton Act e. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What Interferes with Competition? An Overview of the Federal Statutory Scheme on Restraint of Trade KEYWORDS: Bloom's: Knowledge 72. Which of the following is not regulated by the Clayton Act? a. interlocking directorates b. mergers c. tying sales d. monopolization e. All of the above are regulated by the Clayton Act. ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Monopolization KEYWORDS: Bloom's: Knowledge 73. The Celler-Kefauver Act: a. is an amendment to the Clayton Act. b. regulates mergers. c. is the Antitrust Improvements Act. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What Interferes with Competition? An Overview of the Federal Statutory Scheme on Restraint of Trade KEYWORDS: Bloom's: Knowledge

74. Gringo's Restaurant is a small restaurant located in a Mesa, Arizona, neighborhood shopping center that has a grocery store (chain) as its anchor tenant. Carl Williams owns Gringo's and has just negotiated its sale to Wilma Freestone. The covenant not to compete provides that Williams will not open a competing restaurant anywhere within a two-mile radius of Gringo's for a period of two years. The noncompete covenant is: a. too restrictive and is a violation of the Sherman Act. b. not subject to review so long as it is part of the sales contract. c. probably reasonable and enforceable. d. void ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: What Interferes with Competition? Covenants Not to Compete KEYWORDS: Bloom's: Application 75. In Weyerhaeuser v. Ross-Simmons, Weyerhaeuser was found liable for: a. predatory bidding. b. predatory pricing. c. nothing. d. monopsony violations.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Monopsony KEYWORDS: Bloom's: Application 76. Treble damages are recoverable for actions brought under: a. the Sherman Act. b. the FTC Act. c. the Antitrust Improvements Act. d. all of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What are the Penalties and Remedies for Anticompetitive Behavior?

KEYWORDS: Bloom's: Knowledge 77. Superior skill, foresight, and industry is a: a. justification for a monopoly. b. defense to a vertical restraint.

c. defense to predatory pricing. d. all of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Monopolization KEYWORDS: Bloom's: Knowledge 78. Cross-elasticity of demand is: a. the willingness to substitute other products. b. a factor in determining resale price maintenance. c. a factor in determining the geographic market. d. all of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Monopolization KEYWORDS: Bloom's: Knowledge 79. Market power is: a. represented by a relatively inelastic demand curve. b. defined by statute. c. the same as market share above 50 percent. d. all of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Monopolization KEYWORDS: Bloom's: Knowledge 80. Which of the following is not a per se violation of the antitrust laws? a. price fixing. b. group boycotts. c. predatory pricing. d. division of markets. e. All of the above are per se violations.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal Horizontal Restraints of Trade Bloom's: Comprehension

81. The Noerr-Pennington doctrine: a. is an exception to price fixing. b. is based on First Amendment rights. c. does not provide protection even when the action is a sham for anticompetitive behavior. d. all of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Free Speech and Anticompetitive Behavior KEYWORDS: Bloom's: Comprehension 82. Horizontal mergers: a. include mergers between manufacturers and jobbers. b. can be approved if a failing company is acquired. c. are always antitrust violations. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Merging Competitors and the Effect on Competition KEYWORDS: Bloom's: Comprehension 83. Which of the following would not be price fixing? a. agreements to limit production b. agreements to limit competitive bidding c. agreements to charge the same interest on credit contracts d. All of the above are price fixing.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Price Fixing KEYWORDS: Bloom's: Application 84. Jay Farnswood is the president of a local group of real estate agents. At their monthly luncheon meeting, Farnswood stood and told his colleagues that he simply could not survive by charging the 5 percent commission rate and noted, "I don't know what the rest of you are going to do, but I am going to charge 6 percent commission on all my listings starting

today." Farnswood's statements: a. constitute price fixing. b. only reflect his intentions; there is no agreement to fix prices. c. constitute an attempt to monopolize. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Price Fixing KEYWORDS: Bloom's: Application 85. Several law firms in the Detroit area have met and agreed not to charge more than $200 for a simple will so that they can more effectively compete with the increasing number of legal clinics. The agreement for a price maximum is: a. not an antitrust violation because the public benefits from maximum prices. b. not an antitrust violation because it is a service and not a sale of goods. c. price fixing and an antitrust violation. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Price Fixing KEYWORDS: Bloom's: Application 86. Which of the following activities is not covered in the Sherman Act? a. attempts to monopolize b. price fixing c. boycotts d. price discrimination ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What Interferes with Competition? An Overview of the Federal Statutory Scheme on Restraint of Trade KEYWORDS: Bloom's: Knowledge 87. The manufacturers of several designer purses have met and agreed not to sell their purses to Jolie's Department Store because of Jolie's practice of discounting all items 20 percent below the retail costs at other stores. The manufacturers are concerned about maintaining their images of exclusivity and quality. The agreement among the manufacturers: a. is valid because of their need to protect their product. b. violates the Sherman Act because it is a boycott. c. is valid because the rule of reason applies and they have a valid reason.

d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Group Boycotts and Refusals to Deal KEYWORDS: Bloom's: Application 88. Pool Line is the manufacturer of a pool cleaning system that has been called by the pool construction industry, "the miracle we have waited a lifetime for." The cleaning system is very effective and recommended by all consumer magazines. The result is that 93 percent of all new pools have the system, and 94 percent of all pool owners buying replacement systems choose Pool Line. Pool Line's competitors have brought suit charging Pool Line with monopolization of the pool cleaning market. Pool Line: a. probably has a monopoly per se because of the 90 percent+ market share figures. b. probably has a valid defense of superior skill, foresight, and industry. c. will owe treble damages to the competitors. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Monopolization KEYWORDS: Bloom's: Application 89. Pool Line is the manufacturer of a pool cleaning system that has been called by the pool construction industry, "the miracle we have waited a lifetime for." The cleaning system is very effective and recommended by all consumer magazines. The result is that 93 percent of all new pools have the system, and 94 percent of all pool owners buying replacement systems choose Pool Line. The relevant product market is: a. pool cleaning systems. b. pool supplies and equipment. c. cleaning equipment. d. none of the above.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Monopolization KEYWORDS: Bloom's: Application 90. A group of local architects has met and decided that their bidding on public works projects has created a danger for the public because the bids come in so dangerously low that building safety is sacrificed. The action of the architects: a. does not violate the Sherman Act because of the reason for their boycott. b. does not violate the Sherman Act because they offer services only and do not sell goods. c. violates the Sherman Act in spite of their motivation.

d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Group Boycotts and Refusals to Deal Price Fixing KEYWORDS: Bloom's: Application 91. Nike and Reebok, both leading manufacturers of athletic shoes, have proposed a joint venture to manufacture special orthopedic devices for handicapped children. The joint venture is: a. a horizontal merger and violates the Sherman Act. b. subject to a rule of reason review. c. a per se violation of the Sherman Act. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Antitrust Issues in International Competition KEYWORDS: Bloom's: Application 92. Exhaust, Inc. has the exclusive contract with the state of California for building, maintaining, and operating the state's vehicle emission testing centers. Auto Emissions, Inc. has announced it will submit a bid on the upcoming renewal.

Exhaust, Inc. has begun lobbying state legislators to pass a bill allowing only in-state firms to be awarded the exclusive emissions contract. Exhaust is a California corporation and Auto Emissions is a New York corporation. Exhaust's conduct is: a. an intentional act designed to create a monopoly and violates the Sherman Act. b. a boycott and a violation of the Sherman Act. c. an attempt at price fixing and a violation of the Sherman Act. d. protected under the Noerr-Pennington doctrine.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Free Speech and Anticompetitive Bahavior KEYWORDS: Bloom's: Application 93. Carl Wilton has just sold his Mexican restaurant to Jerry Felt. The restaurant is located in Costa Brava, a city of about 300,000 people. In their sales agreement, a clause provides that Carl will not open another restaurant in Costa Brava for a period of five years. The clause is: a. a covenant not to compete. b. void as against public policy. c. prohibited under the Sherman Act.

d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: What Interferes with Competition? Covenants Not to Compete KEYWORDS: Bloom's: Application 94. Which of the following statutes was the first federal antitrust statute? a. Clayton Act b. Sherman Act c. Federal Trade Commission Act d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What Interferes with Competition? An Overview of the Federal Statutory Scheme on Restraint of Trade KEYWORDS: Bloom's: Knowledge 95. What is the maximum penalty a corporation can receive for a violation of the Sherman Act? a. $350,000 b. three years' imprisonment c. $10 million d. both a and b ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What are the Penalties and Remedies for Anticompetitive Behavior?

KEYWORDS: Bloom's: Knowledge 96. Resale price maintenance is: a. a rule of reason violation. b. an attempt by a retailer to control prices. c. regulated by the Clayton Act. d. all of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal

TOPICS: KEYWORDS:

Resale Price Maintenance Bloom's: Knowledge

97. Resale price maintenance occurs when: a. the manufacturer suggests retail price. b. minimum prices are enforced. c. consignment arrangements control prices. d. all of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resale Price Maintenance KEYWORDS: Bloom's: Knowledge 98. Fair trade contracts are: a. valid. b. permitted under state laws. c. an issue related to resale price maintenance. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resale Price Maintenance KEYWORDS: Bloom's: Knowledge 99. Exclusive distributorships are: a. covered under the Robinson-Patman Act. b. illegal per se. c. questioned when there is no interbrand competition. d. all of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sole Outlets and Exclusive Distributorships KEYWORDS: Bloom's: Knowledge 100. Territorial restrictions are: a. illegal per se. b. questioned when there is no interbrand competition. c. the same as tying sales.

d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Customer and Territorial Restrictions KEYWORDS: Bloom's: Knowledge 101. Snow-Man manufactures a cotton candy machine. It will not sell its machine unless the buyer purchases at least fivedozen paper cones for holding the cotton candy. Snow-Man's requirement: a. is an example of an exclusive dealing contract. b. is a tying arrangement. c. is a requirements contract. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Tying Arrangements KEYWORDS: Bloom's: Application 102. Snow-Man manufactures a cotton candy machine. It will not sell its machine unless the buyer purchases at least fivedozen paper cones for holding the cotton candy. The cotton candy machine is: a. the tying product. b. the tied product. c. neither of the above - it is not a tying arrangement d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Tying Arrangements KEYWORDS: Bloom's: Application 103. Predatory pricing is: a. pricing below cost. b. per se illegal. c. price discrimination. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal Price Discrimination Bloom's: Knowledge

104. Vertical mergers are: a. illegal per se. b. mergers between manufacturers and wholesalers. c. regulated by the Sherman Act. d. all of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Vertical Mergers KEYWORDS: Bloom's: Knowledge 105. Which of the following is not an antitrust violation so long as there is sufficient interbrand competition? a. resale price maintenance b. sole outlets and exclusive distributorships c. price discrimination d. all of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sole Outlets and Exclusive Distributorships KEYWORDS: Bloom's: Knowledge 106. Suggested retail prices sent to retailers by the manufacturer constitute: a. resale price maintenance. b. price fixing. c. a violation of the antitrust laws if the suggested prices are enforced. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resale Price Maintenance KEYWORDS: Bloom's: Knowledge 107. Maximum price requirements: a. do not constitute antitrust violations because of the benefits to consumers. b. only affect the amount sold and not the competition; and there is no antitrust violation.

c. constitute resale price maintenance. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resale Price Maintenance KEYWORDS: Bloom's: Knowledge 108. Fair trade contracts: a. can no longer be allowed by the states. b. are contracts that prohibit exclusive distributorships. c. are permissible between manufacturers and retailers. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Knowledge NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resale Price Maintenance KEYWORDS: Bloom's: Knowledge 109. Which of the following arrangements is subject to the rule of reason test? a. sole outlets and exclusive distributorships b. resale price maintenance c. tying d. All of the above are under the rule of reason test.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Tying Arrangements Vertical Trade Restraints KEYWORDS: Bloom's: Knowledge 110. Phillip Esten operates a mail store in which he offers various services such as packaging items for shipment, delivering items to overnight services, and a fax machine. Esten has been charging $2.00 per page for the fax service, but a new store has opened in a nearby shopping center that is charging $1.00 per page. Esten lowers his price to $.50 per page, knowing this charge will not always cover his cost. Esten's actions: a. constitute predatory pricing and are a violation of the Robinson-Patman Act. b. constitute meeting the competition. c. constitute resale price maintenance violations. d. none of the above ANSWER: b

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Price Discrimination KEYWORDS: Bloom's: Application 111. Phillip Esten operates a mail store in which he offers various services such as packaging items for shipment, delivering items to overnight services, and a fax machine. Esten charges $4.00 for deliveries for one-time customers and $2.00 for deliveries for his account customers. Esten's prices: a. are a violation of the Robinson-Patman Act. b. are not covered under the Robinson-Patman Act. c. constitute price discrimination. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Price Discrimination KEYWORDS: Bloom's: Application 112. Vertical mergers are: a. mergers between competitors. b. mergers between buyers and sellers. c. per se violations of antitrust laws. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Vertical Mergers KEYWORDS: Bloom's: Knowledge 113. Fair trade contracts: a. were eliminated in 1975. b. have been permitted in nearly one-half of the states. c. relate to issues surrounding price discrimination. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resale Price Maintenance

KEYWORDS:

Bloom's: Knowledge

114. Coca-Cola, Inc. and PepsiCo, Inc. have only one distributor each in the Phoenix area. The Phoenix market is an intensely competitive soft drink market with prices being among the lowest in the nation. A local restaurateur has requested a dealership from PepsiCo and has been denied. He claims an antitrust violation. Which of the following statements is true? a. The denial of the distributorship to someone who can afford it is anticompetitive and is a per se violation. b. The denial is justifiable given the level of interbrand competition. c. The denial is an example of resale price maintenance. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Sole Outlets and Exclusive Distributorships KEYWORDS: Bloom's: Application 115. Homer, Inc. is the western regional distributor for Plato Ice Cream. Homer charges grocers in California $3.00 per half gallon but charges Utah grocers only $2.00 per half gallon. Homer says the Utah ice cream market is much more competitive and he has to meet the market. Utah competitors charge between $2.50 and $2.75 per half gallon. Homer: a. has engaged in price discrimination. b. is simply meeting the competition. c. is exempt from Robinson-Patman because of interstate sales. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Price Discrimination KEYWORDS: Bloom's: Application 116. Termination of a TV retailer's sales contract with a TV manufacturer by that manufacturer for selling the manufacturer's TVs at too-low prices is: a. a per se violation of the Sherman Act. b. resale price maintenance subject to a rule of reason review. c. price fixing. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Resale Price Maintenance KEYWORDS: Bloom's: Application

117. Salads 'R' Us requires all its franchisees to sign an agreement that they will use napkins and dressings purchased from Salads 'R' Us. Unless the agreement is signed, no one is awarded a franchise. Salads 'R' Us maintains that the agreement is necessary to preserve uniformity and quality in all franchise outlets. The purchasing requirement is: a. an illegal tying arrangement. b. valid as a quality control mechanism for protection of goodwill. c. coercion and is invalid. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Tying Arrangements KEYWORDS: Bloom's: Application 118. Competition among Colgate, Crest, and Aim toothpastes is: a. intrabrand competition. b. interbrand competition. c. controllable through resale price maintenance. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Sole Outlets and Exclusive Distributorships KEYWORDS: Bloom's: Application 119. Sedres, Inc. is the manufacturer of the current best-selling TV video game system. Sedres will not sell parts for repair of the systems to anyone other than its authorized dealers. All Sedres authorized dealers are required to send used parts back to Sedres. Sedres will terminate an authorized dealer if it uses non-Sedres parts for repairs. Sedres' policies on dealers: a. constitute violations of the Sherman Act. b. are simply valid quality control mechanisms. c. are valid since no one is barred from entry. d. would be violations only if there were no other TV video game manufacturers.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Sole Outlets and Exclusive Distributorships KEYWORDS: Bloom's: Application 120. Toys R Us is an international toy retailer. The Justice Department has just filed a complaint against the giant retailer alleging that Toys R Us refuses to carry toy lines or toys if the manufacturers sell their products to discount warehouse stores such as Sam's Club or Costco. Toys R Us maintains that when manufacturers sell toys to these warehouses, they

sell only the hot toy items for the Christmas season at large discounts. Their pricing undercuts Toys R Us and Toys R Us must carry a full line of toys, even those they do not share the same demand levels. Toys R Us: a. has not violated any antitrust laws. b. may have engaged in a refusal to deal. c. may have engaged in a price-fixing conspiracy. d. both b and c ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Group Boycotts and Refusals to Deal Price Fixing KEYWORDS: Bloom's: Application 121. The eventual result in the U.S. v. Microsoft case was: a. Bill Gates was sentenced to one year in prison for violations of the Sherman Act. b. The court concluded there were no violations of the Sherman Act. c. The court concluded that Microsoft violated the Sherman Act. d. The court concluded that Microsoft did not possess monopoly power. e. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Monopolization KEYWORDS: Bloom's: Knowledge 122. What is it called when officers of competing companies serve on each others’ boards of directors? a. Intralocking directorates b. Interlocking directorates c. Cross-locking directorates d. Diagonal directorates ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Subtle Anticompetitive Behavior: Interlocking Directorates KEYWORDS: Bloom's: Knowledge 123. If clients of a brokerage house feel that there are anticompetitive activities being used among and between the various brokerage houses that result in price impacts for them, then: a. their remedy is under the Sherman Act for price fixing or monopolization. b. their remedy is under the Clayton Act for vertical price discrimination.

c. their remedy is under the federal securities laws and regulations. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: What Interferes with Competition? An Overview of the Federal Statutory Scheme on Restraint of Trade KEYWORDS: Bloom's: Application 124. Action Outfitters is a national manufacturer and retailer of outdoor gear. When it agrees to sell its merchandise to a retailer, the retailer must also agree to purchase Action’s outfits for clerks, its displays, its shopping bags, and its gift boxes. Action says that these items are part of its brand identification. A retail outlet has brought suit because it only wants the Action merchandise and does not want the outfits, displays, bags, or boxes. a. The suit is one for tying. b. There is no cause of action here because manufacturers can dictate all the terms of sale and whether they will sell to a retailer. c. The suit is one for monopolization. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Tying Arrangements KEYWORDS: Bloom's: Application 125. Four major insurance brokers agreed that when it came time for renewals of coverage with major customers that only one of them would submit a reasonable bid. The three others would submit a much higher price and thereby not be in the running for the renewal. The agreements of the insurance brokers: a. save time and money and are not anticompetitive. b. are an example of vertical trade restraint. c. are an example of horizontal trade restraint. d. are an example of tying.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Price Fixing KEYWORDS: Bloom's: Application 126. Cicily Bridgeport and Collin Wilson own Northeastern Galleries and Upper West Galleries, respectively. For artists displaying paintings in their galleries, Cicily and Collin charge a 22% commission for any sales made. Cicily and Collin have always charged 22%, but there is a slump in sales. When Cicily meets Collin at a Met event, she suggests, “Collin, let’s both go to 25%. What can they do if we both charge 25% and we can earn enough to make up for the market downturn.” Cicily:

a. has committed a per se violation of the Sherman Act. b. has committed a per se violation of the Clayton Act. c. has agreed to a group boycott. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Price Fixing KEYWORDS: Bloom's: Application 127. Universal Syndication has told television stations and networks that they cannot have the rights to play "Friends" reruns unless they also agree to take packages of Charlie Chan movies, Tony Orlando and Dawn, and Rin Tin Tin reruns.

The stations and networks complain that Chan movies, Tony, and Rin Tin Tin reruns do not draw viewers and that they have trouble selling the ad time on such shows. Universal Syndication’s requirement: a. is a tying arrangement that is a per se violation of federal antitrust law. b. is a tying arrangement that may be a violation of federal antitrust law. c. is one that it is free to impose so long as other syndicators are selling shows. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Tying Arrangements KEYWORDS: Bloom's: Application 128. Blue Cross, a medical insurer, publishes lists of "usual, customary, and reasonable" rates for medical services. Blue Cross insureds can then shop for medical services to be certain they are fully covered. A physician who charges rates higher than Blue Cross alleges there is a combination in restraint of trade to force him out of business and a price-fixing conspiracy. Is he right?

ANSWER: See Ratino v. Medical Service of D.C., 718 F.2d 1260 (4th Cir. 1983); Arizona v. Maricopa County Medical Society, 457 U.S. 332 (1982). Blue Cross is not a competitor. The others are just trying to attract business. If the others owned Blue Cross, the decision might be different.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Price Fixing KEYWORDS: Bloom's: Application 129. Zenith Radio and other American TV manufacturers brought suit against Japanese TV manufacturers for charging artificially low prices in the United States. Can the Japanese manufacturers be sued in the United States?

ANSWER: Yes, if they're doing business here. Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574 (1986).

POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Price Fixing KEYWORDS: Bloom's: Application 130. Several art distributors have met and agreed to limit the number of Hummel figurines being imported into the United States. Is there any anticompetitive behavior involved in doing this?

ANSWER: Yes, by limiting quantity, they can keep prices artificially high. W. Goebel Porzellanfabrik v.

Action Industries, 1984 trade cases, 66,287.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Price Fixing KEYWORDS: Bloom's: Application 131. Sales representatives of several college-book publishers have met together and decided that calling on all schools in their territories is often fruitless, since only one of each of their books can be adopted. They have agreed to split the colleges and only make sales calls on their designated schools. Are there any anticompetitive problems?

ANSWER: Yes. The agreement is a per se violation - division of markets.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Divvying up the Markets KEYWORDS: Bloom's: Application 132. Several gypsum manufacturers have agreed (for union purposes) to limit the number of deliveries per day. They can meet the union demands by doing so. Are there any problems with the agreement?

ANSWER: While the motivation is noble, it is, nonetheless, an agreement to limit supply and is price fixing.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Price Fixing KEYWORDS: Bloom's: Application 133. Colleges and universities around the country keep a common pool of information among them about National Merit Scholars and disclose in their pool information about tuition, scholarship packages, and financial aid. Is such a pool of information appropriate under federal antitrust laws?

ANSWER: The Justice Department recently entered into consent decrees with a number of Ivy League schools on the issue of fixing financial aid packages. This exchange of information and agreement on scholarship made competitive college shopping impossible for the applicants and represented an exchange of price information.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Critical Thinking Price Fixing Bloom's: Application

134. Georges Marciano Guess Company sells its clothes with tags on them with a price indicating "suggested retail price."

Are there any antitrust violations with this practice?

ANSWER: No, unenforced suggestions are okay.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Price Fixing KEYWORDS: Bloom's: Application 135. Greg Rafft, president of the Tricounty Brokerage Association, addressed the members at a luncheon meeting. He suggested that the association purchase two of the area's top three title insurance firms. Are there any antitrust problems with such an acquisition?

ANSWER: Having brokers own such a large share of an integral service might lessen competition.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Monopolization KEYWORDS: Bloom's: Application 136. X-ron Perfume is sold only in one major department store for each city. X-ron will deal only with one department store and will not sell to other stores. Are there any antitrust violations with this arrangement?

ANSWER: Not so long as there is interbrand competition - intrabrand competition can be limited.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Sole Outlets and Exclusive Distributorships KEYWORDS: Bloom's: Application 137. Pat's Bicycle Shop is a Schwinn dealer. In order to be such a dealer, Pat's has to agree not to carry other brands of bicycles. Is this agreement illegal?

ANSWER: Key is interbrand competition in the area. If there is none, this agreement is probably anticompetitive.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Sole Outlets and Exclusive Distributorships KEYWORDS: Bloom's: Application 138. Guernzey Milk produces canned milk under its label and several grocery-store labels. The content is the same but the

grocery-store labels are sold for less. Guernzey says the packaging for the grocery store brands is cheaper. Any antitrust problems?

ANSWER: Could be price discrimination if label cost isn't accurate; like commodities must be sold for same price.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Price Discrimination KEYWORDS: Bloom's: Application 139. 324 Liquor Corporation is a retail liquor and wine dealer. In New York, the wholesalers establish the prices for retail sales and the State Liquor Authority enforces those prices. 324 was cited for violations when it sold a State Liquor Authority investigator a bottle of Chatham Gin for $9.45 (the price was to be $9.65) and a bottle of Smirnoff for $11.59 (the price was to be $11.89). At the hearing, 324 contends that the statutory scheme for regulating prices violates the antitrust laws. Is 324 correct?

ANSWER: A state can regulate prices, but it is the state and not the wholesalers who must regulate those prices. The setup in New York affords too much control to the businesses and will not be exempt from the antitrust laws with such a form of setting prices.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Price Discrimination KEYWORDS: Bloom's: Application 140. Gardner-Denver is the United States' largest manufacturer of ratchet wrenches. Rogers, a former Gardner-Denver employee, formed D.E. Rogers and began selling ratchet wrench parts. From 1964 to 1971, the two competed with Rogers charging prices 30 percent below Gardner-Denver's. In August 1971, Gardner-Denver began a dual price system: Blue list - discounts for quantities of five or more (blue list parts were largely Rogers' parts); white list - non-Rogers' parts. The blue list was given only to Gardner-Denver sales reps. A price war followed with Rogers filing an antitrust suit. Are there any antitrust violations?

ANSWER: The court found no violation and that the effect of the price lists was to encourage competition. See D.E. Rogers Associates, Inc. v. Gardner-Denver, Co., 718 F.2d 1431 (6th Cir. 1983).

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Price Fixing KEYWORDS: Bloom's: Application 141. The price for a Super-Heater X50, a residential water heater, is $372.00 at every store in the greater Atlanta area. The water heater never goes on sale at any of the stores. Super-Heater sells other models of water heaters: the X30 for $301.00 and the X60 for $408.00. There is no store selling the heaters for a different price either. Other companies' water heaters sell at the retail levels at prices ranging from $299-$603. During sales, those prices drop. Is the Super-Heater pricing mechanism a violation of antitrust laws?

ANSWER: There appears to be interbrand competition, but controlled pricing. The consciously parallel price would raise a judicial eyebrow.

POINTS: 1

DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Resale Price Maintenance KEYWORDS: Bloom's: Application 142. Hospitals in Arizona, New Mexico and Colorado are regulated on their emergency room fee schedules by a state hospital emergency room board. The board consists of representatives from all of the hospitals in the state. The board meets twice each year and establishes the prices for emergency room care. The states have assumed a regulatory oversight rule because of the need for universal access for emergency care. The prices charged for emergency room care in these 3 states exceed the average charges in California, Utah, Nevada, Idaho, Oregon and Washington. Patients who experience the higher charges in Arizona, New Mexico and Colorado are concerned about the higher rates. Discuss any legal rights and remedies they may have.

ANSWER: Even when prices are established by a regulatory body, those prices can be challenged as anticompetitive if it can be shown that there was no meaningful oversight over the industry as it established its own rates. The patients may have a class action suit in which they could recover treble damages for the collusion via government agency.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Price Fixing KEYWORDS: Bloom's: Application 143. Explain why the U.S. Supreme Court now applies a rule of reason standard to manufacturers who will no longer sell to retailers who offer deep discounts on the manufacturers’ products.

ANSWER: The court held that enforcing suggested retail prices was not a per se violation because there were services and consumer assistance that full-service retailers provide that are not available at deep discounters Consumers have the ability to become more informed and make the choices on service when these options are there. The court held that trials must examine the effects on competition of such practices in particular markets and not just outlaw the enforcement altogether.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Resale Price Maintenance KEYWORDS: Bloom's: Application 144. The American Kennel Club (AKC), an independent organization that establishes standards for breeding and for certification of purebred dogs issued standards for all purebred dog breeds and recommended standards for Labradors.

The result was that an English strain of Labradors did not meet the minimum height standards that the AKC recommended, and U.S. breeders of a taller American strain were able to monopolize the market for championship dogs.

Which of the following statements is correct? a. The AKC has violated the Sherman Act. b. The AKC, however well intentioned, cannot impose standards on an industry. c. The AKC has not violated the Sherman Act. d. The AKC has violated the Sherman Act if U.S. breeders did benefit from the standards.

ANSWER: c

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Monopolization KEYWORDS: Bloom's: Application 145. Cal-Maine Foods was the defendant in an antitrust suit brought by the purchasers of eggs. Cal-Maine is an egg distributor and the suit accused Cal-Maine of manipulating the egg supply in order to increase prices. Egg prices jumped 28% in 2007 and 14% in 2008 as egg supplies dwindled. Cal-Maine said that following industry-wide animal-welfare guidelines resulted in fewer chickens per farm and, as a result, fewer eggs. Which of the following statements is correct? a. Reducing supplies that affect prices is not covered under the antitrust laws. b. Cal-Maine would have had to conspire with a competitor for the antitrust laws to apply. c. Cal-Maine is not liable to the purchasers of eggs, only the stores that bought the eggs. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Price Fixing KEYWORDS: Bloom's: Application Anheuser-Busch, InBev NV, the maker of Bud Light, proposed a merger with Modelo, the maker of Corona. At the time of the proposed merger, AB InBev NV held 39% of the beer market, Miller/Coors held 26%, Modelo held 7%, and Heineken, the last of the big four held 6%. Other beer makers combined hold the remaining 22% of the U.S. beer market.

The combination would give AB InBev NV 46% of the market. Modelo has been one of the market players that has resisted the parallel price increases in the industry.

146. Which of the following statements is correct? a. The merger would raise questions at the Justice Department about market power. b. The merger would be approved because there are so many other competitors. c. The merger would be approved because there are so many different beers and the relevant market is defined by individual types of beers. d. The Sherman Act does not apply to alcohol companies.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Monopolization KEYWORDS: Bloom's: Application 147. Which of the following is correct? a. The merger proposed is a vertical one. b. The merger proposed is a horizontal one. c. The merger is simply an asset acquisition.

d. The merger is exempt under the failing company doctrine.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Horizontal Restraints of Trade KEYWORDS: Bloom's: Application 148. Yazaki, an auto parts manufacturer, made agreements with three competitors to decide in advance who would bid on contracts with auto manufacturers and what the price would be. The auto parts manufacturers then took turns winning various contracts. Which of the following statements is correct? a. The companies engaged in resale price maintenance. b. The companies created a monopsony. c. The companies were involved in a tying arrangement. d. The companies were involved in divvying up the market and price-fixing.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Divvying up the Markets Price Fixing KEYWORDS: Bloom's: Application

1. The presence of a master-servant relationship determines whether or not a principal must pay wage taxes and withhold income taxes. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Names and Roles: Agency Terminology KEYWORDS: Bloom's: Knowledge 2. In a master/servant relationship, the principal exercises little control over the agent. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Names and Roles: Agency Terminology KEYWORDS: Bloom's: Knowledge 3. An independent contractor is not controlled directly by the principal. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Names and Roles: Agency Terminology KEYWORDS: Bloom's: Knowledge 4. The Restatement of Agency has been adopted in all states. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Names and Roles: Agency Terminology KEYWORDS: Bloom's: Knowledge 5. Express authority must be in writing.

a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Creation of the Agency Relationship KEYWORDS: Bloom's: Knowledge 6. An agency contract must be evidenced by a record to be valid. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Creation of the Agency Relationship KEYWORDS: Bloom's: Knowledge 7. An agency at will is a relationship in which there is no definite ending date. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Termination of Agents Under Employment at Will KEYWORDS: Bloom's: Knowledge 8. Personnel manuals have been held to constitute an employee contract. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Termination of Agents Under Employment at Will KEYWORDS: Bloom's: Knowledge 9. The public policy exception to employment at will does not afford protection for whistle-blowers. a. True b. False

ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Termination of Agents Under Employment at Will KEYWORDS: Bloom's: Knowledge 10. In an agency relationship, both the principal and agent must have legal capacity. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Creation of the Agency Relationship KEYWORDS: Bloom's: Knowledge 11. An unincorporated association is a group that acts as an entity but has no legal existence. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Creation of the Agency Relationship KEYWORDS: Bloom's: Knowledge 12. Implied authority is the extension of express authority by custom. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Creation of the Agency Relationship KEYWORDS: Bloom's: Knowledge 13. The ability of a clerk in a store to accept payment for goods is an example of implied authority. a. True b. False ANSWER: True POINTS: 1

DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Creation of the Agency Relationship KEYWORDS: Bloom's: Application 14. Apparent authority and agency by estoppel are the same thing. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Creation of the Agency Relationship KEYWORDS: Bloom's: Knowledge 15. A principal cannot ratify an act of an agent retroactively. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Creation of the Agency Relationship KEYWORDS: Bloom's: Knowledge 16. Ratification requires full knowledge of the transaction. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Creation of the Agency Relationship KEYWORDS: Bloom's: Knowledge 17. In a master/servant relationship, the principal is liable for the torts of the agent committed within the scope of employment. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Liability of Principals for Agents' Conduct: The Relationship With Third Parties KEYWORDS: Bloom's: Knowledge 18. A principal is not liable for an accident caused by its delivery person. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Liability of Principals for Agents' Conduct: The Relationship With Third Parties KEYWORDS: Bloom's: Knowledge 19. A real estate agent who fails to disclose his interest as a buyer to his seller principal has violated his duty of loyalty. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Principal-Agent Relationship KEYWORDS: Bloom's: Application 20. There is no liability of employers for the acts of independent contractors. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Liability of Principals for Agents' Conduct: The Relationship With Third Parties KEYWORDS: Bloom's: Knowledge 21. Principals and agents have a fiduciary relationship. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal

TOPICS: KEYWORDS:

The Principal-Agent Relationship Bloom's: Knowledge

22. Express and implied authority together are called real authority. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Creation of the Agency Relationship KEYWORDS: Bloom's: Knowledge 23. Agents can collect payoffs made during the course of conducting the principal's business. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Principal-Agent Relationship KEYWORDS: Bloom's: Application 24. Agents are liable to principals for negligence in performing their duties. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Principal-Agent Relationship KEYWORDS: Bloom's: Knowledge 25. A gratuitous agency is one in which the agent is not paid. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Principal-Agent Relationship KEYWORDS: Bloom's: Knowledge

26. A gratuitous agency is void. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Principal-Agent Relationship KEYWORDS: Bloom's: Knowledge 27. Firing an agent does not end apparent authority. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Termination of the Agency Relationship KEYWORDS: Bloom's: Knowledge 28. Constructive notice of termination of an agent is public notice. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Termination of the Agency Relationship KEYWORDS: Bloom's: Knowledge 29. Public notice of termination of an agent is not required. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Termination of the Agency Relationship KEYWORDS: Bloom's: Knowledge 30. Courts view non-compete agreements against the employees and for the employers.

a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Principal-Agent Relationship KEYWORDS: Bloom's: Knowledge 31. The intentional torts of agents are never the responsibility of the principal. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Liability of Principals for Agents' Conduct: The Relationship With Third Parties KEYWORDS: Bloom's: Knowledge 32. All states recognize non-compete agreements as enforceable contract clauses. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Principal-Agent Relationship KEYWORDS: Bloom's: Knowledge 33. The employment-at-will doctrine prohibits the firing of nonunion or noncontract employees. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Termination of Agents Under Employment at Will KEYWORDS: Bloom's: Knowledge 34. Apparent authority ends when an agent is fired. a. True b. False

ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Termination of the Agency Relationship KEYWORDS: Bloom's: Knowledge 35. Apparent authority ends when an agent quits. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Termination of the Agency Relationship KEYWORDS: Bloom's: Knowledge 36. Ratification of a contract by a principal releases the agent from all liability to the third party. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Creation of the Agency Relationship KEYWORDS: Bloom's: Knowledge 37. In a fully disclosed principal situation in which the agent is acting with authority, only the principal is liable on the contract. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Liability of Principals for Agents' Conduct: The Relationship With Third Parties KEYWORDS: Bloom's: Knowledge 38. Unless protected by a statute, an agent for an unincorporated association has full liability on contracts entered into on behalf of that association. a. True b. False

ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Creation of the Agency Relationship KEYWORDS: Bloom's: Knowledge 39. Agents in undisclosed principal situations never have personal liability. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Liability of Principals for Agents' Conduct: The Relationship With Third Parties KEYWORDS: Bloom's: Knowledge 40. A master-servant relationship is one in which the principal has little control over the agent. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Names and Roles: Agency Terminology KEYWORDS: Bloom's: Knowledge 41. A power of attorney is an example of an agency relationship. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Names and Roles: Agency Terminology KEYWORDS: Bloom's: Knowledge 42. The Uniform Unincorporated Nonprofit Association Act provides for limited liability of the members of a nonprofit organization that is not incorporated. a. True b. False ANSWER: True

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Creation of the Agency Relationship KEYWORDS: Bloom's: Application 43. The duty of loyalty of an agent to a principal does not cover conflicts of interest. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Principal-Agent Relationship KEYWORDS: Bloom's: Knowledge 44. Post-employment non-compete agreements are void. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Principal-Agent Relationship KEYWORDS: Bloom's: Knowledge 45. Post-employment non-compete agreements are unenforceable. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Principal-Agent Relationship KEYWORDS: Bloom's: Knowledge 46. An employer is only liable for its actions when hiring, not its failure to do something. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Liability of Principals for Agents' Conduct: The Relationship With Third Parties KEYWORDS: Bloom's: Knowledge 47. A real estate agent who represents both buyer and seller in a transaction without disclosure to both has breached the duty of loyalty. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Principal-Agent Relationship KEYWORDS: Bloom's: Knowledge 48. There is no apparent authority in an undisclosed principal relationship. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Liability of Principals for Agents' Conduct: The Relationship With Third Parties KEYWORDS: Bloom's: Knowledge 49. Respondeat superior is no longer applied in agency relationships. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Liability of Principals for Agents' Conduct: The Relationship With Third Parties KEYWORDS: Bloom's: Knowledge 50. There is no employer liability for negligent hiring. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal Liability of Principals for Agents' Conduct: The Relationship With Third Parties Bloom's: Knowledge

51. An independent contractor is not an agent of the principal. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Names and Roles: Agency Terminology KEYWORDS: Bloom's: Knowledge 52. A sales clerk at a department store is an example of an independent contractor. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Names and Roles: Agency Terminology KEYWORDS: Bloom's: Application 53. An employee who is asked to take company cash to the bank on his lunch hour is not in the scope of employment during that lunch hour. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Liability of Principals for Agents' Conduct: The Relationship With Third Parties KEYWORDS: Bloom's: Application 54. Real estate agents would not customarily have the authority to enter into sales contracts for their clients. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal

TOPICS: KEYWORDS:

Creation of the Agency Relationship Bloom's: Application

55. “I’ll make good on my employee’s promise,” is an example of a ratification. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Creation of the Agency Relationship KEYWORDS: Bloom's: Application 56. “Talk to Ann. She used to work here, but I think she is the best one to get this deal done for us,” is an example of express authority given to an agent. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Creation of the Agency Relationship KEYWORDS: Bloom's: Application 57. Which is a requirement for the creation of an agency relationship? a. a written agreement b. principal with capacity c. agent with capacity d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Creation of the Agency Relationship KEYWORDS: Bloom's: Comprehension 58. Which is not an example of an independent contractor relationship? a. master/servant b. lawyer/client c. accountant/client d. All of the above are not independent contractors.

ANSWER: a POINTS: 1

DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Names and Roles: Agency Terminology KEYWORDS: Bloom's: Application 59. The Restatement of Agency: a. is a summary of the common law agency. b. has been adopted in all states. c. is legislative law. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Names and Roles: Agency Terminology KEYWORDS: Bloom's: Knowledge 60. Express authority: a. must be in writing. b. can limit the agent's authority. c. includes customary authority. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Liability of Principals for Agents' Conduct: The Relationship With Third Parties KEYWORDS: Bloom's: Knowledge 61. An employment-at-will relationship is: a. one in which there is a definite ending date. b. rare in the employment market. c. now illegal. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Termination of Agents Under Employment at Will KEYWORDS: Bloom's: Comprehension 62. A personnel manual:

a. can constitute a contract in an employment-at-will relationship. b. can disclaim any promises made therein. c. is never a contract. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Termination of Agents Under Employment at Will KEYWORDS: Bloom's: Comprehension 63. The public policy exception to the employment-at-will doctrine protects: a. employees who are fired with cause. b. employees who engage in illegal conduct. c. whistle-blowers. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Termination of Agents Under Employment at Will KEYWORDS: Bloom's: Comprehension 64. An unincorporated association: a. has no liability for its members. b. is not a principal with capacity. c. can have agents. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Creation of the Agency Relationship KEYWORDS: Bloom's: Comprehension 65. Mary Scoot was hired to manage the Cactus Cart, a tiny kiosk located in Sky Harbor Airport in Phoenix. No specific duties were listed, but the business owner who hired Mary told her, "Just sell the plants and deposit the money." Mary would have the implied authority to: a. take checks as payment. b. change the business name. c. sell the kiosk. d. all of the above ANSWER: a

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Creation of the Agency Relationship KEYWORDS: Bloom's: Application 66. Under apparent authority: a. a principal is never liable for the acts of an agent. b. a principal is liable for creating the appearance of an agency relationship. c. there is no agency relationship. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Creation of the Agency Relationship KEYWORDS: Bloom's: Application 67. Which is a requirement for establishing apparent authority? a. underlying express authority b. an agency agreement c. both a and b d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Creation of the Agency Relationship KEYWORDS: Bloom's: Knowledge 68. If the act of an agent is ratified: a. there is retroactive authority for the act. b. the principal has agreed to allow the agent to be liable. c. the agent then has express authority for that act in the future. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Creation of the Agency Relationship KEYWORDS: Bloom's: Knowledge

69. In a master-servant relationship, the principal most likely will need to do which of the following? a. Withhold income taxes for the agent b. Pay FICA for the agent c. Pay FUTA for the agent d. All of these ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Names and Roles: Agency Terminology KEYWORDS: Bloom's: Application 70. Principals are liable for the acts of independent contractors if: a. the acts are inherently dangerous activities. b. the independent contractor was negligently hired. c. both a and b d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Liability of Principals for Agents' Conduct: The Relationship With Third Parties KEYWORDS: Bloom's: Knowledge 71. A fiduciary is required to: a. act in the best interests of the principal. b. eliminate all risk for the principal. c. hire a trustee to supervise the funds involved that belong to the principal. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Principal-Agent Relationship KEYWORDS: Bloom's: Comprehension 72. The purpose of anti-retaliation statutes is to protect: a. employers from whistle-blowing employees. b. government agencies from suit in the event a private employer is investigated because of an employee's claim. c. whistle-blowing employees. d. none of the above ANSWER: c POINTS: 1

DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Termination of Agents Under Employment at Will KEYWORDS: Bloom's: Comprehension 73. In which of the following situations is an agent liable to third parties? a. in a situation where there is a fully disclosed principal but only apparent authority b. in a situation where there is a fully disclosed principal but only implied authority c. in a situation where the principal is an unincorporated association d. all of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Creation of the Agency Relationship KEYWORDS: Bloom's: Comprehension 74. Jane and Joseph Sechrist signed a contract to have a swimming pool built in their backyard for $10,000. The salesman for the pool company signed the contract as well on a space marked "Salesperson." Two days after the contract was signed, the salesman called the Sechrists back and asked them to come in and sign a new contract for $11,000 because the vice president had not approved the original price. Jane has checked the contract and discovered that there is no language that requires the approval of anyone other than the salesperson. Jane and Joseph can have their pool built for $10,000 because: a. the pool company was bound once Jane and Joe signed the contract. b. the pool company has ratified the contract. c. of misrepresentation. d. the salesman had at least apparent authority to bind the pool company.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Creation of the Agency Relationship KEYWORDS: Bloom's: Application 75. Gilda Steinforth is a partner in the law firm of Jones, Deloitte & Ernst. A wealthy couple has met with her and asked her to draw up a trust for a portion of their property. They gave Steinforth a check for $10,000 as a retainer fee and a check for $500,000 to begin the trust. Within two days after her meeting with the couple, Gilda and the checks are gone.

The couple wishes to recover from Jones, Deloitte & Ernst. Which of the following statements is true? a. The couple may not recover since Jones, Deloitte & Ernst is not responsible for the intentional torts of its employees. b. The couple may not recover since Steinforth, as a lawyer, was an independent contractor and not a servant of the firm. c. The couple may not recover since Steinforth had no express or implied authority to receive the checks. d. none of the above ANSWER: d

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Liability of Principals for Agents' Conduct: The Relationship With Third Parties KEYWORDS: Bloom's: Application 76. Haskins is an officer of a real estate development firm. Haskins purchased a piece of property in a rural area of Arizona with the idea of building resort homes there. The firm has always had board resolutions for purchases of property (as is common practice) but there was no resolution for this property purchase. The other officers in the firm have learned of the value of the property and are concerned that the firm may not own the property. Which of the following statements is true? a. The firm can ratify Haskin's actions and take over the contract. b. The firm cannot ratify the contract unless Haskins had express authority to buy land. c. If the firm ratifies the contract, the effect is that Haskins is released from liability on it. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Creation of the Agency Relationship KEYWORDS: Bloom's: Application 77. In which of the following situations does the agent have no liability to third parties? a. contract entered into with express authority and a fully disclosed principal b. contract entered into with no authority but later ratified in full by the principal c. contract entered into for a corporation before the corporation was formed but with full knowledge and support of the incorporators d. The agent has no liability in any of the above.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Liability of Principals for Agents' Conduct: The Relationship With Third Parties KEYWORDS: Bloom's: Comprehension 78. Russ Belmont is a staff accountant at a bank in the downtown Phoenix area. Belmont commutes to the bank each day from his suburban home in Mesa - a distance of 19 miles each way. Belmont's working hours are 8:00 AM to 5:00 PM and he commutes from 7:15 AM until he reaches the bank's parking garage between 7:45 and 8:00 (depending upon the traffic). If Russ is in an accident while on the freeway at 7:30 AM: a. the bank will be liable for any injuries to third parties. b. the bank will not be liable for any injuries to third parties. c. Belmont is an independent contractor and the bank will have no liability for injuries or damages in the accident. d. none of the above

ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Liability of Principals for Agents' Conduct: The Relationship With Third Parties KEYWORDS: Bloom's: Application 79. Russ Belmont is a staff accountant at a bank in the downtown Phoenix area. Belmont is sent to various branches throughout the state to do audits and has an accident while en route to one of the audits. Which of the following statements is true? a. The bank will be liable for any injuries to third parties. b. The bank will not be liable for any injuries to third parties. c. Belmont is a professional and an independent contractor and the bank will not be liable. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Liability of Principals for Agents' Conduct: The Relationship With Third Parties KEYWORDS: Bloom's: Application 80. Which of the following is necessary to create an agency relationship? a. consideration b. an agent with contractual capacity c. a ratification by the principal d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Creation of the Agency Relationship KEYWORDS: Bloom's: Knowledge 81. Firing an agent terminates: a. express authority. b. implied authority. c. apparent authority. d. a and b only e. a, b, and c ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal Termination of the Agency Relationship Bloom's: Comprehension

82. Lingering apparent authority results from: a. the failure to give notice of termination. b. ratification. c. the lack of capacity on the part of the principal. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Termination of the Agency Relationship KEYWORDS: Bloom's: Comprehension 83. Joe Helquist and Samantha Gillis were partners in the operation of an office supply business for 32 years. Joe had always handled suppliers and Samantha was responsible for running the store and managing employees. Joe decided to retire and Samantha gave him a fine retirement dinner. Joe had some financial setbacks shortly after retirement when his wife became ill and two of his children decided to go on for their masters' degrees. Joe began ordering supplies from the usual suppliers since they were not aware of his retirement. Joe would intercept the supplies at the loading dock and then sell them on his own. Samantha soon caught the discrepancy in the bills and her inventory and refused to pay the suppliers when she learned of Joe's scheme. Which of the following statements is correct? a. Samantha is not liable to the suppliers since Joe's authority terminated. b. Samantha is not liable to the suppliers because Joe's acts constituted fraud. c. Samantha is liable to the suppliers. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Termination of the Agency Relationship KEYWORDS: Bloom's: Application 84. An agent for which of these would have authority to act? a. An unincorporated company b. A minor c. An incompetent person d. None of these ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Creation of the Agency Relationship

KEYWORDS:

Bloom's: Application

85. Which of these ends apparent authority? a. Departure of the agent b. Retirement of the agent c. Termination of the agent d. None of these ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Termination of the Agency Relationship KEYWORDS: Bloom's: Knowledge 86. The breach of the fiduciary duty by an agent: a. results in termination of the agent. b. terminates the agent's apparent authority. c. does not terminate an agent's implied authority. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Principal-Agent Relationship KEYWORDS: Bloom's: Knowledge 87. Alan Freeman and Bill Freeman, brothers, operated a residential construction firm. There were three divisions of the firm: single-family homes, townhomes, and custom homes. Alan did not enjoy the demands of custom home buyers and Bill did not enjoy the cookie-cutter work of the other divisions. The brothers agreed to split the business with Bill assuming the responsibilities and contracts of the custom home division and Alan handling the remaining divisions. Alan told Bill he could continue to use the company offices until he was able to find offices of his own. Bill met his clients at the company offices, used the plans of the company and even continued to use the company stationery. Three months later Bill left town, leaving custom homes unfinished and taking the deposits of three customers with him. The customers have sued Alan. Which of the following statements is true? a. Alan is not liable since the relationship had been terminated. b. Alan is liable because of apparent authority. c. Bill is not liable because he was Alan's agent. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Liability of Principals for Agents' Conduct: The Relationship With Third Parties KEYWORDS: Bloom's: Application

88. In an undisclosed principal situation in which the agent does not have the authority to enter into a contract for real property and does so: a. only the principal is liable on the contract. b. the third party can elect to hold the principal or agent liable. c. only the agent is liable on the contract. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Liability of Principals for Agents' Conduct: The Relationship With Third Parties KEYWORDS: Bloom's: Comprehension 89. To bind the third party, restrictions on an agent's authority must be: a. known to the third party. b. in contract form between the agent and principal. c. in writing. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Liability of Principals for Agents' Conduct: The Relationship With Third Parties KEYWORDS: Bloom's: Comprehension 90. A pizza deliverer who is in an accident while en route to deliver a pizza for a restaurant has: a. no liability for the accident. b. the only liability for the accident if he was driving his own car. c. liability along with the restaurant for the accident. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Liability of Principals for Agents' Conduct: The Relationship With Third Parties KEYWORDS: Bloom's: Application 91. Which of the following functions would be implied authority for an apartment manager? a. selling the apartment complex b. selling the apartments' appliances c. collecting rent from the tenants d. All of the above would be included in implied authority.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Creation of the Agency Relationship KEYWORDS: Bloom's: Application 92. Which of the following is not a factor in determining whether an agent is a servant or independent contractor? a. level of supervision b. whether the agent has his or her own office c. whether the agent has a college degree d. whether the agent has more than one client e. All of the above are not factors.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Names and Roles: Agency Terminology KEYWORDS: Bloom's: Comprehension 93. What is the general rule with regard to employer liability for employee accidents occurring while the employee is on the way to work? a. The employer is generally not liable. b. The employer is liable unless it furnishes transportation for employees. c. The employer is liable if the employee is reporting to work early. d. both b and c e. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Liability of Principals for Agents' Conduct: The Relationship With Third Parties KEYWORDS: Bloom's: Application 94. Jan hires Duncan to act as her agent in acquiring some property for the development of a new subdivision she is planning that will be an elegant planned community. Jan instructs Duncan that he is not to say he is working for her or, for that matter, that he is working for anyone. If Duncan enters into a contract for land for Jan that is the parcel she wanted: a. Duncan only is liable on the contract for the purchase of the land. b. Jan can never be held liable for the land because Duncan acted in his name. c. both Jan and Duncan are liable on the contract for the purchase of land. d. it is fraud to conceal the identity of a party to a contract. e. none of the above ANSWER: c

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Liability of Principals for Agents' Conduct: The Relationship With Third Parties KEYWORDS: Bloom's: Application 95. Which of the following is not an independent contractor relationship? a. one between a corporation and its outside legal counsel b. one between a corporation and its vice president/general counsel c. one between a lawn service company and a homeowner d. All of the above are independent contractor relationships.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Names and Roles: Agency Terminology KEYWORDS: Bloom's: Application 96. In a partially disclosed principal relationship, who is liable to the third party on a contract within the agent’s authority? a. principal b. agent c. both a and b d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Liability of Principals for Agents' Conduct: The Relationship With Third Parties KEYWORDS: Bloom's: Comprehension 97. In a partially disclosed principal relationship, who is liable to the third party on a contract outside the agent’s authority? a. principal b. agent c. both a and b d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Liability of Principals for Agents' Conduct: The Relationship With Third Parties KEYWORDS: Bloom's: Comprehension

98. Which of the following terminates apparent authority? a. firing an employee b. an employee quitting c. an employee retiring d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Termination of the Agency Relationship KEYWORDS: Bloom's: Knowledge 99. Which of the following types of agency relationships would have to be evidenced by a record to be valid? a. A power of attorney to close on a land transaction. b. A power of attorney to close on the sale of a golf cart for $4,000. c. A power of attorney to sign a six-month lease. d. All of the above must be evidenced by a record for the agent to have authority.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Creation of the Agency Relationship KEYWORDS: Bloom's: Knowledge 100. Ellen Fishman was hired by Attics, Inc., a company that does attic refurbishments and redesigns, to evaluate attics, provide homeowners with estimates, and, hopefully, sign them up with contracts for their attics. Ellen provided an estimate of $11,000 to the Kornbluths for a redesign of their attic. Because she was new at the job, Ellen forgot the demolition costs in the estimate. However, the Kornbluths signed a contract Ellen presented and put down a 10% deposit of $1,100. Attics, Inc.’s president has refused to do the attic for anything less than $15,000, what the estimate should have been. The Kornbluths have no experience with remodeling and had only one other estimate for the refurbishment, which was $12,500. a. Attics, Inc. need not perform the refurbishment because Ellen did not have authority for the bid or contract. b. Attics, Inc. must perform the refurbishment for $11,000 because Ellen had authority to enter into the contract. c. Attics, Inc. need not perform the contract for $11,000 because Ellen made a mistake. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: The Principal-Agent Relationship KEYWORDS: Bloom's: Application 101. Ellen Fishman was hired by Attics, Inc., a company that does attic refurbishments and redesigns, to evaluate

attics,provide homeowners with estimates, and, hopefully, sign them up with contracts for their attics. Ellen provided an estimate of $11,000 to the Kornbluths for a redesign of their attic. Because she was new at the job, Ellen forgot the demolition costs in the estimate. However, the Kornbluths signed a contract Ellen presented and put down a 10% deposit of $1100. Attics, Inc.’s president has refused to do the attic for anything less than $15,000, what the estimate should have been. The Kornbluths have no experience with remodeling and had only one other estimate for the refurbishment, which was $12,500. Attics, Inc. terminated Ellen. However, Ellen still had all the materials, books, contract forms, and her card from Attics, Inc. Ellen went out and got three homeowners to sign contracts for refurbishments for prices ranging from $15,000 to $22,000. Attics, Inc.: a. need not perform any of the contracts because Ellen lacked authority. b. need not perform any of the contracts because the termination ended all of Ellen’s authority. c. must perform on the contracts because Ellen had lingering apparent authority. d. both a and b ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Termination of the Agency Relationship KEYWORDS: Bloom's: Application 102. Ellen Fishman was hired by Attics, Inc., a company that does attic refurbishments and redesigns, to evaluate attics,provide homeowners with estimates, and, hopefully, sign them up with contracts for their attics. Ellen provided an estimate of $11,000 to the Kornbluths for a redesign of their attic. Because she was new at the job, Ellen forgot the demolition costs in the estimate. However, the Kornbluths signed a contract Ellen presented and put down a 10% deposit of $1100. Attics, Inc.’s president has refused to do the attic for anything less than $15,000, what the estimate should have been. The Kornbluths have no experience with remodeling and had only one other estimate for the refurbishment, which was $12,500. Attics, Inc. terminated Ellen. However, Ellen still had all the materials, books, contract forms, and her card from Attics, Inc. Ellen went out and got three homeowners to sign contracts for refurbishments for prices ranging from $15,000 to $22,000. If Attics, Inc. performed the contracts Ellen negotiated, it would: a. need to take steps to terminate Ellen’s implied authority. b. need to take steps to terminate Ellen’s apparent authority. c. need not take any further steps because Ellen’s authority was terminated and it was just ratifying the contracts. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Termination of the Agency Relationship KEYWORDS: Bloom's: Application 103. What is another term for an agency by estoppel? a. implied agency authority b. apparent agency authority c. authority by custom d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Easy

NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Creation of the Agency Relationship KEYWORDS: Bloom's: Knowledge 104. Brian Weyland was an agent for Clothes Horse, Inc., a clothing manufacturer. Weyland’s job was to find new designs and bring them to Clothes Horse for production. Weyland found a new style in women’s tops that he felt would be a top seller. Weyland obtained licenses from the designer and began producing the tops through a company of his own, Wey-Out Designs. Weyland: a. is free to compete because he was an independent contractor. b. has breached his duty of loyalty to Clothes Horse. c. has done nothing wrong as long as he obtained the proper licenses. d. both a and c ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: The Principal-Agent Relationship KEYWORDS: Bloom's: Application 105. James Schoenberger interviewed for a position with the Chicago Transit Authority (CTA). He talked with the person who would ultimately be his supervisor, Zu Christian, and was offered a salary of $19,300. Under CTA procedures, only the Placement Department could give final salary figures. When Placement's figure for Schoenberger was computed, it was lower, and Schoenberger sued for the higher figure. CTA claimed Zu Christian had no authority to offer a particular salary. Discuss the legal issues in the case from both CTA's and Schoenberger's perspectives.

ANSWER: In Schoenberger v. CTA, 405 N.E.2d 1076 (Ill 1980), the court held that there was no apparent authority for Zu Christian because Schoenberger had worked through Placement and had seen the centralized hiring procedures and that Zu Christian did not make the offer.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Liability of Principals for Agents' Conduct: The Relationship With Third Parties KEYWORDS: Bloom's: Application 106. Appendagez, Inc. is a Massachusetts corporation that manufactures jeans, tops, and sweaters under a line called faded glory. Mr. Segal had been one of their salespeople. During a trade show, he signed orders with several stores, but Appendagez did not ship because Segal was not their agent. Segal did, however, still have his display samples and order forms. Is Appendagez required to fill the orders?

ANSWER: Yes. Lingering apparent authority existed because Segal still had orders and samples. Carl Wagner and Sons v. Appendagez, Inc., 485 F.Supp. 762 (NY 1980).

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Termination of the Agency Relationship KEYWORDS: Bloom's: Application

107. Novosel was an employee of Nationwide Insurance and had refused to engage in political lobbying efforts for Nationwide. Novosel was terminated. Discuss Novosel's rights.

ANSWER: He was probably an employee-at-will but the public policy exception would protect him against termination since he was exercising a First Amendment right.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Termination of Agents Under Employment at Will KEYWORDS: Bloom's: Application 108. Discuss the requirements for ending an agency relationship.

ANSWER: Notify (public and private) of termination to stop apparent authority.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Termination of the Agency Relationship KEYWORDS: Bloom's: Knowledge 109. What is the difference between implied authority and apparent authority?

ANSWER: Implied - extension of express; whatever is customary. Apparent - principal creates this by action in the eyes of third parties.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Creation of the Agency Relationship KEYWORDS: Bloom's: Comprehension 110. Berth Ness signed a promissory note for the purchase of real estate in Arizona. Only his name appeared on the note.

Berth had acted as an agent for several corporations and Louise Ness in the past. Upon default, the payee of the note brought suit to collect from the corporations and Louise. They claim Berth was not acting as their agent in the transaction and they are, therefore, not liable. Who is correct?

ANSWER: Students should discuss the issues of actual and apparent authority. Did the payee know of any constraints on Ness? Would they assume Ness was acting for them? Ness v. Greater Arizona Realty, Inc., 517 P.2d 1278 (Az. 1974).

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Creation of the Agency Relationship KEYWORDS: Bloom's: Application 111. Discuss the basic requirements for a non-compete agreement.

ANSWER: To be valid, the non-compete agreement must be the following: 1) balance the need for protection between the employer and employee; 2) the covenant must be reasonable in

geographic scope and time; and 3) the agreement must be validly formed under the applicable law. Students may also mention that in states where these agreements are unenforceable, employers may still try to enforce the concept of non-compete agreements through a tort action.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Principal-Agent Relationship KEYWORDS: Bloom's: Comprehension 112. Discuss why the peer review procedure is successful in some companies.

ANSWER: By utilizing three (or more) employees (managers and fellow employees), an employee may feel his or her complaint has been heard with less bias, and since there is potential for more widespread knowledge of decisions, the decisions by supervisors may be more thoughtful and consistent at the company.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Termination of Agents Under Employment at Will KEYWORDS: Bloom's: Knowledge 113. As you contemplate the purchase of a computer that has been a store demonstrator, the manager of the store says, "Look, take it. If it turns out to have problems, I'll take it back." Would the store manager have the authority to make this promise?

ANSWER: The manager had at least apparent authority to make such a promise if not implied by business custom with respect to the scope of store manager's authority. The manager may have even had express authority. The customer will be protected in these circumstances.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Creation of the Agency Relationship KEYWORDS: Bloom's: Application 114. Elizabeth Drake worked as a nanny for Kimba and Zeus Baird and cared for their 3 children each day from 8 AM until 5:30 PM. At 10:00 AM each day, Elizabeth drove the Bairds' 3-year-old daughter to pre-school. On the way to the pre-school last Tuesday, Elizabeth failed to stop at a stop sign and struck a UPS truck. Could UPS make a claim against the Bairds?

ANSWER: Yes, Elizabeth is in a master-servant relationship and the Bairds are liable for her negligence in the scope of employment POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Liability of Principals for Agents' Conduct: The Relationship With Third Parties KEYWORDS: Bloom's: Application

115. Hayley Franken works at Big Burger after school and on weekends. With her heavy course load, her job and being on the basketball team, Hayley finds that she is simply worn out most of the time. She has said to her manager at work, " Sometimes I am not even sure how I drive myself home because I want to sleep so much." Hayley worked a double shift at Big Burger and did not leave until 2 AM, 4 hours beyond her usual quitting time. On the way home, she apparently dozed off and struck another car head-on and was killed. Her parents are suing Big Burger for wrongful death. Discuss the liability issues.

ANSWER: Traditionally, employers are not liable for accidents caused by employees on their way to and from work and so Big Burger is not liable. However, there have been some newer cases, as the McDonald's case in the book illustrates, to hold employers liable when they are aware that employees are tired and need help getting home.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Liability of Principals for Agents' Conduct: The Relationship With Third Parties KEYWORDS: Bloom's: Application 116. Discuss the theories for employer liability on accidents caused by employees falling asleep when returning home from work.

ANSWER: The theory is a type of supervision theory in that employers have overscheduled employees, mandating hours and work without taking into account the impact on their physical constraints.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Liability of Principals for Agents' Conduct: The Relationship With Third Parties KEYWORDS: Bloom's: Comprehension 117. Aaron Smith, a junior at Yale, was a counselor at Camp Winipesaukee for the summer of 2007. Several of the children, ages 8-12 reported to their parents that they had been physically assaulted by Aaron while they were at camp.

The children had signs of bruising and other injuries. The parents brought suit against Camp W, the corporation that operated the camp for their children’s injuries. Camp W says that it is not liable because (a) it had no knowledge of the assaults; (b) Aaron had not injured anyone in the past; and (c) what Aaron did was not within his scope of employment as a camp counselor. Discuss the liability and defense issues in the case.

ANSWER: Students should discuss the difference between torts in the scope of employment and intentional torts. Ordinarily, employers are not responsible for the intentional torts, criminal acts of employees unless: 1. The employer had knowledge.

2. The employer did not adequately address the background check of the individual.

Here there is no indication that Aaron had a problem. However, the likely sensitive nature of the job as well as the fact that it happened to more than one child will find Camp W liable for its lack of supervision.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Liability of Principals for Agents' Conduct: The Relationship With Third Parties KEYWORDS: Bloom's: Application 118. Zaney, Inc. operated Zaney’s Bar and Grill. An officer of the corporation instructed the bartender at Zaney’s to

“maintain order” at the bar. The bartender pulled out a gun and shot a patron because he was making advances to the girl sitting next to him. Which of the following is correct? a. Zaney’s Inc. is liable to the patron for the injuries caused by the bartender. b. Zaney’s is not a principal because it is a corporation. c. The bartender is not liable for the injuries to the patron because he was working for someone else at the time. d. Zaney’s is not liable for the injuries sustained by the patron.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Liability of Principals for Agents' Conduct: The Relationship With Third Parties KEYWORDS: Bloom's: Analysis 119. Rami Essaid worked for a large computer security firm. As part of his employment agreement, he had been told about and initialed on his contract a noncompete clause that prevented him from starting his own firm or working for a competitor in the area of computer security for six months following his termination of employment, for whatever reason.

Rami quit his job and started his own firm that specializes in protecting websites from automated computer programs, the same type of work that he was doing for his former employer. His former employer has brought suit to stop Rami from operating his company for six months. Which of the following statements is correct? a. The noncompete clause is unenforceable because it inhibits his ability to earn a living. b. The noncompete clause is unenforceable because it runs for too long a time period. c. The noncompete clause is unenforceable because noncompete clauses are void. d. The noncompete clause is enforceable.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: The Principal-Agent Relationship KEYWORDS: Bloom's: Analysis 120. The IRS is conducting an investigation of the construction industry because contractors routinely classify carpenters, dry-wallers, and plumbers who work on all of their projects as independent contractors. These craftsmen report for work on different jobs, but all of the jobs are managed by the same contracting firm. Which of the following will be most important in determining whether the craftsmen are employees rather than independent contractors? a. That they bring their own tools. b. That they determine which jobs they will work on and which they will not. c. That they are told to report for work on which days and at what time. d. That they work for other contractors.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Names and Roles: Agency Terminology KEYWORDS: Bloom's: Analysis

121. Jay Housel, an employee at Raytheon Aircraft Services, was injured when his supervisor blasted compressed air into his backside while he was bending over his toolbox at the plant. Which of the following is correct about Raytheon’s liability in this case? a. Raytheon is not responsible for these kinds of intentional acts outside the scope of employment or that involve misuse of company tools. b. Raytheon could be responsible if it had knowledge of the supervisor’s prior misconduct. c. Raytheon is liable for all injuries that occur in the workplace. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Liability of Principals for Agents' Conduct: The Relationship With Third Parties KEYWORDS: Bloom's: Analysis 122. Kay of Kay’s Realty was representing Tom Tutone, a well known singer and songwriter, in his purchase of a home in Jackson Hole. She was to act as the buyer and then subsequently sign the property back over to Tom. The seller of the home was not to be told that anyone but Kay would hold title to the property. Which of the following statements is correct? a. The transaction is illegal because of misrepresentation because information has been withheld from the seller. b. The transaction involves an undisclosed principal. c. The transaction involves a partially disclosed principal. d. Tom is not liable on the purchase agreements for any homes.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Liability of Principals for Agents' Conduct: The Relationship With Third Parties KEYWORDS: Bloom's: Analysis

1. There are no formal requirements for forming a sole proprietorship. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sole Proprietorships KEYWORDS: Bloom's: Knowledge 2. The sole proprietor's personal assets are subject to business creditor attachment. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sole Proprietorships KEYWORDS: Bloom's: Knowledge 3. The income of the sole proprietor's business is reported as a separate entity's income. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sole Proprietorships KEYWORDS: Bloom's: Knowledge 4. Partners by implication cannot share profits. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Partnerships KEYWORDS: Bloom's: Comprehension 5. A partnership can only be formed voluntarily. a. True

b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Partnerships KEYWORDS: Bloom's: Comprehension 6. Sharing of profits is prima facie evidence that a partnership exists. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Partnerships KEYWORDS: Bloom's: Comprehension 7. A partnership by estoppel arises when actions lead a third party to believe a partnership exists. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Partnerships KEYWORDS: Bloom's: Comprehension 8. The sale of the goodwill of a partnership requires unanimous consent. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Partnerships KEYWORDS: Bloom's: Comprehension 9. Partners' personal assets can be reached by partnership creditors. a. True b. False ANSWER: True

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Partnerships KEYWORDS: Bloom's: Comprehension 10. Partners are mutual principals and agents. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Partnerships KEYWORDS: Bloom's: Comprehension 11. Partners are not liable for each others' torts committed in the scope of business. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Partnerships KEYWORDS: Bloom's: Comprehension 12. A tenancy in partnership does not carry rights of survivorship. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Partnerships KEYWORDS: Bloom's: Comprehension 13. A partner's interest in a partnership is not transferable. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Partnerships KEYWORDS: Bloom's: Comprehension 14. A partnership must file a separate tax return and pay taxes on its income. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Partnerships KEYWORDS: Bloom's: Comprehension 15. Dissolution of a partnership is termination of a partnership. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Partnerships KEYWORDS: Bloom's: Comprehension 16. In a limited partnership, there must be a least one general partner. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Limited Partnerships KEYWORDS: Bloom's: Knowledge 17. Limited partners have liability limited to the amount of their contribution to the partnership. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal

TOPICS: KEYWORDS:

Limited Partnerships Bloom's: Comprehension

18. Only the general partner in a limited partnership has personal liability. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Limited Partnerships KEYWORDS: Bloom's: Comprehension 19. Limited partners can take a management role and remain limited partners. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Limited Partnerships KEYWORDS: Bloom's: Comprehension 20. A limited partnership can exist by implication. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Limited Partnerships KEYWORDS: Bloom's: Comprehension 21. Limited partnerships are taxed the same way as general partnerships. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Limited Partnerships KEYWORDS: Bloom's: Comprehension

22. A corporation is only a domestic corporation in its state of incorporation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 23. Oil company executives are the highest paid CEOs annually. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 24. The articles of incorporation must include the capital stock structure of the corporation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 25. The statutory agent is the party who will be served with lawsuits against the corporation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 26. An S corporation is created as an LLC.

a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 27. Incorporators are not liable for contracts entered into before incorporation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 28. Novation and ratification have the same effect on promoters' pre-incorporation contracts. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 29. Bylaws provide the requirements for meetings and voting. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 30. The corporate veil can be pierced for inadequate capitalization. a. True b. False

ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 31. Watered shares are shares for which the purchaser did pay more than par but less than full market value. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Comprehension 32. Directors are personally liable for errors in business judgment. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Comprehension 33. The corporate opportunity doctrine requires directors to first present related business opportunities to the corporation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Comprehension 34. Boards cannot rely on outside experts in decision making. a. True b. False ANSWER: False POINTS: 1

DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Comprehension 35. In 2012, the highest paid CEO was paid slightly more than $96 million in compensation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 36. Any shareholder can demand access to the corporate books and records. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 37. A proxy is valid only for 11 months. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 38. A copy of the voting trust must be on file in the corporate records. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal Corporations Bloom's: Knowledge

39. Stock transfer restrictions are void. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 40. Partners are only jointly liable for torts of other partners committed in the scope of the partnership business. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Partnerships KEYWORDS: Bloom's: Comprehension 41. Limited partners who act as guarantors for partnership notes lose their limited partner status. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Limited Partnerships KEYWORDS: Bloom's: Knowledge 42. A merger requires a board resolution and shareholder approval. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations

KEYWORDS:

Bloom's: Knowledge

43. Appraisal rights are given only to dissenting shareholders. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 44. Limited partners can consult and advise with the general partner and still retain limited liability. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Limited Partnerships KEYWORDS: Bloom's: Knowledge 45. Limited partners' profits and losses are allocated equally. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Limited Partnerships KEYWORDS: Bloom's: Knowledge 46. An assignment of a limited partner's interest terminates the limited partnership. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Limited Partnerships KEYWORDS: Bloom's: Knowledge

47. Upon termination of both limited and general partnerships, outside creditors have first priority in terms of asset distribution. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Partnerships Limited Partnerships KEYWORDS: Bloom's: Knowledge 48. Close corporations have less formality in their operational requirements. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 49. Subchapter S or S Corporation shareholders have personal liability for corporate debts. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 50. An inadequately capitalized corporation can have its corporate veil pierced. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge

51. It is fraud to form a corporation to avoid personal liability. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 52. Members of limited liability companies have no right to vote on who should manage their companies. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Limited Liability Companies KEYWORDS: Bloom's: Knowledge 53. Owners of limited liability companies enjoy flow-through treatment of income and losses. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Limited Liability Companies KEYWORDS: Bloom's: Knowledge 54. Limited liability companies are peculiar to the United States. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Limited Liability Companies KEYWORDS: Bloom's: Knowledge 55. New members are admitted to an LLC only with approval by a majority of existing members. a. True

b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Limited Liability Companies KEYWORDS: Bloom's: Knowledge 56. A limited liability company can be created informally. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Limited Liability Companies KEYWORDS: Bloom's: Knowledge 57. “Say on pay” gets its name from stakeholders getting to vote on executive compensation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 58. A LLP can be created by implication. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Limited Liability Partnerships KEYWORDS: Bloom's: Knowledge 59. All owners in an LLP have limited liability. a. True b. False ANSWER: True

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Limited Liability Partnerships KEYWORDS: Bloom's: Knowledge 60. A limited liability company can be created informally. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Limited Liability Companies KEYWORDS: Bloom's: Knowledge 61. Limited liability companies, limited liability partnerships, limited partnerships, general partnerships, sole proprietorships and S corporations all have flow-through income and loss provisions for tax purposes. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sole Proprietorships Partnerships Limited Partnerships Corporations Limited Liability Companies Limited Liability Partnerships KEYWORDS: Bloom's: Application 62. Limited partnership interests are generally not transferable. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Limited Partnerships KEYWORDS: Bloom's: Knowledge 63. The corporate veil liability theory has been applied in situations that involve environmental clean-up issues.

a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 64. Parent corporations can never be held liable for the environmental clean-up costs of subsidiaries. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 65. Corporations pay double taxes, on income and shareholders on dividends. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 66. Shareholders generally elect the officers of the corporation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 67. Pooling agreements are the same as voting trusts. a. True b. False

ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 68. LLCs have existed in Europe and South America prior to their existence in the U.S. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Limited Liability Companies KEYWORDS: Bloom's: Knowledge 69. Under Sarbanes-Oxley, loans to corporate officers are prohibited. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 70. Under Sarbanes-Oxley, codes of ethics must cover financial reporting standards. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 71. Lawyers for corporations are not required to reveal investigations of misconduct in the corporation to the CEO. a. True b. False ANSWER: False POINTS: 1

DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 72. Lawyers for corporations are required to report misconduct by the corporation to the SEC after they have exhausted all means for an internal correction. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 73. Under Sarbanes-Oxley, the majority of members of the audit committee must be independent directors. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 74. Close corporations are generally publicly traded. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 75. Piercing the corporate veil has been used for purposes of imposing CERCLA liability. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 76. AIG was not involved in the subprime mortgage debacle. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 77. If members of a limited liability company exercise management authority, they lose their limited liability. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Limited Liability Companies KEYWORDS: Bloom's: Knowledge 78. Under Sarbanes-Oxley, current employees are not considered independent for purposes of board structure. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 79. Which of the following is true of a sole proprietorship? a. A separate tax return must be filed. b. It is not a business entity. c. There is no personal liability for the owner. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sole Proprietorships KEYWORDS: Bloom's: Knowledge 80. Which of the following is not a method for forming a partnership? a. by agreement b. by estoppel c. by implication d. by transfer ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Partnerships KEYWORDS: Bloom's: Knowledge 81. Evidence of sharing profits is prima facie evidence of partnership existence unless the profits are: a. wages or rent. b. not shared equally. c. income. d. all of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Partnerships KEYWORDS: Bloom's: Knowledge 82. A partnership by estoppel: a. is the same as a partnership by implication. b. results when third parties are led to believe a partnership exists. c. is the same as a joint venture. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Partnerships KEYWORDS: Bloom's: Knowledge 83. Partners' personal assets: a. cannot be reached by partnership creditors.

b. cannot be reached by partnership creditors unless partnership assets are exhausted. c. can only be reached by personal creditors. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Partnerships KEYWORDS: Bloom's: Knowledge 84. In 2012, the CEO with the highest compensation was: a. Lawrence Ellison b. Mark Hurd c. John Donahoe d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 85. Unanimous consent of the partners is required for: a. confession of a judgment. b. borrowing money in a trading partnership. c. signing checks. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Partnerships KEYWORDS: Bloom's: Knowledge 86. Partnership property: a. is always personal property. b. is owned by the partners as tenants in partnership. c. can be pledged to a partner's personal creditor. d. all of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal Partnerships Bloom's: Knowledge

87. A, B, and C are partners in a real estate firm. B has just died. B's widow: a. owns one-third of all the partnership land. b. is a tenant in partnership with A and C. c. can force the sale of the partnership property. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Partnerships KEYWORDS: Bloom's: Application 88. A partner's interest: a. is the same as the partnership property. b. cannot be attached by creditors. c. cannot be transferred. d. none of the above.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Partnerships KEYWORDS: Bloom's: Knowledge 89. Transfer of a partner's interest: a. is void. b. results in dissolution of the partnership. c. relieves the partner of liability. d. makes the transferee a partner. e. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Partnerships KEYWORDS: Bloom's: Knowledge 90. For income tax purposes, a partnership: a. files a return and pays taxes.

b. is an entity. c. has no taxes. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Partnerships KEYWORDS: Bloom's: Knowledge 91. Dissolution: a. is the same as termination. b. can result from a limited partner leaving the partnership. c. can result from the death of a partner. d. all of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Partnerships KEYWORDS: Bloom's: Knowledge 92. A limited partnership: a. requires at least one general partner. b. can be created by implication. c. must be run by the limited partners. d. all of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Limited Partnerships KEYWORDS: Bloom's: Knowledge 93. Which of the following is not required for the certificate of limited partnership (under RULPA)? a. names of the limited partners b. capital contributions of the partners c. the profit-sharing arrangement d. None of the above are required.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal Limited Partnerships Bloom's: Knowledge

94. Limited partners have liability: a. for the full amount of partnership debts. b. only for the amount of their contribution. c. for the negligent acts of the general partner. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Limited Partnerships KEYWORDS: Bloom's: Knowledge 95. Limited partners: a. can use their name in the partnership name. b. can contribute management services to the partnership. c. cannot advise the general partner. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Limited Partnerships KEYWORDS: Bloom's: Application 96. The assignment of limited partnership interests: a. is prohibited by the ULPA. b. may be a sale of securities subject to federal regulation. c. is liberally permitted under the Internal Revenue Code. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Limited Partnerships KEYWORDS: Bloom's: Knowledge 97. Which is the proper order for distribution of assets upon dissolution of a limited partnership? a. outside creditors; distributions owed to partners; capital contributions; remainder split according to distribution agreement

b. outside creditors; limited partners' profits; limited partners' capital; general partners' advances; general partners' profit; general partners' capital c. limited partners' capital; outside creditors; limited partners' advances; general partners' capital and profits d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Limited Partnerships KEYWORDS: Bloom's: Knowledge 98. Which of the following is not required for the articles of incorporation? a. names of incorporators b. capital stock structure c. names of board members d. All of the above are required.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 99. In a novation by the board of a pre-incorporation contract involving the corporation, the promoter, and a third party: a. the corporation is released from liability. b. the promoter is released from liability. c. the promoter is made secondarily liable. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 100. In a ratification by the board of a pre-incorporation contract involving the corporation, the promoter, and a third party: a. the corporation is released from liability. b. the promoter is released from liability. c. the promoter is made secondarily liable. d. none of the above ANSWER: c POINTS: 1

DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 101. The corporate veil can be pierced when: a. there is only one shareholder in the corporation. b. the corporation was formed to avoid personal liability. c. the corporation has only preferred stock. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 102. Watered shares result: a. when a purchaser does not pay full market value for the shares. b. when a purchaser does pay more than par value for the shares. c. in personal liability for the shareholders. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 103. The business judgment rule holds directors liable for: a. errors in business judgment. b. their mistakes. c. failure to obtain necessary information for making decisions. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 104. A director who usurps a corporate opportunity:

a. will owe his/her corporation the profits from the opportunity. b. will not owe the profits to the corporation so long as the venture was disclosed in advance. c. has violated the business judgment rule. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 105. Which of the following shareholders would qualify for access to the corporate books and records? a. a shareholder who owns 5 percent of any class of stock b. a shareholder who owns 5 percent of all the outstanding stock of a corporation c. a shareholder who has owned stock for six months d. All of the above shareholders qualify.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Corporations KEYWORDS: Bloom's: Application 106. A shareholder proxy is: a. good until revoked. b. not subject to any securities laws. c. a transfer of a right to vote. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 107. Transfer restrictions: a. must be noted on the stock to be valid. b. are generally valid only in family-owned corporations. c. cannot be used to satisfy SEC restrictions. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 108. A corporate dissolution: a. cannot result from an agreement. b. results when a corporation does not hold an annual meeting. c. can begin with a board resolution. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 109. A Subchapter S or S Corporation is: a. a special class of close corporation under the MBCA. b. an IRS tax treatment option for corporations owned by a limited number of shareholders. c. a not-for-profit corporation. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Corporations KEYWORDS: Bloom's: Application 110. Hank Greenberg was the head of: a. the SEC. b. Citigroup. c. AIG. d. BP. ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 111. Which of the following cannot be used to pierce the corporate veil? a. inadequate capitalization

b. alter ego theory c. formation of the corporation to avoid personal liability d. All of the above theories can be used.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Application 112. Which of the following activities will cause a limited partner to lose his limited liability status? a. being employed by the general partner as an employee b. managing the firm with the general partner c. consulting with or advising the general partner d. All of the above will result in the loss of limited liability status.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Limited Partnerships KEYWORDS: Bloom's: Application 113. When shareholders get to vote on executive compensation it is referred to as what? a. Pay-to-play b. Say-on-pay c. Day-of-pay d. Play-on-payday ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Application 114. Pooling agreements are: a. illegal as against public policy. b. the same as voting trusts. c. valid if filed with the corporation's secretary. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal Corporations Bloom's: Application

115. A limited liability company: a. can be created informally. b. does not have the pass-through feature of income and losses. c. is exclusive to the United States. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Limited Liability Companies KEYWORDS: Bloom's: Knowledge 116. Owners of a limited liability company: a. have unlimited liability for contracts entered into by the LLC. b. can transfer their membership as a personal property interest. c. cannot assume any management responsibilities. d. all of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Limited Liability Companies KEYWORDS: Bloom's: Knowledge 117. Which of the following forms of business organizations does not have the pass-through feature of income and losses? a. partnership b. limited partnership c. S corporation d. corporation ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 118. A joint venture: a. is a partnership limited in scope. b. is a limited liability company.

c. must be incorporated to be recognized. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: International Issues in Business Structure KEYWORDS: Bloom's: Knowledge 119. What conduct will cost a limited partner his/her limited liability status? a. engaging in the management of the business b. allowing his/her name to be used in the business name c. failure to file the limited partnership agreement d. All of the above will result in a loss of limited liability status.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Limited Partnerships KEYWORDS: Bloom's: Application 120. A limited liability partnership (LLP): a. is a statutory creature. b. is the same as a limited partnership. c. is the same as a LLC. d. all of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Limited Liability Partnerships KEYWORDS: Bloom's: Knowledge 121. Which of the following forms of business structure provides limited liability for the personal assets of the owners? a. sole proprietorship b. general partnership c. LLC d. partnership by implication e. All of the above provide limited liability.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal Limited Liability Companies Bloom's: Knowledge

122. The directors of Kmart, Inc. voted several years ago to approve a new marketing plan that involved endorsements by Martha Stewart of Kmart home products such as linens, paint and decorations. Marketing studies have shown that Martha Stewart was not the right match for endorsements for Kmart's customer base. Kmart is now in Chapter 11 bankruptcy. Its shareholders believe the Martha Stewart decision was the cause of the company's demise. a. The shareholders have a cause of action against the directors for violation of the business judgment rule. b. The shareholders have a cause of action against the directors for violation of the corporate opportunity doctrine. c. The shareholders can have the court order the directors removed for cause. d. The directors of Kmart are protected under the business judgment rule. e. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Corporations KEYWORDS: Bloom's: Application 123. In which of the following forms of doing business does the death of one of the owners cause dissolution? a. partnership b. S Corporation c. C Corporation d. closely-held corporation e. nonprofit corporation ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Partnerships KEYWORDS: Bloom's: Knowledge 124. Which of the following is a requirement under Sarbanes-Oxley? a. The majority of the board of directors must be independent. b. No inside officers can serve on the board of directors. c. Lawyers must blow the whistle on their corporate clients engaged in fraud. d. all of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal

TOPICS: KEYWORDS:

Corporations Bloom's: Knowledge

125. A corporation is said to have double taxation. What is meant by this statement? a. The corporation pays double the tax rate of individuals. b. The corporation pays taxes on its income and its shareholders pay taxes on their dividends from the corporation. c. both a and b d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 126. Which of the following forms of business structure has the easiest means of transfer of ownership interests? a. LLCs b. LLPs c. Subchapter S corporations d. C corporations ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 127. Jim Braun has been a partner in a real estate investment partnership with Alicia Kaynes for 10 years. When the real estate market took a downward turn, one of their investments in a strip mall became a cash drain. Jim refused to contribute any more cash and withdrew from the partnership. Alicia was left to manage the property. Before she could sell it, Alicia had put in $125,000 into the strip mall property. Following the sale, Alicia demanded one-half of the $125,000 from Jim. Jim said he is not liable because he left the partnership. a. Jim is correct; he withdrew and his liability ended. b. Alicia is correct; Jim owes her his share of what she paid. c. Neither is correct; how much Jim owes depends on when he withdrew. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Partnerships KEYWORDS: Bloom's: Application

128. Grace Owen formed a corporation with three of her friends for purposes of operating a catering company. Grace used her own checking account to deposit the client payments and to make distributions of the corporation’s profits to her three friends, who together owned 50% of the shares, with Grace owning the remainder of the shares. Grace promised her friends “no meetings, no formalities, we’ll just run the catering business.” Several wedding guests at a reception Grace’s company catered became ill. Grace had not purchased insurance. The guests brought suit to recover their medical bills and other damages from Grace and her three friends. Grace says she has no personal liability for the bad food that resulted in their illness. a. Grace is correct; their suit should be against the corporation. b. Grace is incorrect because of the veil and alter ego theory. c. Grace is liable, but her friends are not. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Corporations KEYWORDS: Bloom's: Application 129. Under Sarbanes-Oxley, which of the following is true? a. Companies must have a separate code of ethics for financial reporting. b. Boards of directors are not subject to the act’s provisions. c. The act does not cover publicly traded companies. d. both b and c ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Corporations KEYWORDS: Bloom's: Application 130. The CEO of Citigroup announced a $8 billion write-down for the company because of bad loans. This announcement followed a previous announcement of a $5 billion write-down three quarters earlier. The board asked him to step down. a. The board does not have the authority to remove a CEO. b. The shareholders must approve the removal of a CEO. c. The CEO is elected by the shareholders. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Corporations KEYWORDS: Bloom's: Application 131. Allied Van Lines has structured its company by giving its franchisees stock ownership in the company. On the stock

is the following language: NOTE: Restrictions apply to ownership of this stock. Only franchisees and employees of Allied Van Lines can own this stock. In the event of a franchise or employment termination, the stock must first be offered to the Allied Board for purchase. Is the restriction valid?

ANSWER: Yes, the restriction is probably valid: (1) it is noted on the stock; (2) it is for the purpose of keeping ownership in the company; (3) it is reasonable - shares are offered to the board.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Corporations KEYWORDS: Bloom's: Application 132. ABC partnership owns and operates a potato farm in Idaho. A, B, and C are the partners/owners. C is having significant personal financial problems. Savoy Stores has obtained a judgment against C in the amount of $l2,341. Savoy knows that ABC is about to harvest its potatoes. When the ABC potatoes are being transported for processing, Savoy takes one-third of the potatoes to satisfy the debt. A and B object. C claims he is using the partnership property to satisfy a debt. Can C do this?

ANSWER: No. Creditors can attach the partner's interest but not the partnership property. Savoy could attach C's profits from the potatoes but not the potatoes themselves.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Partnerships KEYWORDS: Bloom's: Application 133. Alan Freeman is in the process of forming a corporation in order to protect himself from liability in the operation of his construction/development business. The business is incorporated on November 1, 1986. However, Alan was anxious to get started on a townhouse development. He signed contracts with subcontractors for the project during September and October. Discuss Alan's liability before and after incorporation.

ANSWER: Alan is personally liable on the contracts before and after incorporation. He can be relieved if the incorporation, the subs, and he enter into a novation. He will be secondarily liable if the corporation ratifies the contract.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Corporations KEYWORDS: Bloom's: Application 134. Utah Light, Inc. has a takeover offer from Cal Corp. Utah Light is experiencing difficulty with earnings and its share price has dropped from $32 to $19. Cal Corp's offer is for $23 per share. Utah Light's board feels that because of pending plans and developing assets, it should not accept the offer. Must the board accept the offer?

ANSWER: No, the case is a classic illustration of the business judgment rule. The decision is supportable even though others may disagree - the directors are protected.

POINTS: 1 DIFFICULTY: Challenging

NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Corporations KEYWORDS: Bloom's: Application 135. Discuss investors’ concerns regarding CEO compensation.

ANSWER: The main concerns are the following: increased compensation when company performance and value are down; lack of independent oversight; shareholder votes are not binding on the board; decreased shareholder frustration; and, current say-on-pay companies seem to have reasonable results from it.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 136. Discuss CEO concerns regarding CEO compensation.

ANSWER: The main concerns are the following: micromanaging by the shareholders; lack of shareholder sophistication; creation of a talent pool drain to non-United States companies; creation of another reason to take a company private; and, say-on-pay does not promote a managementshareholder dialogue.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 137. Draw a chart comparing the formation, liability, taxation, and management of partnerships, limited partnerships, corporations, and limited liability companies.

ANSWER: Use the chart on page 587 of the text as the key.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations Partnerships Limited Partnerships Limited Liability Companies KEYWORDS: Bloom's: Comprehension 138. American Homes has just waged a successful takeover of Pioneer Homes. There are several minority shareholders of Pioneer who strongly objected to the merger due to the potential of Pioneer and that their earnings would be far greater once Pioneer was out of its cash crunch. What rights do these minority shareholders have?

ANSWER: There is little the minority shareholders can do except to voice their objection, vote against the takeover or merger, and insist upon their payment rights for their shares. In the case of a voted-upon takeover, the majority wins regardless of the long-term wisdom of that vote.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Corporations KEYWORDS: Bloom's: Application 139. Explain when a shareholder has a right to see the books and records of a corporation.

ANSWER: A shareholder has the right to see the books and records of a corporation if he, she or it owns 5% of the outstanding shares of the corporation and has a proper business purpose. Also, a shareholder has the right to see the books and records of a corporation once he, she or it has owned the shares for 6 months and has a proper purpose.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 140. List the provisions of Sarbanes-Oxley that affect corporation governance.

ANSWER: The act has provisions on the structure of the board, particularly independent directors and their role. The act also requires a code of ethics on financial issues. The act prohibits loans to officers. The act requires up-the-ladder reporting by auditors and lawyers.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Corporations KEYWORDS: Bloom's: Knowledge 141. Roche Holding and AstraZeneca have agreed to work together to share research data and fund joint research projects so that they can speed up the process for getting approved drugs to the market. Which of the following best describes the relationship between these two corporations? a. They are a partnership with full liability for the work that they do. b. They have merged. c. They have created a joint venture. d. There is no legal business structure here.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: International Issues in Business Structure KEYWORDS: Bloom's: Synthesis 142. American Greetings, a family-owned corporation, wished to take the company private, and the family shareholders made an offer to purchase the shares of all non-family members. The family owns 10% of the company’s shares, but has 50% of the voting power. The board refused to approve the offer for the shares because the price was too low. Which of

the following is correct? a. The approval of the board is not required for the family purchase of shares. b. The board’s failure to approve the transaction means that the acquisition cannot be done without dissenting shareholders. c. The approval of the board cannot be obtained until the family uses its votes to restructure the board with directors friendly to its proposal. d. Those with a minority interest cannot acquire other shares.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Corporations KEYWORDS: Bloom's: Synthesis 143. The shareholders of Beazer Homes USA filed suit against the directors for the compensation plan that the Board approved for officers that provided the officers with bonuses despite the losses the company experienced and the continuing declines in sales of homes. Which of the following is correct about the suit? a. Shareholders are not permitted to sue their own directors. b. Absent fraud or illegality, the shareholders have no rights against the directors. c. The shareholders will need to establish a violation of the business judgment rule. d. Unless the shareholders were harmed directly, they have no right to bring suit or recover.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Corporations KEYWORDS: Bloom's: Synthesis 144. Several retirement funds that own shares in News Corp., Inc., have filed suit against Rupert Murdoch, the chairman of the board and CEO of News Corp., alleging that Mr. Murdoch had the board approve the purchase of his daughter’s company for $675 million. Part of the purchase deal included putting Murdoch’s daughter on the News Corp. board.

Which would be the best theory for recovery by the retirement funds? a. Insider trading b. Violation of the corporate opportunity doctrine c. Violation of the business judgment rule d. Breach of fiduciary duty ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Corporations KEYWORDS: Bloom's: Synthesis 145. Ann Archer purchased shares from XYZ Corp. for $10. The par value of the shares is $5. What is the amount of

water per share in the shares? a. $0 b. $5 c. $10 d. $1 ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Corporations KEYWORDS: Bloom's: Synthesis 146. John Bloomberg and Erick Ashman have been working together to earn money by doing yard work in residential areas. John collects the payments and has purchased the equipment the two use, including a lawn mower, edger, and trimmers. After deducting expenses for gasoline, repairs, and insurance, John gives one-half of the net to Erick. The two have no agreement about their relationship. Which of the following is correct? a. John and Erick have a general partnership. b. John and Erick have a limited partnership. c. John and Erick have a joint venture. d. John and Erick have no business structure because they have no agreement.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Partnerships KEYWORDS: Bloom's: Synthesis

1. The states did not have federal legislation prior to the time of the federal securities laws. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: History of Securities Law KEYWORDS: Bloom's: Knowledge 2. A primary offering is a first-time offering of shares for sale. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Primary Offering Regulation: The 1933 Securities Act KEYWORDS: Bloom's: Knowledge 3. A bond is not considered a security under federal law. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What is a Security?

KEYWORDS: Bloom's: Knowledge 4. A limited partnership interest is not considered a security. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What is a Security?

KEYWORDS: Bloom's: Knowledge 5. The 1933 Securities Act regulates primary offerings. a. True

b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Primary Offering Regulation: The 1933 Securities Act KEYWORDS: Bloom's: Knowledge 6. The 1934 Securities Exchange Act regulates the secondary sale of securities. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Securities Exchange Act of 1934 KEYWORDS: Bloom's: Knowledge 7. Municipal bonds are exempt from SEC requirements. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Primary Offering Regulation: The 1933 Securities Act KEYWORDS: Bloom's: Knowledge 8. The intrastate registration exemption requires that 100 percent of the offerees be residents of the same state as the issuer. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Regulating Primary Offerings: Exemptions KEYWORDS: Bloom's: Knowledge 9. The intrastate registration exemption requires that 100 percent of the issuer's assets be located in its resident state. a. True b. False

ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Regulating Primary Offerings: Exemptions KEYWORDS: Bloom's: Knowledge 10. Regulation A short-form exemptions can be used for offerings of $5 million or less. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Regulating Primary Offerings: Exemptions KEYWORDS: Bloom's: Knowledge 11. An accredited investor includes any corporation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Regulating Primary Offerings: Exemptions KEYWORDS: Bloom's: Comprehension 12. A natural person whose net worth is greater than $1 million is an accredited investor. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Regulating Primary Offerings: Exemptions KEYWORDS: Bloom's: Comprehension 13. All Regulation D offerings can be sold through advertising. a. True b. False ANSWER: False POINTS: 1

DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Regulating Primary Offerings: Exemptions KEYWORDS: Bloom's: Comprehension 14. The SEC prohibits an analyst from issuing a report that is contrary to the analyst’s true opinion about a security. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Securities Exchange Act of 1934 KEYWORDS: Bloom's: Knowledge 15. Rule 505 carries a 35-purchaser maximum (excluding accredited investors). a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Regulating Primary Offerings: Exemptions KEYWORDS: Bloom's: Knowledge 16. A bank is an example of an accredited investor for purposes of Regulation D. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Regulating Primary Offerings: Exemptions KEYWORDS: Bloom's: Knowledge 17. Rule 506 has no dollar limitations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal Regulating Primary Offerings: Exemptions Bloom's: Knowledge

18. Rule 504 has no limitations on number of offerees. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Regulating Primary Offerings: Exemptions KEYWORDS: Bloom's: Knowledge 19. Rule 506 carries a 35-purchaser maximum (excluding accredited investors). a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Regulating Primary Offerings: Exemptions KEYWORDS: Bloom's: Knowledge 20. Shareholder proposals that call for a shareholder vote on compensation are proper under SEC rules. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Regulating Voter Information - Section 14 KEYWORDS: Bloom's: Application 21. There are no resale limitations on Regulation A offerings. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Regulating Primary Offerings: Exemptions

KEYWORDS:

Bloom's: Knowledge

22. A tombstone ad can be run before the registration statement is effective. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What Must Be Filed: Documents and Information for Registration KEYWORDS: Bloom's: Knowledge 23. The SEC conducts a merit review of its filed registrations. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What Must Be Filed: Documents and Information for Registration KEYWORDS: Bloom's: Knowledge 24. A red herring is a prospectus sent prior to the effective date of the registration date. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What Must Be Filed: Documents and Information for Registration KEYWORDS: Bloom's: Knowledge 25. Section 11 of the 1933 Securities Act imposes liability for the failure to file a registration statement. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Violations of the 1933 Act KEYWORDS: Bloom's: Knowledge

26. Only directors can be held liable for a Section 11 violation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Violations of the 1933 Act KEYWORDS: Bloom's: Knowledge 27. Only those who actually signed the registration statement can be liable for a Section 11 violation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Violations of the 1933 Act KEYWORDS: Bloom's: Knowledge 28. The due diligence defense is one that is easy to establish. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Violations of the 1933 Act KEYWORDS: Bloom's: Knowledge 29. A Section 12 violation results from making a material misstatement in a registration statement. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Violations of the 1933 Act KEYWORDS: Bloom's: Knowledge 30. Selling securities before the effective date of the registration statement is a Section 12 violation. a. True

b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Violations of the 1933 Act KEYWORDS: Bloom's: Knowledge 31. A company registered on the New York Stock Exchange must file a 10-Q report. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Periodic Filing Under the 1934 Act: Those Alphabet Reports KEYWORDS: Bloom's: Application 32. Section 10(b) applies to all securities sold in interstate commerce. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The 1934 Act Antifraud Provision: 10(b) KEYWORDS: Bloom's: Knowledge 33. Section 10(b) applies to corporate insiders and tippees. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The 1934 Act Antifraud Provision: 10(b) KEYWORDS: Bloom's: Application 34. Only an actual seller or purchaser can bring a suit for civil recovery under 10(b). a. True b. False ANSWER: True

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The 1934 Act Antifraud Provision: 10(b) KEYWORDS: Bloom's: Knowledge 35. Section 16 applies to all stock transactions of directors and officers (of a 1934 Act company). a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Insider Trading and Short Swing Profits KEYWORDS: Bloom's: Comprehension 36. Registration statements must include audited financial statements. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What Must Be Filed: Documents and Information for Registration KEYWORDS: Bloom's: Comprehension 37. The federal securities laws do not apply to proxy solicitation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Regulating Voter Information - Section 14 KEYWORDS: Bloom's: Comprehension 38. Blue sky laws are state securities registration laws. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy

NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: State Securites Laws KEYWORDS: Bloom's: Knowledge 39. A merit review standard is the same as the SEC review. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: State Securities Laws KEYWORDS: Bloom's: Knowledge 40. Section 10(b) violations carry fines of only $10,000. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The 1934 Act Antifraud Provision: 10(b) KEYWORDS: Bloom's: Knowledge 41. Section 12 violations would include selling before the effective date. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Violations of the 1933 Act KEYWORDS: Bloom's: Comprehension 42. A false prospectus is covered under Section 11. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal

TOPICS: KEYWORDS:

Violations of the 1933 Act Bloom's: Comprehension

43. All companies required to register under the 1934 Act must file a 10-K report. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Periodic Filing Under the 1934 Act: Those Alphabet Reports KEYWORDS: Bloom's: Comprehension 44. Regulation A filings are exempt from Section 11 liability. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Regulating Primary Offerings: Exemptions KEYWORDS: Bloom's: Knowledge 45. A registration approved by the SEC need not be registered at the state level. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: State Securities Laws KEYWORDS: Bloom's: Knowledge 46. Bernie Madoff was sentenced to 50 years in prison for his fraud convictions. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Securities Exchange Act of 1934 KEYWORDS: Bloom's: Knowledge

47. Shares of stock issued pursuant to a corporate reorganization must be registered. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Regulating Primary Offerings: Exemptions KEYWORDS: Bloom's: Knowledge 48. Under Section 14, shareholders can make proposals for action in the proxy materials. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Regulating Voter Information - Section 14 KEYWORDS: Bloom's: Knowledge 49. The intrastate exemption violates the commerce clause. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Regulating Primary Offerings: Exemptions KEYWORDS: Bloom's: Knowledge 50. Insider trading rules apply only to officers and directors. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Insider Trading and Short Swing Profits KEYWORDS: Bloom's: Application 51. Short-swing profits are acceptable if there was no inside information.

a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Insider Trading and Short Swing Profits KEYWORDS: Bloom's: Knowledge 52. Shares issued through reorganizations must be registered. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Regulating Primary Offerings: Exemptions KEYWORDS: Bloom's: Knowledge 53. A merger is the combination of two firms into one of the old firms. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Shareholder Rights in Takeovers, Mergers, and Consolidations KEYWORDS: Bloom's: Knowledge 54. In a consolidation, a new firm is established. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Shareholder Rights in Takeovers, Mergers, and Consolidations KEYWORDS: Bloom's: Knowledge 55. A tender offer is another form of business combination. a. True b. False

ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Shareholder Rights in Takeovers, Mergers, and Consolidations KEYWORDS: Bloom's: Knowledge 56. A hostile takeover is one supported by management. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Shareholder Rights in Takeovers, Mergers, and Consolidations KEYWORDS: Bloom's: Knowledge 57. Asset acquisitions are not subject to any federal regulation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Shareholder Rights in Takeovers, Mergers, and Consolidations KEYWORDS: Bloom's: Knowledge 58. The Williams Act only applies to National Stock Exchange companies. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Shareholder Rights in Takeovers, Mergers, and Consolidations KEYWORDS: Bloom's: Knowledge 59. A company filing Williams Act materials is not required to file proxy materials. a. True b. False ANSWER: False POINTS: 1

DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Shareholder Rights in Takeovers, Mergers, and Consolidations KEYWORDS: Bloom's: Knowledge 60. State antitakeover statutes that delay takeovers are unconstitutional. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Shareholder Rights in Takeovers, Mergers, and Consolidations KEYWORDS: Bloom's: Knowledge 61. Only a small minority of states have antitakeover statutes. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Shareholder Rights in Takeovers, Mergers, and Consolidations KEYWORDS: Bloom's: Knowledge 62. To qualify for an intrastate offering exemption, the shares must contain transfer restrictions. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Regulating Primary Offerings: Exemptions KEYWORDS: Bloom's: Knowledge 63. An IPO does not require SEC registration. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal Regulating Primary Offerings: Registration Bloom's: Knowledge

64. Shelf registration is good for a maximum of two years, provided there are regular filings such as the 10-K. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What Must Be Filed: Documents and Information for Registration KEYWORDS: Bloom's: Knowledge 65. The due diligence defense to Section 11 is difficult to prove. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Violations of the 1933 Act KEYWORDS: Bloom's: Knowledge 66. Shareholder proposals can include topics such as executive compensation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Regulating Voter Information - Section 14 KEYWORDS: Bloom's: Application 67. Publicly traded companies can no longer issue non-GAAP financial statements. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Violations of the 1933 Act

KEYWORDS:

Bloom's: Application

68. The penalties for certification of false financial statements are up to $1 million in fines and/or 10 years. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Periodic Filing Under the 1934 Act: Those Alphabet Reports KEYWORDS: Bloom's: Knowledge 69. Accounting firms must register annually with PCAOB if they want to audit publicly traded companies. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Violations of the 1933 Act KEYWORDS: Bloom's: Knowledge 70. Black-out periods are timeframes in which trading by company employees is prohibited. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Violations of the 1933 Act KEYWORDS: Bloom's: Knowledge 71. Short-swing profit rules apply only to officers and directors. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Insider Trading and Short Swing Profits KEYWORDS: Bloom's: Knowledge

72. Shareholders who solicit proxies need not comply with Section 14 of the 1934 Act. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Regulating Voter Information - Section 14 KEYWORDS: Bloom's: Knowledge 73. If the earnings of a company are revealed to be false, the officers who earned bonuses based on these earnings must forfeit them. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Violations of the 1933 Act KEYWORDS: Bloom's: Knowledge 74. The trend in international markets is away from regulating insider trading. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: International Issues in Securities Laws KEYWORDS: Bloom's: Knowledge 75. Insider trading rules apply to information exchanged over the Internet and chat rooms. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Insider Trading and Short Swing Profits KEYWORDS: Bloom's: Knowledge 76. Pump and dump is the act of hyping a stock in order to benefit from a sale once the hype affects the price.

a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The 1934 Act Antifraud Provision: 10(b) KEYWORDS: Bloom's: Knowledge 77. Sarbanes-Oxley requires all covered companies to have a code of ethics for financial officers. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Violations of the 1933 Act KEYWORDS: Bloom's: Knowledge 78. Under Sarbanes-Oxley, a company must file an 8-K if it has waived its code of ethics for a financial reporting officer. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Violations of the 1933 Act KEYWORDS: Bloom's: Knowledge 79. Under Sarbanes-Oxley, audit committees of publicly held companies’ boards need not be made up of independent members so long as the majority of the board is independent. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Violations of the 1933 Act KEYWORDS: Bloom's: Knowledge 80. Destruction of documents related to the financial reports of a company carries a 20-year penalty. a. True

b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Periodic Filing Under the 1934 Act: Those Alphabet Reports KEYWORDS: Bloom's: Knowledge 81. Attorneys who represent publicly traded companies need not report any financial fraud to boards because of attorneyclient privilege. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The 1934 Act Antifraud Provision: 10(b) KEYWORDS: Bloom's: Knowledge 82. An auditor for a company cannot also perform appraisal functions. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Violations of the 1933 Act KEYWORDS: Bloom's: Knowledge 83. Section 404 of Sarbanes-Oxley is the section that requires certification of the adequacy of a company’s internal controls. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Violations of the 1933 Act KEYWORDS: Bloom's: Knowledge 84. Under Sarbanes-Oxley, audit partners in charge of accounts must be rotated every 10 years. a. True

b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Violations of the 1933 Act KEYWORDS: Bloom's: Knowledge 85. EBITDA is the same as GAAP accounting. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Violations of the 1933 Act KEYWORDS: Bloom's: Knowledge 86. Under Sarbanes-Oxley, every board audit committee must have at least one financial expert. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Violations of the 1933 Act KEYWORDS: Bloom's: Knowledge 87. Sarbanes-Oxley has special anti-retaliation protections for employees who raise questions about financial reports and internal accounting. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Violations of the 1933 Act KEYWORDS: Bloom's: Knowledge 88. A primary offering is an: a. initial offering of securities. b. offering by a 1933 or 1934 Act company.

c. offer of treasury shares to original shareholders. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Primary Offering Regulation: The 1933 Securities Act KEYWORDS: Bloom's: Knowledge 89. Which of the following would not be considered a security under the 1933 Act? a. limited partnership interest b. bonds c. pension fund d. Subchapter S corporate stock ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What is a Security?

KEYWORDS: Bloom's: Application 90. Which of the following is not an exempt security under the 1933 Act? a. municipal bonds b. insurance policies c. promissory notes d. annuities e. All of the above are exempt securities.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Regulating Primary Offerings: Exemptions KEYWORDS: Bloom's: Application 91. Which of the following is not required for the intrastate exemption? a. The investors and issuer must all be residents of the same state. b. Of the issuer's income, 100 percent must be earned in its resident state. c. Of the issuer's assets, 80 percent must be located in its resident state. d. Of the proceeds from the sale, 80 percent must be earned on operations in the state. e. All of the above are requirements.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Regulating Primary Offerings: Exemptions KEYWORDS: Bloom's: Application 92. Regulation A offerings: a. still require registration. b. are available for offerings up to $10 million. c. are now part of Regulation D. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Regulating Primary Offerings: Exemptions KEYWORDS: Bloom's: Application 93. Which of the following is not an accredited investor for purposes of Regulation D? a. any bank b. anyone who certifies that he can afford to lose the investment c. a purchaser of $150,000 or more of the securities d. any person with income greater than $150,000 ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Regulating Primary Offerings: Exemptions KEYWORDS: Bloom's: Application 94. A comment or deficiency letter: a. is a denial of registration. b. must be issued within 20 days of the filing of the registration statement. c. can only be issued once. d. all of the above ANSWER: b POINTS: 1 DIFFICULTY: Knowledge NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What Must Be Filed: Documents and Information for Registration KEYWORDS: Bloom's: Knowledge 95. Which of the following can be done before the registration statement is effective? a. tombstone ads

b. red herrings c. offers to sell to accredited investors d. a and b e. all of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What Must Be Filed: Documents and Information for Registration KEYWORDS: Bloom's: Application 96. Which of the following is not a Section 12 violation? a. false statements in the registration statement b. failure to file a registration statement c. false statement in the prospectus d. All of the above are Section 12 violations.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Violations of the 1933 Act KEYWORDS: Bloom's: Knowledge 97. Who is liable for a Section 11 violation? a. directors b. officers c. only directors who sign the registration statement d. both a and b e. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Violations of the 1933 Act KEYWORDS: Bloom's: Comprehension 98. Which firms would be required to file a 10-K? a. company with 600 shareholders and $5 million in assets and not listed on national exchange b. company with 300 shareholders and $10 million in assets and not listed on a national exchange c. company with 700 shareholders and $6 million in assets and listed on a national exchange d. all of the above ANSWER: c POINTS: 1

DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Periodic Filing Under the 1934 Act: Those Alphabet Reports KEYWORDS: Bloom's: Application 99. Section 10(b) applies only to: a. stock exchange listed stores. b. public corporations. c. officers, directors, and 10 percent shareholders. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The 1934 Act Antifraud Provision: 10(b) KEYWORDS: Bloom's: Comprehension 100. Tippees: a. are people who get information from corporate insiders. b. are relatives of corporate directors who are given nonpublic information. c. can be liable under section 10(b). d. all of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The 1934 Act Antifraud Provision: 10(b) KEYWORDS: Bloom's: Application 101. Who would have standing to bring a civil suit under section 10(b)? a. purchaser of shares b. contractor with firm who loses business c. person who refrained from buying because of overly pessimistic information d. person who refrained from selling because of overly optimistic information e. all of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Violations of the 1933 Act KEYWORDS: Bloom's: Comprehension

102. The scienter required for proof of a 10(b) violation is: a. intent to defraud. b. gross negligence. c. negligence. d. a or b ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The 1934 Act Antifraud Provision: 10(b) KEYWORDS: Bloom's: Comprehension 103. Section 16 applies to: a. all shareholders. b. only directors who also own stock. c. an officer of a corporation. d. only officers who own stock. e. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Insider Trading and Short Swing Profits KEYWORDS: Bloom's: Comprehension 104. The 1934 Act proxy registration requirements: a. apply only to management. b. include a requirement for shareholders' proposals. c. are not applicable to dissenters' solicitations. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Regulating Voter Information - Section 14 KEYWORDS: Bloom's: Comprehension 105. The 1934 Act proxy regulations apply: a. only to corporations. b. only to annual meeting solicitations. c. to all corporations. d. none of the above ANSWER: d

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Regulating Voter Information - Section 14 KEYWORDS: Bloom's: Comprehension 106. Under Section 14, a shareholder proposal in the proxy materials: a. is limited to 200 words. b. must be made by a shareholder who owns at least 5 percent of the outstanding shares of the corporation. c. need not be included if management objects. d. all of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Regulating Voter Information - Section 14 KEYWORDS: Bloom's: Comprehension 107. Which of the following is true of a Rule 504 offering? a. It must be made only to accredited investors. b. It is limited to $1 million. c. It is limited to 35 purchasers. d. all of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Regulating Primary Offerings: Exemptions KEYWORDS: Bloom's: Knowledge 108. A tombstone ad: a. is permitted in Regulation D offerings. b. is an offer to sell securities. c. can be run prior to the effective date of the registration. d. all of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What Must Be Filed: Documents and Information for Registration KEYWORDS: Bloom's: Knowledge

109. Section 10(b) would apply to which of the following situations? a. a financial printer trading stock based on takeover information in the printing he is doing for a corporation b. an accounting firm performing an audit in a grossly negligent fashion that results in misleading financial statements c. a guest at a reception trading on information she overheard at the party d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The 1934 Act Antifraud Provision: 10(b) KEYWORDS: Bloom's: Application 110. Section 16 applies: a. only to shareholders. b. to directors of all covered corporations. c. when there is a purchase followed by a sale within a six-month period. d. all of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Insider Trading and Short Swing Profits KEYWORDS: Bloom's: Comprehension 111. Maxine Knight is an investment banker who has just completed negotiations for a merger between two major motion picture studios. Maxine lives with Ron Heywood and suggests dinner to celebrate the successful negotiations that will become public in three days. Ron celebrates with Maxine and the next morning buys substantial blocks of shares in both the firms. After the merger is announced, the value of the shares doubles. Which of the following statements is true? a. Ron has violated Section 10(b). b. Ron is not an insider and therefore has not violated 10(b). c. Ron has probably violated Section 16. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Insider Trading and Short Swing Profits KEYWORDS: Bloom's: Application 112. Venture Capital, Inc. needs to raise $10 million in capital and has been able to obtain the agreements of ten insurance companies to invest $1 million each. If Venture wishes to avoid the cost of full SEC registration, it should: a. simply register under the state blue sky laws. b. use a Rule 504 exemption.

c. use Regulation A. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Regulating Primary Offerings: Exemptions KEYWORDS: Bloom's: Application 113. Which of the following is not a security for purposes of the 1933 Act? a. a limited partnership interest b. a promissory note due in six months c. a demand note d. All of the above are securities.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: What is a Security?

KEYWORDS: Bloom's: Application 114. Which of the following does not have resale restrictions? a. intrastate sales b. Rule 505 c. Regulation A d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Regulating Primary Offerings: Exemptions KEYWORDS: Bloom's: Knowledge 115. In Stoneridge, Charter Communications engaged in which of the following activities? a. Misclassification of its customer base b. Improper capitalization c. Delayed reporting of material facts d. All of these ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal

TOPICS: KEYWORDS:

The 1934 Act Antifraud Provision: 10(b) Bloom's: Comprehension

116. Who would be a tippee for purposes of insider trading? a. a janitor who gathers information by reading files on corporate counsel's desk b. an MBA student who tracks the market very closely c. a broker who once worked in the pharmaceutical industry d. All of the above would be tippees.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: The 1934 Act Antifraud Provision: 10(b) KEYWORDS: Bloom's: Application 117. Which of the following exemptions under the 1933 Securities Act does not have limitations on the number of purchasers? a. Rule 504 b. Rule 505 c. Rule 506 d. All of the above have limitations on the number of purchasers.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Regulating Primary Offerings: Exemptions KEYWORDS: Bloom's: Knowledge 118. Which of the following is not a defense to false information in the registration statement? a. due diligence b. limited time as a director c. purchaser knew the information was false at the time of purchase d. None of the above is a defense.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Violations of the 1933 Act KEYWORDS: Bloom's: Knowledge 119. What does the Securities Litigation Reform Act's safe harbor provision do? a. eliminates director and officer liability under Section 11 b. eliminates auditors' liability under Section 11

c. provides liability protection for income predictions in the registration statement d. all of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Violations of the 1933 Act KEYWORDS: Bloom's: Knowledge 120. Corporation A merges with Corporation B and becomes Corporation B. The transaction is a: a. merger. b. consolidation. c. tender offer. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Shareholder Rights in Takeovers, Mergers, and Consolidations KEYWORDS: Bloom's: Knowledge 121. Bob's Grocery merges with Pete's Produce and becomes PB Foods. The transaction is a: a. merger. b. consolidation. c. tender offer. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Shareholder Rights in Takeovers, Mergers, and Consolidations KEYWORDS: Bloom's: Knowledge 122. Williams Act filings are: a. only required of offerors. b. not required of white knights. c. not required in management offers. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal

TOPICS: KEYWORDS:

Shareholder Rights in Takeovers, Mergers, and Consolidations Bloom's: Knowledge

123. State laws regulating tender offers are: a. preempted by the Williams Act. b. unconstitutional under the Commerce Clause. c. no longer in existence. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Shareholder Rights in Takeovers, Mergers, and Consolidations KEYWORDS: Bloom's: Knowledge 124. State antitakeover statutes: a. generally require additional filings beyond Williams Act requirements. b. generally deal with corporate governance. c. are valid only against corporations formed after passage of the law. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Shareholder Rights in Takeovers, Mergers, and Consolidations KEYWORDS: Bloom's: Knowledge 125. Pacific West Utility has made a takeover offer to the shareholders of San Diego Edison. The board and management are concerned about the ability of Pacific West to manage San Diego Edison and have solicited the help of Western Power. Western Power will make a tender offer to the shareholders of San Diego Edison that is $1.00 more than Pacific West's offer. Which of the following statements is true? a. Pacific West is the target company. b. Western Power is the target company. c. Western Power must comply with the Williams Act. d. Pacific West need not comply with the Williams Act. ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Shareholder Rights in Takeovers, Mergers, and Consolidations KEYWORDS: Bloom's: Application 126. A hostile tender offer is made:

a. to the board of the target company. b. to the shareholders of the target company. c. through SEC communications to shareholders. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Shareholder Rights in Takeovers, Mergers, and Consolidations KEYWORDS: Bloom's: Knowledge 127. The shareholders of Tennis Man, Inc. have just approved an amendment to their articles of incorporation that requires 75 percent of all shareholders to approve a merger before it can take place. The amendment is an example of: a. a tender offer. b. an illegal act preempted by the Williams Act. c. a valid antitakeover defense. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Shareholder Rights in Takeovers, Mergers, and Consolidations KEYWORDS: Bloom's: Application 128. Which of the following actions can the SEC take if there is a violation of Section 14 on proxy solicitation? a. an injunction preventing the vote with the proxies b. "unwinding" the election results c. order reimbursement of costs for second solicitation by the party who violated Section 14 d. The SEC can take any of the above actions.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Regulating Voter Information - Section 14 KEYWORDS: Bloom's: Knowledge 129. Hawkin and Snead is a partnership located in South Dakota that specializes in documentary films. Hawkin and Snead feel that they need additional capital to expand and their personal assets are fully tapped. The partners envision a sale of common stock shares only to South Dakota residents and they need about $10,000,000. They also realize that their pool of investors is large, but shallow. That is, they can recruit many potential share purchasers, but their investment amounts will be small. They feel they do not have the money for a national offering and full-blown SEC registration. Which of the following exemptions will suit Hawkin and Snead's needs best? a. a Rule 504 offering b. a Rule 505 offering

c. a Regulation A offering d. an intrastate offering e. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Regulating Primary Offerings: Exemptions KEYWORDS: Bloom's: Application 130. To which of the following will the 10b prohibitions on insider trading apply? a. An officer exercising stock options on the day before the company announces its earnings for the quarter. b. An officer exercising stock options on the day before the company reveals an SEC investigation. c. An officer exercising stock options on the day before the company announces an earnings reversal. d. An officer's son buying stock on the day before the company announces an earnings increase. e. All of the above are violations of 10b.

ANSWER: e POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Insider Trading and Short Swing Profits KEYWORDS: Bloom's: Application 131. Which of the following securities sales must be registered? a. a sale of $450,000 in shares to 2,003 residents of Oklahoma and Arkansas b. a sale of $10,000,000 in shares to 353 U.S. residents c. a sale of $50,000,000 in shares to 10 institutional investors located around the United States d. a sale of $50,000,000 in shares to 10,000 residents of Arizona by a company doing business only in Arizona e. All of the above must be registered.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Regulating Primary Offerings: Exemptions KEYWORDS: Bloom's: Application 132. When can a company run a tombstone ad? a. only after the securities registration is approved b. only if there is a national registration with the SEC c. only if there is also a blue sky registration d. after the filing of the registration statement e. none of the above ANSWER: d

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What Must Be Filed: Documents and Information for Registration KEYWORDS: Bloom's: Comprehension 133. Who signs the 10-Qs and 10-Ks of publicly trading companies to certify their content? a. CEO b. CFO c. both a and b d. The treasurer or controller of the company.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Periodic Filing Under the 1934 Act: Those Alphabet Reports KEYWORDS: Bloom's: Knowledge 134. Which of the following events would be material for purposes of 10b and disclosure? a. a pending merger b. not meeting quarterly earnings expectations c. product liability lawsuit d. a and c only e. all of the above ANSWER: e POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: The 1934 Act Antifraud Provision: 10(b) KEYWORDS: Bloom's: Application 135. Under Sarbanes-Oxley, which of the following would be a conflict of interest for the outside auditor of a company? a. Providing management consulting services to the company, too. b. Providing actuarial service to the company, too. c. Designing the company’s financial system. d. all of the above ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Violations of the 1933 Act KEYWORDS: Bloom's: Application

136. Under Sarbanes-Oxley, how often must the audit partner in charge of an audit client be rotated? a. every year b. every two years c. every five years d. There is no rotation requirement.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Violations of the 1933 Act KEYWORDS: Bloom's: Knowledge 137. Pump and dump: a. is a term for downloading music. b. refers to posting stock information on the Internet to increase its value before you sell. c. is not prohibited by the SEC. d. both b and c ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The 1934 Act Antifraud Provision: 10(b) KEYWORDS: Bloom's: Knowledge 138. Under Sarbanes-Oxley, when must a company file an 8-K? a. every quarter b. annually c. only when selling stock d. within two days of any changes listed in the statute ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The 1934 Act Antifraud Provision: 10(b) KEYWORDS: Bloom's: Comprehension 139. Under Sarbanes-Oxley, who cannot be a member of an audit committee of a publicly traded company? a. officer b. consultant to the company c. outside lawyer for the company d. all of the above cannot be a member of the company’s audit committee ANSWER: d

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Violations of the 1933 Act KEYWORDS: Bloom's: Comprehension 140. Bernie Madoff used a ___ scheme in his fraud schemes. a. Bait-and-Switch b. Ponzi c. Pump-and-dump d. Poison Pill ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Securities Exchange Act of 1934 KEYWORDS: Bloom's: Knowledge 141. Ralph Newsome is an employee at Quest Industries. In the men’s room he overhears two officers discussing a merger that they say will be announced in two days. Ralph purchases 1,000 shares of Quest. When the merger is announced, Quest’s stock has a 15% bounce in value. a. Ralph has engaged in insider trading. b. Ralph simply overheard a conversation and can trade on that information. c. Ralph is not an officer and can trade in advance of announcements. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Insider Trading and Short Swing Profits KEYWORDS: Bloom's: Application 142. J. Rooney is Chairman of Rooney, Pace Group, Inc. and has decided to acquire stock in Pantry Pride. Rooney is able to purchase 7 percent of the stock in October 2015. Is Rooney subject to any SEC requirements? Discuss.

ANSWER: Is he trading on inside information? Once he reaches 10 percent, he will be subject to 16b requirements proxy solicitation.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Insider Trading and Short Swing Profits KEYWORDS: Bloom's: Application 143. Lund was the CEO of Verit Co. Lund was contacted by Horowitz, the CEO and Chairman of the Board of P & F.

Horowitz told Lund of an opportunity P & F had to buy into a Las Vegas casino. Lund immediately purchased 10,000 shares of P & F. Three days after Lund's purchase, P & F announced its intentions to enter into a joint venture for a Las Vegas casino. Lund was then able to sell his shares for considerable profit. Discuss the propriety of Lund's actions under the 1934 Act. ANSWER: Lund is a tippee. There is a 10(b) violation. SEC v. Lund, 570 F.Supp. 1397 (C.D.Cal.1983).

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Insider Trading and Short Swing Profits KEYWORDS: Bloom's: Application 144. Consider the following transactions by a director of a corporation listed on the National Stock Exchange.

September 1, 2015, purchased 100 shares of his company's stock at $10 per share.

October 30, 2015, sold the 100 shares of stock for $7 per share.

November 30, 2015, purchased 100 shares of his company's stock for $5 per share.

Does the director have any liability under 16b?

ANSWER: Yes, SEC matches the highest sale with the lowest purchase; the director had a profit of $200 he owes to the corporation.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Insider Trading and Short Swing Profits KEYWORDS: Bloom's: Application 145. Discuss Goldman Sachs obligation to disclose to its investors its position in the mortgage instrument markets.

ANSWER: Goldman’s view is the clients who purchased instruments from them are sophisticated investors who do not need such a disclosure. The clients’ market positions reflect their knowledge and risk strategies. On the other hand, not all of Goldman’s clients are that knowledgeable, and, since Goldman was shorting, they wanted the market price to decline.

That is not what you would expect from sophisticated purchasers.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Insider Trading and Short Swing Profits KEYWORDS: Bloom's: Application 146. Discuss why Bernie Madoff received the sentence he did for his crimes.

ANSWER: Mr. Madoff received 150 years in prison after pleading guilty. Madoff’s high level of harm to so many investors for such a long period of time increased the level of punishment for him.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Critical Thinking The Securities Exchange Act of 1934 Bloom's: Application

147. Charlie Seam is a broker for a major stockbroker in New York City. Charlie took a job at night with a janitorial firm that is responsible for doing the cleaning on several of the major law firms in New York. These firms also handle the legal business for the largest companies in the United States. Over the past few years these same firms have drafted the documents and done the necessary filings for takeovers among these firms. Charlie has discovered that, as a supervisor, he is able to move freely around the offices and read of developing events on the partners' desks. Through this job Charlie has been able to make some very good investments for himself and his clients. Do Charlie's actions violate 10(b)?

ANSWER: Probably yes because he had no interest in the information and was violating the client's confidence by using the access to the offices for obtaining information. On the other hand, a good argument could be made that Charlie is no different than the printer and that if he happens along on information that is valuable, there is no breach of duty.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Insider Trading and Short Swing Profits KEYWORDS: Bloom's: Application 148. Betty Furnish owns a consignment furniture business that she wishes to expand to several other cities. She does need capital to be able to do so and needs to raise $1 million. Betty says she cannot afford a full SEC registration. Can you offer Betty some suggestions for raising the capital?

ANSWER: Betty could try an intrastate offering if her business will remain in one state. She could also try a short-form registration. Or she could try Regulation D. Rule 504 fits if she registers the offering in her state. If she wants to limit investors, she could try a 505 or 506 offering. She has several options and need not do a full-blown SEC registration.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Regulating Primary Offerings: Exemptions KEYWORDS: Bloom's: Application 149. Explain Goldman Sachs trading huddles and its implications.

ANSWER: Goldman Sachs used trading huddles to combine the efforts of analysts and traders on long and short investments on particular shares. The results of the huddles were then communicated to their own traders and some of their clients; these conclusions were often different from publicly issued Goldman reports and recommendations. Goldman was trying to drive the market, make money for itself, and for some special clients.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Insider Trading and Short Swing Profits KEYWORDS: Bloom's: Application 150. Put the following steps in the securities registration process in chronological order.

Experts' opinions Registration filing Red herring prospectus Tombstone ad Offers to sell securities Sale of securities Registration approval ANSWER:

1. Experts' opinions 2. Registration filing 3. Red herring prospectus 4. Tombstone ad 5. Registration approval 6. Offers to sell securities 7. Sale of securities POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What Must Be Filed: Documents and Information for Registration KEYWORDS: Bloom's: Comprehension 151. Describe who must file 10K, 10Q and 8K reports.

ANSWER: Any company listed on a national stock exchange; any company with $10 million or more in assets and 500 or more shareholders.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Periodic Filing Under the 1934 Act: Those Alphabet Reports KEYWORDS: Bloom's: Knowledge 152. Describe shareholders' rights under Section 14.

ANSWER: Shareholders have the right to receive information on upcoming shareholder meetings including the issues and directors to be voted upon. The proxy must contain certain information about compensation, performance and directors and the board committees. In addition, shareholders have the right to submit proposals for action at the meeting.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Regulating Voter Information - Section 14 KEYWORDS: Bloom's: Knowledge 153. Gwen Knight is a CPA who works in the internal controls area of Winthrop Industries, a NASDAQ company. Gwen has discovered that there are problems with the company’s processing of invoices for payments that allow the postponement of those payments. The company is 18 months behind on some payments. Gwen reports the problems to her supervisor. Gwen assumes that her supervisor will notify the head of internal audit and take the appropriate corrective steps. On her next performance evaluation, done three weeks later, Gwen receives her first poor rating in 10 years. She is put on a six-month performance improvement plan. Discuss Gwen’s position, rights, and any protections she may have.

ANSWER:

Gwen works for a publicly traded company and so is protected by the anti-retaliation provisions of SOX. It seems that she has been targeted for raising an issue on financial reporting. Gwen has the right to file a complaint for retaliation.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Violations of the 1933 Act KEYWORDS: Bloom's: Application 154. A shareholder who was buying additional shares in Wayport, Inc., told the shareholder seller “he was not aware of any bluebirds of happiness in the corporation's world.” However, at the time the buyer made the statement he was aware that the CEO had informed the board via e-mail of a patent sale by Wayport that meant that the corporation would receive net proceeds of $7.6 million and would increase its year-end cash position by 22%. Which of the following statements is correct? a. The statement was too general to constitute a basis for a 10(b) claim. b. The statement would need to contain numbers to be a material misrepresentation. c. The buyer has done nothing wrong unless he was the CEO or a member of the board. d. The seller has a 10(b) claim against the buyer.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Insider Trading and Short Swing Profits KEYWORDS: Bloom's: Synthesis 155. The executive vice president for Best Buy appeared on television in an interview about how Best Buy was doing because of concerns about the abrupt departure of the company’s CEO. The executive vice president said, “Customers are lining up at our stores and television sales are going really strong.” Which of the following is correct about the EVP’s statements? a. The statement was too general to constitute a basis for a 10(b) claim. b. The statement does need to contain numbers to be a material misrepresentation. c. The buyer has done nothing wrong unless he was told to not reveal that information. d. The seller has a 10(b) claim against the seller.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Insider Trading and Short Swing Profits KEYWORDS: Bloom's: Synthesis 156. Under the new securities rules issued under the JOBS Act, which of the following companies would need to register its securities under the 1934 Securities Exchange Act for purposes of periodic reporting? a. A company with $5 million in assets and 2,000 shareholders. b. A company with $10 million in assets and 1,500 shareholders. c. A company with $10 million in assets, 2,000 shareholders, and 550 non-accredited shareholders.

d. A company with $10 million in assets, 2,000 shareholders, and 500 non-accredited investors.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Securities Registration KEYWORDS: Bloom's: Synthesis 157. Directors A and B of a large, publicly traded company filed advance reports of their plans to sell stock. Such advanced filed plans allow directors and officers to sell shares without having to worry about whether they have inside information at the time of the sale. The dates for their sales are locked in for one year. Directors A and B have, however, encouraged the CEO to announce a boost in sales and revenues prior to the quarterly financial statement release because such an announcement would allow the information to go public and thereby allow them to sell their shares, according to their prior-approved plan, at a much higher price. Which of the following is correct? a. Directors A and B have engaged in insider trading. b. Directors A and B have violated their fiduciary duty as directors by requesting the advance announcement. c. Directors A and B have violated Section 16(b). d. Directors A and B have not violated 10(b).

ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Insider Trading and Short Swing Profits KEYWORDS: Bloom's: Synthesis 158. The following stock transactions were completed by the executive vice president of Vinco, Inc., a publicly traded corporation: January 12, 2015 - EVP sells 100 shares @ $40 per share May 5, 2015 - EVP buys 100 shares @ $20 per share June 1, 2015 - EVP sells 100 shares @ $30 per share Which of the following statements is correct? a. EVP has a short-swing profit of $2,000. b. EVP has a net loss of $1,000. c. EVP has a short-swing profit of $1,000. d. EVP has a short-swing profit of $3,000.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Insider Trading and Short Swing Profits KEYWORDS: Bloom's: Synthesis

1. The Fair Labor Standards Act is often called the minimum wage law. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Fair Labor Standards Act (FLSA) KEYWORDS: Bloom's: Knowledge 2. Mining is the industry with the highest fatality rate. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Workplace Safety KEYWORDS: Bloom's: Knowledge 3. Corporate officers can be held liable for FLSA violations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Fair Labor Standards Act (FLSA) KEYWORDS: Bloom's: Knowledge 4. FLSA no longer contains provisions on overtime pay. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Fair Labor Standards Act (FLSA) KEYWORDS: Bloom's: Knowledge 5. Child labor protections are part of FLSA. a. True

b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Fair Labor Standards Act (FLSA) KEYWORDS: Bloom's: Knowledge 6. The Equal Pay Act is an amendment to FLSA. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Equal Pay Act of 1963 KEYWORDS: Bloom's: Knowledge 7. The Equal Pay Act is a comparable worth statute. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Equal Pay Act of 1963 KEYWORDS: Bloom's: Knowledge 8. Retaliatory conduct against an employee who files a complaint is prohibited under OSHA. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Workplace Safety KEYWORDS: Bloom's: Knowledge 9. FICA contributions are covered under FLSA. a. True b. False ANSWER: False

POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Social Security KEYWORDS: Bloom's: Knowledge 10. ERISA was passed to regulate employee pension and retirement plans. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Private Retirement Plans KEYWORDS: Bloom's: Knowledge 11. Unemployment benefits are paid regardless of whether the employee quit or was fired. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Unemployment Compensation KEYWORDS: Bloom's: Knowledge 12. In workers' compensation cases, fault is immaterial. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Workers' Compensation Laws KEYWORDS: Bloom's: Knowledge 13. Independent contractors are covered under workers' compensation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Workers' Compensation Laws KEYWORDS: Bloom's: Knowledge 14. Drug testing of employees is a violation of the FLSA. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Workplace Safety KEYWORDS: Bloom's: Knowledge 15. Unemployment benefits are administered by the federal government. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Unemployment Compensation KEYWORDS: Bloom's: Knowledge 16. The Wagner Act is the National Labor Relations Act. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Wagner Act KEYWORDS: Bloom's: Knowledge 17. The NLRA established the NLRB as the enforcement agency for labor laws. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal

TOPICS: KEYWORDS:

The Wagner Act Bloom's: Knowledge

18. The Taft-Hartley Act is the Labor Management Relations Act. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Taft-Hartley Act: Labor-Management Relations Act of 1947 KEYWORDS: Bloom's: Knowledge 19. The Taft-Hartley Act includes the presidential power to invoke a "cooling-off period" in transportation strikes. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Taft-Hartley Act: Labor-Management Relations Act of 1947 KEYWORDS: Bloom's: Knowledge 20. The Landrum-Griffin Act is the Labor-Management Reporting and Disclosure Act. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Landrum-Griffin Act: Labor Management Reporting and Disclosure Act of 1959 KEYWORDS: Bloom's: Knowledge 21. The Landrum-Griffin Act contains a bill of rights for union members. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Landrum-Griffin Act: Labor Management Reporting and Disclosure Act of 1959 KEYWORDS: Bloom's: Knowledge

22. Collective bargaining units are determined by employees. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Unionization Process KEYWORDS: Bloom's: Knowledge 23. Collective bargaining units generally consist of employees who do the same work. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Unionization Process KEYWORDS: Bloom's: Knowledge 24. The legal trend in overtime pay requirements is to expand the number of employees covered. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Fair Labor Standards Act (FLSA) KEYWORDS: Bloom's: Knowledge 25. A certified union has the exclusive right to represent employees in contract negotiations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Unionization Process KEYWORDS: Bloom's: Knowledge 26. An election for a union cannot be held more than once every 12 months.

a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Unionization Process KEYWORDS: Bloom's: Knowledge 27. Only employers are subject to the NLRA's good-faith bargaining requirement. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Union Contract Negotiations KEYWORDS: Bloom's: Knowledge 28. Wages and hours are examples of mandatory subjects for good-faith bargaining. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Union Contract Negotiations KEYWORDS: Bloom's: Knowledge 29. Failure to bargain on a mandatory subject matter is an unfair labor practice. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Union Contract Negotiations KEYWORDS: Bloom's: Knowledge 30. Picketing is a permissible economic weapon. a. True b. False

ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Protected Concerted Activities KEYWORDS: Bloom's: Knowledge 31. Featherbedding is payment for work not actually performed and is an unfair labor practice. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Unfair Employee Practices KEYWORDS: Bloom's: Knowledge 32. Threatening a job loss for joining a union is an unfair labor practice for employers. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Employer Rights KEYWORDS: Bloom's: Knowledge 33. Promising promotions for not joining a union is an unfair labor practice. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Employer Rights KEYWORDS: Bloom's: Knowledge 34. Right-to-work states outlaw closed shops. a. True b. False ANSWER: True POINTS: 1

DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Right-to-Work Laws KEYWORDS: Bloom's: Knowledge 35. Plant closings are always unfair labor practices. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Economic Weapons of Employers KEYWORDS: Bloom's: Knowledge 36. The largest OSHA fine was $870 million given to BP for a Texas refinery’s violations. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Workplace Safety KEYWORDS: Bloom's: Knowledge 37. Workers' compensation systems are administered by the federal government. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Workers' Compensation Laws KEYWORDS: Bloom's: Knowledge 38. Under workers' compensation systems, fault is immaterial. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal Workers' Compensation Laws Bloom's: Knowledge

39. Workers' compensation systems cover only physical injuries not problems stemming from stress. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Workers' Compensation Laws KEYWORDS: Bloom's: Knowledge 40. Workers' compensation systems cover independent contractors. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Workers' Compensation Laws KEYWORDS: Bloom's: Knowledge 41. Unscheduled injuries in workers' compensation systems are not covered by the systems. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Workers' Compensation Laws KEYWORDS: Bloom's: Knowledge 42. Employee evaluation systems that rank employees in tiers for purposes of raises and termination violate the Fair Labor Standards Act. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal

TOPICS: KEYWORDS:

The Fair Labor Standards Act (FLSA) Bloom's: Knowledge

43. The use of company e-mail by union organizers remains an unresolved issue. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Union Organizing Efforts and Social Media KEYWORDS: Bloom's: Knowledge 44. The USA Patriot Act imposes stricter standards for employers and deportation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Immigration Laws KEYWORDS: Bloom's: Knowledge 45. The Department of Homeland Security has a cabinet-level head. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Immigration Laws KEYWORDS: Bloom's: Knowledge 46. The I-9 is the form employers must have for non-citizen employees. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Immigration Laws KEYWORDS: Bloom's: Knowledge

47. The I-9 is the green card. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Immigration Laws KEYWORDS: Bloom's: Knowledge 48. The U.S. Department of Labor prohibits U.S. companies from using child labor in all countries. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Working Conditions and International Labor Law KEYWORDS: Bloom's: Knowledge 49. The overtime pay provisions of the FLSA are now broader because of rule interpretations by the Department of Labor. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Fair Labor Standards Act (FLSA) KEYWORDS: Bloom's: Knowledge 50. States do not limit the length of time a person can receive disability payments. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Workers' Compensation Laws KEYWORDS: Bloom's: Knowledge 51. Keeping two sets of books on employee hours worked and payment made is sufficient to hold principals liable for an

FLSA violation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Fair Labor Standards Act (FLSA) KEYWORDS: Bloom's: Knowledge 52. The Pension Reform Act requires all employers to have pension plans for their employees. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Private Retirement Plans KEYWORDS: Bloom's: Knowledge 53. The Pension Reform Act changed both the funding and accounting requirements for employer-sponsored pension plans. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Private Retirement Plans KEYWORDS: Bloom's: Knowledge 54. The Pension Reform Act was passed in response to company bankruptcies that discharged their pension plan obligations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Private Retirement Plans KEYWORDS: Bloom's: Private Retirement Plans

55. Which federal law provides for unemployment compensation? a. FLSA b. OSHA c. ERISA d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Unemployment Compensation KEYWORDS: Bloom's: Knowledge 56. Which federal law regulates minimum wage? a. FLSA b. OSHA c. ERISA d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Fair Labor Standards Act (FLSA) KEYWORDS: Bloom's: Knowledge 57. When is a warrant required for an OSHA search? a. only when a complaint has been filed b. only when a random inspection is being conducted c. both a and b d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Workplace Safety KEYWORDS: Bloom's: Knowledge 58. Which firms are covered under FLSA? a. hotels b. retail businesses c. restaurants d. All of the above are covered.

ANSWER: d POINTS: 1

DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Fair Labor Standards Act (FLSA) KEYWORDS: Bloom's: Knowledge 59. Which employees are exempt under FLSA? a. agricultural employees b. professions of law and medicine c. executives and administrators d. All of the above are exempt.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: CPA Exam KEYWORDS: Bloom's: Knowledge 60. Which protection is not part of FLSA? a. minimum wage b. maximum hours c. retirement benefits d. All of the above are protections.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Fair Labor Standards Act (FLSA) KEYWORDS: Bloom's: Knowledge 61. Child labor protections: a. are part of FLSA. b. apply only to children under age 16. c. both a and b d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Fair Labor Standards Act (FLSA) KEYWORDS: Bloom's: Knowledge 62. The Equal Pay Act:

a. prohibits merit systems. b. prohibits seniority systems. c. is a comparable worth statute. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Equal Pay Act of 1963 KEYWORDS: Bloom's: Knowledge 63. OSHA: a. is the agency responsible for ensuring safety in the workplace. b. has no inspection authority. c. covers employers with three or more employees. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Workplace Safety KEYWORDS: Bloom's: Knowledge 64. Under OSHA, random inspections are permitted if: a. announced. b. a warrant is obtained. c. there has been a complaint. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Workplace Safety KEYWORDS: Bloom's: Knowledge 65. ERISA applies: a. to any medical, retirement, or income-deferral plan. b. to businesses with three or more employees. c. only to employees not seeking Social Security benefits. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Private Retirement Plans KEYWORDS: Bloom's: Knowledge 66. Unemployment benefits: a. are paid regardless of the reason for termination of employment. b. are paid from FICA contributions. c. cannot be regulated by the state. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Unemployment Compensation KEYWORDS: Bloom's: Knowledge 67. Workers' compensation programs are: a. applicable to injuries in the scope of employment. b. no-fault programs. c. supported by FICA. d. a and b only ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Workers' Compensation Laws KEYWORDS: Bloom's: Knowledge 68. Under workers' compensation: a. the employee loses the right to litigation against the employer for covered incidents. b. employee fault controls compensation. c. injuries by fellow employees are not covered. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Workers' Compensation Laws KEYWORDS: Bloom's: Knowledge 69. Independent contractors are: a. not covered under workers' compensation.

b. defined under workers' compensation laws the same way as they are defined under agency law. c. not employees. d. all of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Workers' Compensation Laws KEYWORDS: Bloom's: Knowledge 70. ERISA: a. requires all employers to have a pension plan. b. dictates the types of investments employers can make with pension plan funds. c. regulates employer-sponsored pension funds. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Private Retirement Plans KEYWORDS: Bloom's: Knowledge 71. Overtime pay provisions: a. do not apply to executive and administrative personnel. b. do not apply if the minimum wage is paid. c. apply only to federal contractors. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Fair Labor Standards Act (FLSA) KEYWORDS: Bloom's: Knowledge 72. John Smith is injured at work when he and another employee hold forklift races during their lunch hour at the warehouse where they work. All workers had been repeatedly warned about using the forklifts for such activity. Which of the following statements is true? a. John's injuries will not be covered under workers' compensation because of his negligence. b. John's injuries will be covered under workers' compensation. c. John's injuries will not be covered because he violated company rules in doing the races. d. none of the above ANSWER: b POINTS: 1

DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Workers' Compensation Laws KEYWORDS: Bloom's: Application 73. Ralph Quest is an air traffic controller who has had significant problems with high blood pressure. He has changed his diet, takes medication, and the problem persists. His doctor has recommended that Quest find other employment because his job is causing his high blood pressure and continuing to work at the job will lead to a massive heart attack. Ralph has no training for any other job. Which of the following statements is true? a. Ralph has a job-related injury that will be covered under workers' compensation. b. Ralph has a medical problem that will not be covered. c. Ralph will need to have a heart attack before he qualifies as disabled. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Workers' Compensation Laws KEYWORDS: Bloom's: Application 74. Which type of visa allows companies to make intracompany transfers of employees working in other countries and will be on temporary assignment? a. H-1 b. H-1B c. HIV-1 d. L-1 ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Immigration Laws KEYWORDS: Bloom's: Knowledge 75. Which is the most recent statute to be enacted? a. FLSA b. ERISA c. OSHA d. workers' compensation statutes ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal

TOPICS: KEYWORDS:

Private Retirement Plans Bloom's: Knowledge

76. Overtime pay is computed on a: a. monthly basis. b. daily basis. c. weekly basis. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Fair Labor Standards Act (FLSA) KEYWORDS: Bloom's: Knowledge 77. The minimum wage under FLSA: a. applies to all employees. b. does not apply to employees between ages 16 and 18. c. has not increased since 1968. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Fair Labor Standards Act (FLSA) KEYWORDS: Bloom's: Knowledge 78. Which of the following violates the Equal Pay Act? a. a seniority system b. merit pay systems c. pay based on longevity of employment d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Equal Pay Act of 1963 KEYWORDS: Bloom's: Knowledge 79. Ralph Pew is the president of a small corporation, Yogurt for You, Inc. The company has two yogurt stores in malls in Mesa, Arizona. There were 22 employees in the stores in 1993. Pew, facing business startup costs, did not pay Yogurt for You's portion of the Social Security taxes (employees did have their shares withheld). Who is liable for the missing taxes? a. Yogurt for You

b. Ralph Pew c. all officers of Yogurt for You d. all of the above ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Social Security KEYWORDS: Bloom's: Application 80. Which of the following is not a function of OSHA? a. promulgating safety standards for the workplace b. conducting random inspections of workplaces c. responding to employee complaints d. All of the above are functions of OSHA. ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Workplace Safety KEYWORDS: Bloom's: Knowledge 81. Unemployment benefits are not collectable when: a. an employee leaves a job voluntarily because of pregnancy. b. an individual is involuntarily terminated from his/her job. c. you are seeking employment. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Unemployment Compensation KEYWORDS: Bloom's: Application 82. An employee who is raped at the employer's plant site while on the job is: a. covered by workers' compensation. b. not covered by workers' compensation and could recover damages only from the perpetrator. c. not covered by workers' compensation and could recover damages from the employer. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Critical Thinking Workers' Compensation Laws Bloom's: Application

83. Which of the following kinds of worker must be paid the minimum wage rate? a. Cooks b. Housekeepers c. Full-time babysitters d. All of the these ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: The Fair Labor Standards Act (FLSA) KEYWORDS: Bloom's: Application 84. The Norris-LaGuardia Act is: a. also known as the Anti-Injunction Act. b. is the National Labor Relations Act. c. was declared unconstitutional. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Norris-LaGuardia Act of 1932 (Anti-Injunction Act) KEYWORDS: Bloom's: Knowledge 85. The National Labor Relations Act: a. is also known as the Wagner Act. b. is also known as the Landrum-Griffin Act. c. gives management a bill of rights. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Wagner Act KEYWORDS: Bloom's: Knowledge 86. A collective bargaining unit: a. must be exclusively within one business. b. must consist of workers who perform the same functions.

c. is determined by the union. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Unionization Process KEYWORDS: Bloom's: Knowledge 87. Which is not a mandatory subject matter for good-faith bargaining? a. wages b. hours c. vacations d. merit pay e. All of the above are mandatory subject matters.

ANSWER: e POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Union Contract Negotiations KEYWORDS: Bloom's: Knowledge 88. Which is not a mandatory subject matter for good-faith bargaining? a. seniority b. insurance c. pension plans d. strike vote e. All of the above are mandatory subject matters.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Union Contract Negotiations KEYWORDS: Bloom's: Knowledge 89. Which of the following is the top OSHA violation type from the 2012 OSHA inspections? a. Machine guards b. Scaffolding issues c. Fall protection d. Electrical systems ANSWER: c POINTS: 1 DIFFICULTY: Challenging

NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Workplace Safety KEYWORDS: Bloom's: Application 90. Right-to-work statutes: a. are prohibited by federal law. b. outlaw closed shops. c. existed prior to federal laws on unionization but not today. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Right-to-Work Laws KEYWORDS: Bloom's: Knowledge 91. Radio Electronics' plant in Mississippi held a union election on January 3, 2016, and the United Electronics Workers was certified as the collective bargaining agent for the plant. Many of the workers (42 percent) are dissatisfied with the result and feel that if they stage a better campaign, the election results will be different. How quickly can these workers demand an election? a. January 4, 2016 b. 30 days from January 3, 2016 c. one year from January 3, 2016 d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: The Unionization Process KEYWORDS: Bloom's: Application 92. Which of the following is an unfair labor practice? a. stopping distribution of union flyers off company property during nonworking hours b. picketing c. strike d. All of the above are unfair labor practices.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Employer Rights KEYWORDS: Bloom's: Application

93. U.S. companies that operate plants in other countries: a. are required to comply with OSHA standards outside the United States if they are incorporated in the United States. b. are subject to the Fair Labor Standards Act if they have 15 or more employees in the United States. c. must apply for exemptions from the National Labor Relations Act prior to opening factories in other countries. d. are exempt from U.S. labor laws there if they close plant operations in the United States. e. none of the above ANSWER: e POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: International Issues in Labor KEYWORDS: Bloom's: Knowledge 94. If a union is certified by workers in a plant, what is the least amount of time before another union election can be held? a. the next day because the right to organize is ongoing b. in six months c. five years d. twelve months e. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Unionization Process KEYWORDS: Bloom's: Knowledge 95. On which federal statute do states base their right-to-work laws? a. Taft-Hartley b. Fair Labor Standards Act c. ERISA d. OSHA e. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Right-to-Work Laws KEYWORDS: Bloom's: Knowledge 96. Enron employees had much of their retirement plan invested in Enron stock. One of the company's former employees

has said, "There was something wrong with the way this whole thing was handled. There must be some federal law that gives us protection." Which federal statute covers such retirement plans? a. Social Security Act b. ERISA c. OSHA d. Taft-Hartley e. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Private Retirement Plans KEYWORDS: Bloom's: Knowledge 97. Jake Barnett was injured at work one day when the forklift he was operating malfunctioned. The forklift was new, having just been purchased by Jake's employer one month prior to his accident. Jake wants to recover for his medical bills, lost wages and pain and suffering. a. Jake can file suit and recover from his employer. b. Jake can file suit and recover from the forklift manufacturer. c. Jake can file suit and recover from the forklift manufacturer, but he will first have to reimburse his employer for any workers' compensation benefits. d. Jake has no right of suit against either his employer or the forklift manufacturer. e. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Workers' Compensation Laws KEYWORDS: Bloom's: Application 98. The Illegal Immigration Reform and Immigrant Responsibility Act of 1996: a. increased the number of crimes that constituted grounds for deportation. b. was declared unconstitutional. c. increased the defenses to deportation. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Immigration Laws KEYWORDS: Bloom's: Knowledge 99. The U.S. Department of Homeland Security: a. includes INS.

b. includes customs. c. was created by the USA Patriot Act. d. all of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Immigration Laws KEYWORDS: Bloom's: Knowledge 100. The American Competitive and Workforce Investment Act of 1998: a. limited the number of skilled workers allowed to enter the U.S. b. increased the number of highly skilled workers allowed to enter the U.S. c. prohibited the movement of U.S. factories overseas. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Immigration Laws KEYWORDS: Bloom's: Knowledge 101. The USA Patriot Act: a. created a cabinet level position for immigration enforcement issues. b. has been declared unconstitutional. c. requires warnings to workers before factories can be closed. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Immigration Laws KEYWORDS: Bloom's: Knowledge 102. For international labor practices, the U.S. Department of Labor recommends: a. a code of conduct. b. monitoring of subcontractors. c. more uniform standards across countries. d. all of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal New Trends in Managing International Wage and Safety Standards Bloom's: Knowledge

103. The American Competiveness in the 21st Century Act: a. prohibits U.S. employers from terminating U.S. workers after hiring immigrants as employers. b. prohibits U.S. employers from hiring immigrants as employers. c. allows U.S. employers to terminate U.S. employees and hire immigrant employees if necessary to remain competitive. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Immigration Laws KEYWORDS: Bloom's: Knowledge 104. The Department of Homeland Security: a. has been disbanded. b. is now responsible for immigration issues. c. is not a cabinet level department. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Immigration Laws KEYWORDS: Bloom's: Knowledge 105. ICE is: a. disbanded under changes to immigration law. b. the agency responsible for immigration and customs enforcement. c. is part of the Department of Homeland Security. d. both b and c ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Immigration Laws KEYWORDS: Bloom's: Knowledge 106. A form I-9 is required: a. of all employees who do not have proof of U.S. Citizenship.

b. of all employees. c. of all employees who have an accent. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Immigration Laws KEYWORDS: Bloom's: Knowledge 107. Arleen Ray is starting a new business. She will operate a children's clothing store and will need to cover the store with sales help from 10:00 AM to 9:00 PM Monday through Friday and from 1:00 PM to 6:00 PM on Saturdays and Sundays. She has several questions about her yet-to-be work force. (a) What is the maximum number of hours each employee can work? (b) When will she be required to pay overtime? (c) What is the minimum wage requirement? (d) Will the employees be covered under state workers' compensation laws? (e) Will Arleen be required to handle withholding for the employees?

ANSWER: Under the FLSA, the maximum number of hours without overtime is 40. After that number of hours, Arleen will need to pay 1 1/2 times the pay rate per hour. The employees will be under state workers' compensation and Arleen will have to handle withholding.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: The Fair Labor Standards Act (FLSA) KEYWORDS: Bloom's: Application 108. Susan McIntyre is employed by the Huff Corporation as a crane operator. During the course of operating the crane, Susan was injured when the cable swung back and shattered the glass in the operating booth. The investigation revealed that Susan was operating the crane improperly. Can Susan still recover for her injuries? How? ANSWER: Workers' compensation; fault is not an issue; Susan recovers according to a schedule of injuries.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Workers' Compensation Laws KEYWORDS: Bloom's: Application 109. List and describe all of the basic statutory protections for workers.

ANSWER: FLSA - minimum wage, overtime, child labor; ERISA - retirement income protections and disclosures; Equal Pay Act - equal pay for equal work; OSHA - job safety; FICA unemployment insurance; workers' compensation - job injuries.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic

STATE STANDARDS: TOPICS:

KEYWORDS:

United States - OH - AICPA: BB-Legal Wages and Hours Protection Workplace Safety Employee Pensions, Retirement, and Social Security Bloom's: Knowledge

110. Describe the characteristics of a workers' compensation system.

ANSWER: Fault is immaterial; a schedule dictates payments; employee can't bring suit; government agency administers; must be an injury in the scope of employment.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Workers' Compensation Laws KEYWORDS: Bloom's: Knowledge 111. Discuss the leading causes of occupational injuries.

ANSWER: The leading causes of occupational injuries are, in order, highway and transportation accidents, contact with objects and equipment, assaults and violence, falls, exposure to substances and environment, and fire and explosions.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Workplace Safety KEYWORDS: Bloom's: Comprehension 112. Describe the employer requirements under ERISA. ANSWER: Employer must have a fiduciary act as the responsible party for the pension investments; must disclose on an annual basis the amount the employee has in the plan and what that means in terms of retirement benefits; employer use of funds is restricted.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Private Retirement Plans KEYWORDS: Bloom's: Knowledge 113. What protections does the Equal Pay Act provide?

ANSWER: Guarantees equal pay for men and women doing the same jobs; does not guarantee equal pay for comparable jobs; it is not a comparable worth statute.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Equal Pay Act of 1963 KEYWORDS: Bloom's: Knowledge

114. A word processor at a large defense contractor's plant is injured when she slips and falls in one of the corridors of the plant. After the accident, it was discovered that the floor had recently been mopped, but no sign had been placed to warn employees of the wet floor. The word processor wants to sue her employer for its negligence. Can she do so?

ANSWER: No - she is covered under workers' compensation and will have to accept whatever is provided for her injuries. She was injured while at work and fault and negligence are immaterial - it is a universal coverage statute.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Workers' Compensation Laws KEYWORDS: Bloom's: Application 115. Maine Central Railroad had a labor dispute with its employees and their Brotherhood of Maintenance of Way Employees (BMWE). Roughly 300 of its 400 employees belonged to BMWE. The strike of BMWE slowed traffic on Maine Central's lines. However, the traffic was transferred to Guilford Transportation Industries Lines. Guilford is the parent company of Maine Central. BMWE workers then refused to put rerouted traffic on Guilford lines. Guilford claims this is an unfair labor practice. Discuss.

ANSWER: In Burlington Northern v. BMWE, 481 U.S. 429 (1987), the U.S. Supreme Court held it was not a secondary boycott; it was all the same company. Not an unfair labor practice.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Economic Weapons of Employers KEYWORDS: Bloom's: Application 116. For over 30 years, Sterlingware operated a textile dyeing and finishing plant in Fall River, Massachusetts. During those 30 years, Sterlingware's employees had been represented by United Textile Workers of America. In 1982, Sterlingware sold out to one of its customers, Marcamy Sales. The employees claim Marcamy must continue to honor their collective bargaining agreement. Are they correct?

ANSWER: In Fall River Dyeing and Finishing Corp. v. NLRB, 482 U.S. 27 (1987), the court held yes; otherwise transfers could eliminate union agreements.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Union Contract Negotiations KEYWORDS: Bloom's: Application 117. Charles Goodman has filed a suit against his employer for violation of Title VII but has also joined the union in the suit because the union agreement resulted in the discrimination. Is the issue a subject matter for collective bargaining?

Can the union be held liable?

ANSWER: In Goodman v. Lukens, 482 U.S. 656 (1987), the court held yes to both; unions are subject to Title VII restrictions.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Critical Thinking Union Contract Negotiations Bloom's: Application

118. Discuss the propriety of each of the following actions by management: a. offering employees a bonus of one week's vacation just prior to an election b. threatening bankruptcy if a union is approved c. sending a management person to a labor meeting ANSWER: a. Probably unfair if the benefit will not continue. b. Probably unfair; like threatening a shutdown. c. Definitely unfair.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Employer Rights KEYWORDS: Bloom's: Application 119. Al Hunt was an engineer with the State Department of Transportation. While surveying a segment of highway, Mr. Hunt was injured when a motorist did not honor the "Slow" and "Caution" signs posted for 1/2 mile before the survey location. Mr. Hunt's leg is permanently damaged and he has missed 3 months of work in recovery and therapy. Can Hunt recover from the State Department of Transportation? What are his rights against the motorist?

ANSWER: Hunt is under workers' comp and can't sue his employer but will have statutory benefits. He can sue and recover from the motorist but must first pay back the workers' comp system before his recovery.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Workers' Compensation Laws KEYWORDS: Bloom's: Application 120. Discuss when OSHA will find willful violations.

ANSWER: OSHA will find willful violations (meaning more costly fines) for such things as when employers have been warned of problems and have not fixed them, over-zealous cost-cutting in maintenance and safety budgets, antiquated equipment, fatigued employees, and undue production pressures.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Workplace Safety KEYWORDS: Bloom's: Knowledge 121. Describe the types and sliding scales of penalties under OSHA. ANSWER: The penalties for OSHA violations include fines and imprisonment. The level of penalty is determined by whether the violations are intentional and whether they are repeat violations.

For example, an employer who is aware of a violation or if the violation is a repeat violation, then the penalty includes imprisonment.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Workplace Safety KEYWORDS: Bloom's: Knowledge 122. Liz Bonham has a pension plan through her employer. Give a list of her rights and her employer’s obligations under the plan.

ANSWER: Her employer must follow accounting and funding rules under the federal laws and regulations. Liz has certain vesting rights in the pension. Liz has rights on annual statements.

Liz also has certain federal guarantees on the plan.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Employee Pensions, Retirement, and Social Security KEYWORDS: Bloom's: Application 123. Stephen H. Grabowski sustained injuries when his fellow employees, William Mangler, David Smith, and Joseph Ziemba, detained Grabowski in a bathroom, brought him to the ground, and wrapped him, from ankles to shoulders, in duct tape. Grabowski suffered both physical injuries, which required surgery on his lower back and right knee, and posttraumatic stress, which required counseling. Grabowski has since received over $300,000 in workers' compensation for his injuries. He has brought suit against the three men to recover for the damages he has experienced beyond what worker’s compensation covered. Which of the following is correct? a. There can be no recovery from third parties when there is a worker’s compensation claim. b. There can be no recovery for horseplay in the workplace, even under worker’s compensation. c. If there is recovery, Grabowski must first reimburse the worker’s compensation fund for payments received to date. d. There is no third-party liability in workplace injuries, regardless of how they occurred.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Workers' Compensation Laws KEYWORDS: Bloom's: Synthesis 124. Inspectors from OSHA arrived at the Upper Big Branch mine for a surprise inspection. Which of the following is correct? a. The managers at the mine can demand that OSHA obtain a warrant. b. The managers can give voluntary consent for their inspection. c. The managers can accompany the inspectors during their inspection. d. All of the above are correct.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Critical Thinking Workplace Safety Bloom's: Synthesis

125. Erica has worked the following hours at her job as a waiter at a local restaurant: Week One - 28 hours Week Two - 47 hours Week Three - 40 Hours Week Four - 39 hours Which of the following statements is correct? a. Erica is owed 7 hours of overtime pay. b. Erica is owed no money for overtime pay because her average hours per week are below 40. c. Wait staff are not entitled to overtime compensation because of their tips. d. Erica is owed compensation for the failure of her employer to give her the agreed-for 40 hours per week.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: The Fair Labor Standards Act (FLSA) KEYWORDS: Bloom's: Synthesis 126. Which of the following would be entitled to unemployment compensation? a. Jan, who quit her job to attend school full time. b. Elise, who quit her job because her employer reduced her hours to 29 per week. c. Alfred, who quit to care for his newborn son. d. Jack, who was fired for being tardy for work too often.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Unemployment Compensation KEYWORDS: Bloom's: Synthesis

1. Violations of civil laws can result in imprisonment. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Classifications of Law KEYWORDS: Bloom's: Knowledge 2. If conduct is a criminal violation, it cannot also be a civil violation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Classifications of Law KEYWORDS: Bloom's: Comprehension 3. There are no criminal laws at the federal level. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Classifications of Law KEYWORDS: Bloom's: Knowledge 4. Terms of a consulting contract are an example of private law. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Classifications of Law KEYWORDS: Bloom's: Knowledge 5. Substantive laws provide the means and mechanisms for the enforcement of laws. a. True

b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Classifications of Law KEYWORDS: Bloom's: Knowledge 6. Stare decisis is Latin for "let the decision stand." a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Classifications of Law KEYWORDS: Bloom's: Knowledge 7. The common law in each state is the same. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Classifications of Law KEYWORDS: Bloom's: Knowledge 8. Jurisprudence is legal philosophy. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Theory of Law: Jurisprudence KEYWORDS: Bloom's: Knowledge 9. Zoning laws are substantive only. a. True b. False ANSWER: False

POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Classifications of Law Sources of Law KEYWORDS: Bloom's: Application 10. The scholars of jurisprudence generally agree on the theory of law. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Theory of Law: Jurisprudence KEYWORDS: Bloom's: Knowledge 11. Statutory law exists at all levels of government. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Knowledge 12. The United States Code includes laws on anticompetitive activities as well as laws regulating the sale of securities. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Application 13. Ordinances are generally found in state legislative codes. a. True b. False ANSWER: False POINTS: 1

DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Application 14. The Code of Federal Regulations includes the enactments of federal administrative agencies. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Knowledge 15. States do not have administrative laws. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Knowledge 16. City ordinances generally cover the legal aspects of incorporation and securities registration. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Application 17. Citations are a form of legal shorthand for referring to statutes, ordinances, and cases. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal Sources of Law Bloom's: Knowledge

18. Constitutions exist at both state and federal levels. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Knowledge 19. The Internal Revenue Code is part of federal statutory law. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Application 20. Equitable remedies are not available in courts of law in the United States. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Classifications of Law KEYWORDS: Bloom's: Knowledge 21. Laws' flexibility allow adjustments for technology changes. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Characteristics of Law

KEYWORDS:

Bloom's: Application

22. A personnel manual is an example of private law. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Classifications of Law KEYWORDS: Bloom's: Application 23. Union/management laws demonstrate the role of law as a compromiser. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Purposes of Law KEYWORDS: Bloom's: Application 24. Criminal laws are generally enforced by individuals. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Classifications of Law KEYWORDS: Bloom's: Comprehension 25. A multilateral treaty is a treaty among several nations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Introduction to International Law KEYWORDS: Bloom's: Knowledge

26. The act of state doctrine permits other countries to intervene in a nation's government when human rights are violated. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Introduction to International Law KEYWORDS: Bloom's: Analysis 27. The EU has its own currency. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Introduction to International Law KEYWORDS: Bloom's: Knowledge 28. The Uniform Commercial Code and the Uniform Partnership Act are both enactments of Congress. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Application 29. Party autonomy is not permitted in international contracts. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Introduction to International Law KEYWORDS: Bloom's: Knowledge 30. The EU will be disbanded in 2016. a. True

b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Introduction to International Law KEYWORDS: Bloom's: Knowledge 31. Treaties are a source of international law. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Introduction to International Law KEYWORDS: Bloom's: Knowledge 32. Custom has no impact on international law. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Introduction to International Law KEYWORDS: Bloom's: Knowledge 33. Once a court decision is issued, it cannot be reversed without legislative action. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Synthesis 34. A curfew is an example of the type of law that would be found in city or town ordinances. a. True b. False ANSWER: True

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Application 35. The uniform laws on partnerships and corporations are found codified in the United States Code. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Synthesis 36. There are agency regulations at both the state and federal levels. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Application 37. Courts create and apply the common law. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Classifications of Law KEYWORDS: Bloom's: Knowledge 38. If you run a red light and hit and injure a pedestrian, both civil and criminal laws will apply. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Classifications of Law KEYWORDS: Bloom's: Synthesis 39. Most countries follow a philosophy of caveat emptor. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Introduction to International Law KEYWORDS: Bloom's: Knowledge 40. The Uniform Commercial Code (UCC) has been adopted in all 50 states. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Knowledge 41. The CISG is another name for the UCC. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Introduction to International Law KEYWORDS: Bloom's: Knowledge 42. Scalping ordinances are an example of criminal laws. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal

TOPICS: KEYWORDS:

Sources of Law Bloom's: Application

43. Context is a factor in types of legal systems. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Knowledge 44. Courts interpret all levels of statutes and regulations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law Classifications of Law KEYWORDS: Bloom's: Knowledge 45. Zoning is an example of private law. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Knowledge 46. A question about a licensing exam for a real estate agent is best answered by going to federal laws. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Sources of Law

KEYWORDS:

Bloom's: Application

47. Statutes that eliminate constitutional protections are still valid if they are federal statutes. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Synthesis 48. The U.S. Constitution does not apply to the states. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Comprehension 49. Judicial review is one means for clarifying the meaning of laws. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Application 50. Which of the following is not a purpose of law? a. keeping order b. influencing conduct c. promoting equality d. providing compromises e. All of the above are purposes of law.

ANSWER: e POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal

TOPICS: KEYWORDS:

Purposes of Law Bloom's: Analysis | Bloom's: Comprehension

51. Several states have recently enacted legislation to permit casino gambling on river boats docked in their states.

Gambling is permitted only while the boats are traveling in the rivers surrounding or inside the states. One governor issued the following statement: "It wouldn't matter how many gaming statutes are passed or how many legislatures passed them, the fact of the matter is that commercial gambling is wrong." This governor's views: a. indicate that he follows the positive law theory. b. indicate that he follows the natural law theory. c. indicate that he is against principles of justice. d. are most parallel to those of Oliver Wendell Holmes.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: The Theory of Law: Jurisprudence KEYWORDS: Bloom's: Analysis 52. Bill Blackburn is the new mayor of Oceanside, Washington. He discovered that the city-run utility requires a deposit of $50 from new customers in homes. However, new customers who reside in apartments, condominiums, or townhouses must pay a $500 deposit. Mayor Blackburn proposed that the utility deposit be $100 for all new customers. Blackburn's change fits best under which theory of law? a. positive law theory b. natural law theory c. theory of justice d. theory of custom ANSWER: c POINTS: 1 DIFFICULTY: Challening NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: The Theory of Law: Jurisprudence KEYWORDS: Bloom's: Analysis 53. Which of the following is not an example of a law that promotes equality? a. employment discrimination laws b. antisegregation statutes c. Social Security statutes d. trespassing statutes e. All of the above laws promote equality.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Purposes of Law

KEYWORDS:

Bloom's: Analysis

54. Which is the proper cite for the Code of Federal Regulations? a. CFR b. USC c. USCFR d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Knowledge 55. Which of the following is not part of the United States Code? a. 1933 Securities Act b. Sherman Act c. Equal Employment Opportunity Act d. Uniform Commercial Code e. All of the above are part of the United States Code.

ANSWER: d POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Knowledge 56. Which is the proper cite for Executive Orders? a. CFR b. USC c. E.O.O.C. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Knowledge 57. The UCC has been adopted by: a. all 50 states. b. over half the states. c. 49 states.

d. a quarter of the states, but it is rapidly gaining in adoptions.

ANSWER: c POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Knowledge 58. Enactments of federal administrative agencies are found in: a. the United States Code. b. the Code of Federal Regulations. c. U.S.C. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Knowledge 59. In "cite 15 U.S.C. sec. 77," the 15 represents: a. page number. b. volume number. c. the session of Congress when enactment occurred. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Knowledge 60. Uniform laws are: a. required to be adopted by states. b. written to make interstate business less complicated. c. found in USC. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law

KEYWORDS:

Bloom's: Comprehension

61. Legal and equitable remedies: a. are available in all courts in the United States. b. are awarded by separate courts of equity and law. c. are the same remedies. d. exist only in the United States. e. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Classifications of Law KEYWORDS: Bloom's: Knowledge 62. Which is not an example of private law? a. lease on a residential home b. lease on a commercial building c. zoning ordinances d. contract for the sale of a car e. employer regulations ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Classifications of Law Sources of Law KEYWORDS: Bloom's: Application 63. Which of the following is not true regarding constitutional law? a. exists at the state and federal levels b. establishes government structure c. establishes individual rights d. can be changed by Congress ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Comprehension 64. Phil's Corner Mart is a convenience store and gasoline station. A representative from the Environmental Protection Agency (EPA) has just notified Phil that there is some leakage from his underground gasoline storage tanks. The EPA

representative explains to Phil that he will be issuing a citation for violation of federal environmental laws and that Phil could be liable for clean-up costs and penalties. Which of the following statements is true? a. Phil has been charged with a crime. b. Phil has been charged with violation of a state statute. c. Phil is facing civil penalties for the violation. d. The EPA promulgates USC provisions.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Classifications of Law KEYWORDS: Bloom's: Analysis 65. A state statute that prohibits "baby buying" regardless of circumstances is a law that most closely follows which theory of jurisprudence? a. justice b. natural law c. positive law d. custom ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: The Theory of Law: Jurisprudence KEYWORDS: Bloom's: Comprehension 66. Administrative regulations are promulgated by: a. Congress. b. constitutional conventions. c. administrative agencies. d. state legislatures. e. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Knowledge 67. Which of the following subjects is not generally covered by local ordinances? a. zoning b. curfews c. dog licensing

d. partnerships e. traffic ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Application 68. Criminal laws: a. carry fines and/or imprisonment penalties. b. are enforced by individuals. c. are generally not enforced by government agencies. d. are the same as private laws. e. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Classifications of Law KEYWORDS: Bloom's: Synthesis 69. On faxed documents, it is often difficult to tell if a signature is authentic, both because clarity is a problem and also because signatures can be cut and pasted onto new documents from old documents. The Uniform Commercial Code provides that anything placed on a document with the intent to authenticate it is a binding signature for a valid contract.

The UCC definition: a. did not anticipate the technology problems arising from the fax. b. will apply even in these fax situations. c. is a common law definition. d. is part of federal law.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Characteristics of Law KEYWORDS: Bloom's: Analysis 70. Which of the following is not an example of a law that promotes order? a. disclosure statutes for securities sales b. curfew c. speed limits d. trespassing laws ANSWER: a

POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Purposes of Law KEYWORDS: Bloom's: Application 71. Changes in laws that are made because of changes in technology illustrate which characteristic of law? a. consistency b. pervasiveness c. flexibility d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Characteristics of Law KEYWORDS: Bloom's: Application 72. Which of the following is an example of a law that provides compromises? a. curfews b. antitrust laws c. traffic laws d. union/management laws ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Purposes of Law KEYWORDS: Bloom's: Application 73. The federal statute that carries imprisonment as a penalty for trading securities on inside information is an example of a: a. private law. b. civil law. c. procedural law. d. criminal law. e. all of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Classifications of Law

KEYWORDS:

Bloom's: Application

74. Common law: a. no longer exists today. b. began in the United States. c. exists only in England. d. was eliminated with the courts of equity. e. none of the above ANSWER: e POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Classifications of Law KEYWORDS: Bloom's: Comprehension 75. Which of the following is not a source of international law? a. custom b. treaties c. private law d. Code of Federal Regulations ANSWER: d POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Introduction to International Law KEYWORDS: Bloom's: Knowledge 76. The European Union: a. was disbanded by GATT. b. is an organization of European countries. c. has established trade barriers. d. has strict customs controls among the members.

ANSWER: b POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Introduction to International Law KEYWORDS: Bloom's: Comprehension 77. Ellen Benson has been operating a small catering business out of her home. Business growth is now requiring an office and kitchen facilities. Before expanding facilities, Ellen wishes to incorporate her business. Where would Ellen find the laws of incorporation? a. state statutes

b. zoning ordinances c. Code of Federal Regulations d. county ordinances ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Sources of Law KEYWORDS: Bloom's: Analysis 78. Which of the following is not a source of private law? a. lease b. employment agreement c. ordinance d. marriage prenuptial agreement ANSWER: c POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law Classifications of Law KEYWORDS: Bloom's: Application 79. When is precedent not followed? a. when circumstances have changed b. when technology has changed c. when there are changes in the factual circumstances from those in which the precedent was established d. It is possible that precedent would not be followed in all of the above circumstances.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Classifications of Law Characteristics of Law KEYWORDS: Bloom's: Synthesis 80. Anna Elleson has just opened her plumbing business in a small industrial park located within the boundaries of the city of Tempe, Arizona. Upon opening her plumbing business, Anna receives a notice from the landlord that her largest pieces of equipment (backhoes) may not be parked in the parking lot of the industrial park overnight. Anna asks why and the landlord explains that there is a restriction in her lease. The restriction against parking equipment in the complex is: a. enforceable as a private law. b. unenforceable unless a city zoning ordinance prohibits such parking. c. an unconstitutional regulation of private property. d. unenforceable unless signs are posted.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Sources of Law Classifications of Law KEYWORDS: Bloom's: Application 81. Anna's landlord of her business property in Tempe, Arizona notifies her that when the next lease period begins, her rent will increase $45 each month. Where can Anna go to determine her rights with respect to the rent increase? a. her rental contract b. Arizona Revised Statutes c. rent control ordinances d. all of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Application 82. Anna would like to incorporate her plumbing business, which is located in Tempe, Arizona. Where can she find out the requirements for incorporation? a. Tempe city ordinances b. her rental agreement c. Arizona Revised Statutes d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Application 83. Anna feels, after negotiating her first few plumbing contracts, that there is a pricing conspiracy involving other plumbing contractors that keeps her from really breaking into the market. Her business is located in Tempe, Arizona.

Where would Anna find the law on anticompetitive behavior? a. Arizona Revised Statutes b. United States Code c. Tempe city ordinances d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Application 84. John Renfro was recently downsized as part of a corporate restructuring at the jet propulsion firm where he works.

Renfro is confused, "Do I have any rights on my health insurance? What about unemployment?". Which sources of law would have information for Renfro in answering his questions? a. jurisprudence b. ordinances c. executive orders d. federal statutes (U.S.C.) ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Application 85. Jane Dixon is going to create a limited liability company for operating her business that does billing for physicians and medical laboratories. Jane is unsure whether her state allows for the creation of limited liability companies. Advise Jane on the best place to look for finding whether she can create a limited liability company in her state: a. United States Code b. Code of Federal Regulations c. municipal ordinances d. state statutes e. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Application 86. Wexler Corporation has established a new policy on employee e-mails. The policy reads: "All e-mail sent using the company server is the property of the company and is not private. Supervisors and managers shall have the right to review such e-mails. Inasmuch as the company is liable for e-mail content, it reserves the right to review it." The policy: a. is an example of private law. b. is an example of statutory law. c. is an example of constitutional law. d. is never enforceable. e. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law Classifications of Law KEYWORDS: Bloom's: Application 87. Which of the following is an example of law not enacted by an elected body? a. municipal law b. administrative regulations c. state codes d. United States Code e. all of the above are enacted by an elected body ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Comprehension 88. The CISG: a. is an example of uniform state laws. b. is an example of uniform international laws. c. is an example of a war convention among several nations. d. does not exist in the EU. e. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Introduction to International Law KEYWORDS: Bloom's: Knowledge 89. Jim Ream is a freshman at Woise State. Jim is a computer whiz and has found a way to download movies from DVDs and then transfer the files to others. “But, Jim,” you tell him, “that Grokster thing made all that illegal.” Jim responds, “That was music, this is movies. Completely different. No legal problems.” Jim: a. is correct because federal law does not apply to movies. b. is correct because the precedent can be distinguished. c. is incorrect because there is an infringement issue and Napster is precedent. d. Both a and b ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking

TOPICS: KEYWORDS:

Characteristics of Law Bloom's: Application

90. Frank Zelco is a manufacturer’s rep who represents the product lines of several manufacturers. Frank has worked with his brother, Dion, in their two person firm for almost five years. They have no written contract, but they split the profits.

Frank would like to create a business organization and put their arrangement in a written contract. Which sources of law will Frank need to help him do this? a. ordinances b. the UCC c. state laws on business organizations d. both b and c ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Application 91. During 2003, the White House asked its legal counsel for an interpretation of what constitutes torture of prisoners of war and who is considered a prisoner of war. What sources of law will the legal counsel need to consult? a. federal statutes b. international treaties c. ordinances d. both a and b ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law Introduction to International Law KEYWORDS: Bloom's: Application 92. The term “common law” has been in existence since: a. the end of the Civil War. b. the end of World War I. c. 1492. d. 1066.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Classifications of Law KEYWORDS: Bloom's: Knowledge

93. When the music companies filed suit against the peer-to-peer file sharers on copyrighted music, they wanted legal and equitable remedies. Which of the following is an equitable remedy? a. money damages for the loss of royalties on the downloaded copyrighted songs b. injunction against the facilitating software provider for the downloading c. civil penalties for the infringement d. both a and c ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Classifications of Law KEYWORDS: Bloom's: Application 94. A court of chancery: a. is another name for a court that provides equitable remedies. b. is another name for a court that provides legal remedies. c. never existed in the United States. d. handles decisions regarding lottery disputes at the state level.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Classifications of Law KEYWORDS: Bloom's: Application 95. Ralph Waters is a developer who is interested in developing a planned adult mobile home community in Mesa, Arizona. Ralph will need to incorporate and then learn the procedures necessary to begin the development. What levels of law will affect Ralph? What types of laws will apply to him?

ANSWER: Students should discuss the following: County ordinances - zoning City ordinances - zoning, permits State statutes - incorporation Federal statutes - mortgages (FHA, VA) Federal regulations - HUD Private law - contracts for homes POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Comprehension 96. Give a sample citation for each of the following statutes/regulations: a. United States Code b. Code of Federal Regulations ANSWER: 15 U.S.C. sec.77

12 C.F.R. sec.226 POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Knowledge 97. In confirmation hearings of nominated judges and justices, what role may stare decisis play in the questioning of the nominee?

ANSWER: Stare decisis means to “let the decision stand”. A judge is supposed to apply the law as written by a legislature. By following stare decisis, a judge will not disregard established precedent simply because the judge does not like it. Since Senators are not supposed to ask nominees about specific case holdings, the questions can try to avoid that by, for example, asking a nominee if she or he believes Roe v. Wade is a legal precedent and then asking if she or he believes in stare decisis.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Classifications of Law KEYWORDS: Bloom's: Comprehension 98. Discuss the differences between public and private law.

ANSWER: Criminal versus civil penalties Private enforcement versus public enforcement Governmental enactment versus individual enactment POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Classifications of Law KEYWORDS: Bloom's: Application 99. Give an example of the type of law found at each level of government noted: a. U.S. Constitution b. congressional enactments c. state legislation d. federal administrative regulations ANSWER: Bill of rights protections like First Amendment; structure of U.S. Constitution: government Congressional: Antitrust statutes Securities laws Internal Revenue Code State legs: Uniform Commercial Code Uniform Partnership Act Corporations laws Federal regs: IRS regs Truth-in-lending regs Securities regs

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Application 100. The Family Leave Act was passed by Congress in 1993. The Act requires certain employers (those of a certain size) to give 12 weeks of leave to their employees for the birth or adoption of a child or the care of an ill spouse, parent, or child. Answer the following questions: a. In which set of statutes will this new law be found? b. Is the statute a civil or criminal law? c. Is the statute an example of legislating natural law?

ANSWER: a. United States Code b. Civil Law Yes, in a way. The law legislates the right to be with family members when we are c. needed most.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Classifications of Law Sources of Law The Theory of Law: Jurisprudence KEYWORDS: Bloom's: Comprehension 101. Name three types of business arrangements governed, at least in part, by private law.

ANSWER: Leases; employment contracts; consulting contracts; sales contracts POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Classifications of Law Sources of Law KEYWORDS: Bloom's: Application 102. Draw the pyramid of laws and label each level of the pyramid with the appropriate source of law.

ANSWER: The students should reproduce the pyramid figure from chapter one with the sources of law from bottom to top being: constitution; federal legislative enactments; federal agency regulations; state constitutions; state legislative enactments; state agency regulations; county, city and borough laws; private laws; and the pyramid is surrounded by case law; all statutes are subject to interpretation.

POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Comprehension

103. Give the source of statutory law for each of the following topics: a. Uniform Revised Limited Partnership Act b. 1933 Securities Act c. law requiring bikes on public streets to be licensed d. no taking of property without just compensation e. establishment of the House of Representatives ANSWER: a. state law b. federal law c. ordinance d. constitution e. constitution POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Sources of Law KEYWORDS: Bloom's: Analysis 104. For each of the following actions, describe the sources of law the individuals should consult: a. obtaining a bicycle license b. incorporating a company c. determining how many feet of set back are required for residential construction d. selling securities on a national exchange ANSWER: a. ordinances b. state law c. ordinances d. federal statutory law - U.S.C. and SEC regulations, C.F.R. POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Analysis 105. Following the 1999 tragedy at Columbine High School in Littleton, Colorado, when 13 students were killed by two of their armed classmates there was discussion of Second Amendment rights and gun control regulations were passed by Congress. What sources of law were part of the discussions and legislation?

ANSWER: Second Amendment is part of U.S. Constitution and Congress passed laws that became part of U.S.C. POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Comprehension 106. Give an example of an executive order.

ANSWER: The book gives several examples such as executive branch agencies being required to first try alternative dispute resolution, the "gag rule" on abortion counseling, ban on federal funds for abortion, the classification of executive branch documents and the use of minority workers in

federal contracting. Others that are topical and in the news include the use of federal funds for stem-cell research and the declaration of national preserves.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Sources of Law KEYWORDS: Bloom's: Knowledge 107. In 2006, Congress passed the Pension Reform Act. The act amended the Employee Retirement Income Security Act (ERISA). The act was passed when several companies declared bankruptcy and were discharged from paying their pension obligations to retired employees. Discuss how the Pension Reform Act illustrates the purpose of law and what purposes emerge from the new legislation.

ANSWER: The pension reforms accomplished several purposes that are part of the law. First, the law restored stability to the economy as well as the lives of the retired workers by not eliminating their only source of income. Second, the law was used to enforce expectations and provide reassurance that we can plan on the basis of promises and law in existence at the time we were employees and savings funds in the pension plan. With this reassurance that pensions would be honored. Congress also imposed some new requirements on employers that required them to honor their promises. In all likelihood the reforms had a secondary goal of keeping order because there were threatened strikes and protests when the pensions were discharged.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Purposes of Law KEYWORDS: Bloom's: Comprehension 108. Jason Friedman developed software that allows his fellow students to use the university server for purposes of downloading movies, songs, etc. (all copyrighted), without being detected by the university, which monitors its users for purposes of avoiding vicarious copyright infringement charges and suits. Jason does not sell the software to his fellow students; he simply distributes it to them when they ask. Applying the decisions from the Grokster and Viacom decisions, which of the following statements is correct? a. Because Jason is not making any money from the software, he has done nothing to violate copyright laws. b. Because Jason's software does not involve the ability for the actual downloading of copyrighted materials, he has done nothing to violate copyright laws. c. Because Jason’s software is not copyrighted, he has done nothing to violate copyright laws. d. Because Jason’s software facilitates copyright infringement, he could be liable for that infringement.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Characteristics of Law KEYWORDS: Bloom's: Analysis 109. Animo runs a website that allows amateur photographers to post photographs that they have taken for purposes of getting their work recognized and with the hope that others will see their works and purchase them for use in ad,

textbooks, and other publications. Animo employees do not review the website, but they do remove photos when notified that a posted photo is not posted with permission and is copyrighted by someone other than the person who posted it.

Applying the decisions from the Grokster and Viacom decisions, which of the following statements is correct? a. Animo is liable for copyright infringement because it does not check its cite for possible violations. b. Animo is liable for copyright infringement once it is notified of a problem, but does not take action. c. Because Animo does not accept payment from photographers for the posting and cannot be liable for copyright infringement. d. Animo is liable for copyright infringement only if the owner of the copyright notifies it of the infringement.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Characteristics of Law KEYWORDS: Bloom's: Analysis 110. The laws on copyright ownership and infringement were passed by the U.S. Congress. Where would you find those laws? a. in the Uniform Commercial Code b. copyright is governed by the common law c. in the Federal Register d. in the United States Code ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Sources of Law KEYWORDS: Bloom's: Analysis

1. Business ethics provides a guarantee of profitability. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Why Business Ethics?

KEYWORDS: Bloom's: Knowledge 2. Unethical behavior is not necessarily illegal behavior. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: What is Ethics?

KEYWORDS: Bloom's: Knowledge 3. A lack of business ethics can result in a lack of business goodwill. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Importance of Ethics in Business Success and the Costs of Unethical Conduct KEYWORDS: Bloom's: Comprehension 4. Business ethics is the application of standards for moral reasoning to business dilemmas. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: What is Business Ethics?

KEYWORDS: Bloom's: Application 5. Situational ethics is also known as moral relativism. a. True

b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: What is Business Ethics?

KEYWORDS: Bloom's: Comprehension 6. Natural law and positive law are one and the same theories of moral standards. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: What is Business Ethics?

KEYWORDS: Bloom's: Comprehension 7. Milton Friedman's standard for business social responsibility is one that requires a company to do all that it can for its community. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Social Responsibility: Another Layer of Business Ethics KEYWORDS: Bloom's: Comprehension 8. The inherence school is one that follows the standard of society's interest coming first. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Social Responsibility: Another Layer of Business Ethics KEYWORDS: Bloom's: Comprehension 9. The enlightened self-interest school manager serves only the shareholder. a. True b. False

ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Social Responsibility: Another Layer of Business Ethics KEYWORDS: Bloom's: Comprehension 10. Invisible hand managers do not become involved in social issues. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Social Responsibility: Another Layer of Business Ethics KEYWORDS: Bloom's: Comprehension 11. The social-responsibility school holds that businesses profit by being responsive to society. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Social Responsibility: Another Layer of Business Ethics KEYWORDS: Bloom's: Comprehension 12. Business self-regulation has been effective in solving social problems. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Importance of Ethics in Business Success and the Costs of Unethical Conduct KEYWORDS: Bloom's: Application 13. Giving a false impression, although not actually an untruth, is still an ethical violation. a. True b. False ANSWER: True POINTS: 1

DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: What are the Categories of Ethical Dilemmas?

KEYWORDS: Bloom's: Comprehension 14. A code of ethics is an individual firm's behavior standard for employees. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Creation of an Ethical Culture in Business KEYWORDS: Bloom's: Knowledge 15. Most businesses today do not have a code of ethics. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Creation of an Ethical Culture in Business KEYWORDS: Bloom's: Knowledge 16. Condoning unethical behavior is an ethical breach. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: What are the Categories of Ethical Dilemmas?

KEYWORDS: Bloom's: Knowledge 17. Personal choices and lifestyles have no impact on one's business ethics. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Critical Thinking Creation of an Ethical Culture in Business Bloom's: Knowledge

18. The "front page of the newspaper test" is an application of whether conduct gives the appearance of impropriety. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Resolution of Business Ethical Dilemmas KEYWORDS: Bloom's: Application 19. The first question of the Blanchard/Peale model for resolving ethical dilemmas is whether the conduct is legal. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Resolution of Business Ethical Dilemmas KEYWORDS: Bloom's: Application 20. Whether everyone else does it is one method for evaluating the ethics of a particular course of action. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Why We Fail to Reach Good Decisions in Ethical Dilemmas KEYWORDS: Bloom's: Application 21. "I was just following orders," is a defense in law and a test for ethical behavior. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Why We Fail to Reach Good Decisions in Ethical Dilemmas

KEYWORDS:

Bloom's: Comprehension

22. Sexual harassment is a form of interpersonal as well as organizational abuse. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: What are the Categories of Ethical Dilemmas?

KEYWORDS: Bloom's: Application 23. A relativist asks why someone is engaged in unethical or illegal conduct before determining whether the conduct is right or wrong. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: What is Business Ethics?

KEYWORDS: Bloom's: Application 24. "That's the way it has always been done," is a phrase that often signals ethical difficulties. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Why We Fail to Reach Good Decisions in Ethical Dilemmas KEYWORDS: Bloom's: Analysis 25. The first question of the Wall Street Journal model is whether the conduct complies with the law. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Resolution of Business Ethical Dilemmas KEYWORDS: Bloom's: Knowledge

26. In the Parable of the Sadhu, the hikers are certain the religious pilgrim survived. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Why Business Ethics?

KEYWORDS: Bloom's: Comprehension 27. In the Parable of the Sadhu, the hikers' climb is successful. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Why Business Ethics?

KEYWORDS: Bloom's: Knowledge 28. Ethics can provide a strategic advantage for companies. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Importance of Ethics in Business Success and the Costs of Unethical Conduct KEYWORDS: Bloom's: Knowledge 29. A 2012 Josephson Institute study found nearly half of high school students copied homework from other students. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: What is Ethics?

KEYWORDS: Bloom's: Knowledge 30. Rationalization is an effective means of analysis for ethical issues.

a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Why We Fail to Reach Good Decisions in Ethical Dilemmas KEYWORDS: Bloom's: Application 31. An ethics officer and/or ethics hotline are both critical to an ethical culture in a company. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Creation of an Ethical Culture in Business KEYWORDS: Bloom's: Knowledge 32. The least corrupt countries have the most stable economies. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Ethical Issues in International Business KEYWORDS: Bloom's: Analysis 33. “Everybody else does it” is a valid test for determining whether conduct is ethical. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Why We Fail to Reach Good Decisions in Ethical Dilemmas KEYWORDS: Bloom's: Analysis 34. Warren Buffett follows the Front-Page-of-the-Newspaper test as a guide for his businesses. a. True b. False

ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Resolution of Business Ethical Dilemmas KEYWORDS: Bloom's: Application 35. Compliance with the law meets all ethical standards. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: What is Business Ethics?

KEYWORDS: Bloom's: Application 36. The level of cheating in high schools and colleges is declining. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: What is Ethics?

KEYWORDS: Bloom's: Knowledge 37. Sarbanes-Oxley is extensive congressional reform of federal laws that apply to corporations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Creation of an Ethical Culture in Business KEYWORDS: Bloom's: Knowledge 38. An anonymous reporting system is a requirement for companies under Sarbanes-Oxley. a. True b. False ANSWER: True POINTS: 1

DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Creation of an Ethical Culture in Business KEYWORDS: Bloom's: Knowledge 39. Having a code of ethics does not reduce a company’s sentence under the federal sentencing guidelines. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Creation of an Ethical Culture in Business KEYWORDS: Bloom's: Application 40. A company that self-reports a legal violation risks a higher penalty. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Creation of an Ethical Culture in Business KEYWORDS: Bloom's: Comprehension 41. Training employees in ethics is a factor that reduces a company’s sentence under the federal sentencing guidelines. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Creation of an Ethical Culture in Business KEYWORDS: Bloom's: Comprehension 42. The either/or conundrum is an example of moral relativism. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Critical Thinking Creation of an Ethical Culture in Business Bloom's: Application

43. Pressure contributes to the use of the either/or test for resolving ethical dilemmas. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Creation of an Ethical Culture in Business KEYWORDS: Bloom's: Application 44. The 2012 corruption index shows that Somalia is considered the most corrupt country. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Ethical Issues in International Business KEYWORDS: Bloom's: Knowledge 45. Trust is not critical to investment or economic success. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Ethical Issues in International Business KEYWORDS: Bloom's: Comprehension 46. Ethics consists of the unwritten rules we apply in both business and personal lives. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: What is Ethics?

KEYWORDS:

Bloom's: Knowledge

47. “When in Rome, do as the Romans do,” is an example of moral relativism. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: What is Business Ethics?

KEYWORDS: Bloom's: Application 48. Conflicts of interest can result in the use of quid pro quo. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: What are the Categories of Ethical Dilemmas?

KEYWORDS: Bloom's: Application 49. The 2012 Corruption Perceptions Index lists Denmark as the least corrupt country. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Ethical Issues in International Business KEYWORDS: Bloom's: Knowledge 50. “It’s a gray area,” if it applies, means that the conduct you are evaluating is ethical, so long as you stay in the gray area. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Why We Fail to Reach Good Decisions in Ethical Dilemmas KEYWORDS: Bloom's: Application

51. Rationalization is one form of ethical analysis. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Why We Fail to Reach Good Decisions in Ethical Dilemmas KEYWORDS: Bloom's: Comprehension 52. When Hilton Hotels hired Ross Klein and Amar Lalvani from Starwood Hotels, Klein and Lalvani took many electronic documents with them from Starwood. What they did was simply good business and presented no ethical problems. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: What are the Categories of Ethical Dilemmas?

KEYWORDS: Bloom's: Analysis 53. The “Tony Bennett Factor” refers to the importance of adhering to values as a key to long-term success. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Importance of Ethics in Business Success and the Costs of Unethical Conduct KEYWORDS: Bloom's: Comprehension 54. The regulatory cycle provides an opportunity for self-regulation during the latency stage. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Importance of Ethics in Business Success and the Costs of Unethical Conduct KEYWORDS: Bloom's: Synthesis

55. Once a legal loophole has been used to the advantage of business and the disadvantage of a customer, the number of options for self-regulation declines. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Importance of Ethics in Business Success and the Costs of Unethical Conduct KEYWORDS: Bloom's: Synthesis 56. When Danica Patrick stated she would take performance-enhancing drugs if she would never get caught, she was just saying what everyone else does in a highly competitive field, so it is not unethical. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Why We Fail to Reach Good Decisions in Ethical Dilemmas KEYWORDS: Bloom's: Analysis 57. To obtain the protections and benefits of the sentencing guidelines, companies must have a code of ethics. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Creation of an Ethical Culture in Business KEYWORDS: Bloom's: Application 58. To obtain the protections and benefits of the sentencing guidelines, companies must have some form of anonymous reporting. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Creation of an Ethical Culture in Business

KEYWORDS:

Bloom's: Application

59. Ethics are key to the success of economic systems. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Ethics Issues in International Business KEYWORDS: Bloom's: Knowledge 60. Corruption impedes economic development. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Ethical Issues in International Business KEYWORDS: Bloom's: Comprehension 61. The statement, "What's good for GM is good for the country," is an example of the thoughts of a manager from the: a. inherence school. b. enlightened self-interest school. c. social responsibility school. d. invisible hand school.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Social Responsibility: Another Layer of Business Ethics KEYWORDS: Bloom's: Analysis 62. According to the 2012 Corruption Perception Index, which country is perceived as the least corrupt? a. Denmark b. Somalia c. New Zealand d. Iceland ANSWER: c POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Critical Thinking Ethical Issues in International Business Bloom's: Knowledge

63. Which of the following statements is true about an ethical business? a. It will always be profitable. b. It will always satisfy all stakeholders. c. It will always survive over the long run. d. It will avoid the consequences of unethical behavior.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Importance of Ethics in Business Success and the Costs of Unethical Conduct KEYWORDS: Bloom's: Synthesis 64. Which of the following is not always a result of unethical behavior? a. loss of trust b. loss of goodwill c. loss of profits d. strained relations with regulators ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Importance of Ethics in Business Success and the Costs of Unethical Conduct KEYWORDS: Bloom's: Knowledge 65. A manager at a chemical weapons plant discovered that toxic by-products from chemical manufacturing at the plant are simply put in barrels and stacked near the boundary lines of the plant property. Children in the homes near these boundaries have an unusually high rate of kidney disease. The manager does not want to disclose the barrels' contents because he will lose his job and the town will lose its major employer. Which of the following ethical tests would support the manager's decision? a. Wall Street Journal model b. ethical relativism c. Blanchard/Peale model d. "front page of the newspaper test" ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: What is Business Ethics?

KEYWORDS: Bloom's: Evaluation

66. Which of the following models has a question that requires analysis of the effect of a decision on stakeholders? a. Blanchard/Peale b. Wall Street Journal model c. Does the conduct comply with the law? d. all of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Resolution of Business Ethical Dilemmas KEYWORDS: Bloom's: Comprehension 67. Milton Friedman's philosophy on corporate behavior is: a. a business serves its shareholders best by serving the community. b. a business serves its shareholders best by serving society at large. c. a business serves its shareholders best by serving regulatory interests. d. a business serves its shareholders best by serving shareholders.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Social Responsibility: Another Layer of Business Ethics KEYWORDS: Bloom's: Comprehension 68. An inherence school company would become involved in a residential property tax for schools only if: a. the community would benefit from the tax. b. government leaders are in favor of the tax. c. the issue would affect the company's performance. d. community leaders favored it.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Social Responsibility: Another Layer of Business Ethics KEYWORDS: Bloom's: Analysis 69. The invisible hand school and the inherence school: a. both serve society primarily. b. both refuse involvement in social issues. c. are proactive in legislation for social issues. d. believe long-term success comes from social responsibility.

ANSWER: b POINTS: 1

DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Social Responsibility: Another Layer of Business Ethics KEYWORDS: Bloom's: Analysis 70. Which of the following is not an ethical breach? a. taking things that do not belong to you b. giving or allowing false impressions c. perpetrating interpersonal abuse d. All of the above are ethical breaches.

ANSWER: d POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: What are the Categories of Ethical Dilemmas?

KEYWORDS: Bloom's: Knowledge 71. Which of the following is not a consequence of poor ethical choices by a company? a. loss of reputation b. loss of earning power c. additional regulation d. All of the above are consequences of poor ethical choices.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Importance of Ethics in Business Success and the Costs of Unethical Conduct KEYWORDS: Bloom's: Application 72. A parents' group and the National Association of Teachers is concerned about the lyrics on the albums of some rock music groups and has expressed the concern publicly. Capitol Records adopted a voluntary labeling system that provides warning labels on albums that contain explicit lyrics about sex, drugs, or satanic worship. Capitol's action is an example of a: a. nonmandated ethical response. b. waste of shareholder dollars according to Milton Friedman. c. violation of shareholder rights. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Importance of Ethics in Business Success and the Costs of Unethical Conduct

KEYWORDS:

Bloom's: Analysis

73. Which of the following is not a question for the Blanchard/Peale test for ethical behavior? a. Is it legal? b. Does it follow industry code? c. Is it balanced? d. How does it make me feel?

ANSWER: b POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Resolutions of Business Ethical Dilemmas KEYWORDS: Bloom's: Knowledge 74. Which of the following actions would be permitted under the Friedman philosophy of business involvement in social issues? a. a corporate contribution to a shelter program for runaway teenagers b. a corporate contribution to a pro-choice organization c. a corporate contribution to Mother Teresa's worldwide organization d. a corporate contribution to a mass transit system that will serve the offices of the company throughout the city ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Social Responsibility: Another Layer of Business Ethics KEYWORDS: Bloom's: Analysis 75. Under which of the schools is the corporation best served by serving only the shareholders? a. inherence school b. enlightened self-interest school c. invisible hand school d. social responsibility school ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Social Responsibility: Another Layer of Business Ethics KEYWORDS: Bloom's: Knowledge 76. Which school most parallels the Friedman model for social responsibility? a. inherence school b. enlightened self-interest school c. invisible hand school

d. social responsibility school ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Social Responsibility: Another Layer of Business Ethics KEYWORDS: Bloom's: Knowledge 77. An employer instituted a wellness program for all employees. The wellness program includes an exercise facility and several pay incentives for losing weight, quitting smoking, or beginning an exercise program. The program is not required under any state or national laws. Which of the following schools of social responsibility applies to this employer? a. inherence school b. enlightened self-interest school c. invisible hand school d. social responsibility school ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Social Responsibility: Another Layer of Business Ethics KEYWORDS: Bloom's: Analysis 78. A law firm in the Phoenix area provides "sick care" for employees' children. Sick care can be used when the child is too ill to go to school or its regular care facility. The law firm manager claims the program has cut down on sick days taken by employees to care for sick children. The program is an illustration of which type of social responsibility school? a. inherence school b. enlightened self-interest school c. invisible hand school d. social responsibility school ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Social Responsibility: Another Layer of Business Ethics KEYWORDS: Bloom's: Analysis 79. Which of the following is not an indication of a company environment ripe for unethical behavior? a. intense competition threatening survival b. employees with few or no personal values c. employees who are independent d. compensation incentive system tied only to sales ANSWER: c POINTS: 1

DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Creation of an Ethical Culture in Business KEYWORDS: Bloom's: Analysis 80. The policy on travel reimbursement at Public Service Company is that receipts for meals under $25.00 are not required. Internal auditors at Public Service have recently discovered that 80 percent of all meal submissions are in a range from $12.50 to $12.99. When one manager is questioned about his submissions and those of his employees he responds, "So, they make a little bit on meals - it helps their miserable salaries." The manager's evaluation: a. demonstrates an ethical commitment to his employees. b. is ethical since no one is really harmed. c. demonstrates a lapse in the company's ethical culture. d. is an example of Christian consequentialism.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Creation of an Ethical Culture in Business KEYWORDS: Bloom's: Comprehension 81. Which of the following is not necessarily a benefit of using ethics as a business strategy? a. firm's profits increase b. affords opportunity for planning c. creates goodwill in the community d. All of the above are benefits.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Why Business Ethics?

KEYWORDS: Bloom's: Comprehension 82. The "front page of the newspaper test": a. was developed by Laura Nash. b. is the same as the Wall Street Journal test. c. was developed by Blanchard/Peale. d. uses the perspective of an objective reporter.

ANSWER: d POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Resolution of Business Ethical Dilemmas

KEYWORDS:

Bloom's: Knowledge

83. In the Parable of the Sadhu: a. the lesson of personal values vs. organizational or group values is drawn. b. the lesson that the rules of business prevail over personal values is drawn. c. the lesson of survival of the fittest is given. d. the lesson of "every man for himself" is critical for business survival.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Why Business Ethics?

KEYWORDS: Bloom's: Comprehension 84. In international business: a. there are no ethical rules. b. corruption facilitates commerce. c. trust and honesty are required for investment and economic growth. d. a company must operate by a set of rules different from its U.S. rules.

ANSWER: c POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Ethical Issues in International Business KEYWORDS: Bloom's: Knowledge 85. Which of the following is not an element of the Nash test? a. Will I feel as good over the long term about this decision? b. Is it legal? c. What am I trying to accomplish with my decision? d. Could I discuss this decision with the affected parties?

ANSWER: b POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Resolution of Business Ethical Dilemmas KEYWORDS: Bloom's: Knowledge 86. Which of the following is not important for capitalism to function? a. consumer confidence b. absence of corruption c. grease payments d. risk takers comfortable with trustworthiness of government officials

e. All of the above are necessary for capitalism.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Ethical Issues in International Business KEYWORDS: Bloom's: Synthesis 87. Milton Friedman's view of the social responsibility of business is best described as: a. the social responsibility of a business is to make money within the rules of the game. b. the social responsibility of a business should be dictated by its managers. c. the social responsibility of a business requires it to be environmentally clean. d. businesses have no social responsibility. e. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Social Responsibility: Another Layer of Business Ethics KEYWORDS: Bloom's: Comprehension 88. Which of the two following groupings of ethical thought would you describe as opposites? a. natural law and moral relativism b. moral relativism and situational ethics c. natural law and religious beliefs d. moral absolutes and natural law e. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: What is Business Ethics?

KEYWORDS: Bloom's: Analysis 89. Which of the following ethical models incorporates conscience into the decision-making process? a. Front-page-of-the-newspaper test b. Wall Street Journal test c. Blanchard and Peale model d. Positive law e. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Resolution of Business Ethical Dilemmas KEYWORDS: Bloom's: Knowledge 90. Enron Corporation filed for bankruptcy following a number of revelations about its accounting procedures. Enron used a complex structure of corporations and off-the-books debt to mask its true financial picture from the markets. When asked about the propriety of Enron's reporting methods, many analysts have responded, "They simply did what most corporations do." Their comments: a. reflect analysis under the Nash model. b. reflect analysis under the Blanchard/Peale model. c. reflect rationalization. d. reflect Wall Street Journal analysis. e. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Why We Fail to Reach Good Decisions in Ethical Dilemmas KEYWORDS: Bloom's: Analysis 91. Enron's failure to disclose its off-the-book debts was legal. Which of the following ethical categories do you think apply to that type of financial reporting? a. balancing ethical dilemmas b. giving or allowing a false impression c. taking unfair advantage d. both b and c e. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: What are the Categories of Ethical Dilemmas?

KEYWORDS: Bloom's: Application 92. Which of the following statements best describes the ethical position of Enron executives? a. If it’s legal, its ethical. b. If we are under pressure to keep the stock price up, we do what it takes. c. Everybody does it. d. both a and b ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Critical Thinking What are the Categories of Ethical Dilemmas?

Bloom's: Analysis

93. Which of the following is not a requirement of Sarbanes-Oxley? a. code of ethics b. ethics hotline (anonymous) c. ethics officer d. both a and c ANSWER: d POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Creation of an Ethical Culture in Business KEYWORDS: Bloom's: Knowledge 94. Sarbanes-Oxley is: a. a philosophical school that serves society first b. federal legislation that imposed ethics requirements on corporations c. an international accounting treaty d. the former CEO of World.Com ANSWER: b POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Creation of an Ethical Culture in Business KEYWORDS: Bloom's: Knowledge 95. The Corruptions Perceptions Index compiled by Transparency International: a. shows that all countries’ governments are corrupt. b. shows a correlation between corruption and the lack of economic development. c. shows corruption is acceptable in most countries. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Ethical Issues in International Business KEYWORDS: Bloom's: Comprehension 96. An example of unethical behavior in the New York City and Boston marathon races was committed by: a. Elise McDonough b. Martha Stewart

c. Rosie Ruiz d. Danica Patrick ANSWER: c POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: What are the Categories of Ethical Dilemmas?

KEYWORDS: Bloom's: Knowledge 97. Jane Eyring works for PharmaMeds, Inc. Jane is a physician-scientist who is responsible for running the pilot tests on PharmaMed’s new oral spray medication for individuals with adult onset diabetes. Jane has discovered that if those in the test group do not spray the medicine correctly or if they spray for too short of a time, the medicine is not effective, or as effective, and insulin shock has resulted in a few of the patients. Jane talks with one of her colleagues who responds, “Look, there’s no need to stop the testing or the drug’s release. Just tell them in the test and in the brochures that will be with the spray, ‘Spray correctly! If you do not, you may not receive your necessary dose.’” Jane is not sure anyone can be 100% accurate in spraying all the time. What risks does the company run if the spray doesn’t work for the patients? a. fines and penalties b. litigation by patients who become ill c. damage to its reputation d. all of the above ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Importance of Ethics in Business Success and the Costs of Unethical Conduct KEYWORDS: Bloom's: Synthesis 98. Jane Eyring works for PharmaMeds, Inc. Jane is a physician-scientist who is responsible for running the pilot tests on PharmaMed’s new oral spray medication for individuals with adult onset diabetes. Jane has discovered that if those in the test group do not spray the medicine correctly or if they spray for too short of a time, the medicine is not effective, or as effective, and insulin shock has resulted in a few of the patients. Jane talks with one of her colleagues who responds, “Look, there’s no need to stop the testing or the drug’s release. Just tell them in the test and in the brochures that will be with the spray, ‘Spray correctly! If you do not, you may not receive your necessary dose.’” Jane is not sure anyone can be 100% accurate in spraying all the time. Whom is affected by Jane’s decision, regardless of what decision she makes? a. shareholders b. customers c. Jane and her reputation d. all of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Social Responsibility: Another Layer of Business Ethics KEYWORDS: Bloom's: Synthesis

99. Why does the late Dr. Milton Friedman feel that managers should not involve their companies in social issues? a. they are agents of the shareholders and should act in their best interests b. companies lose money when they are socially responsible c. economic studies show businesses that are socially responsible make less money d. all of the above ANSWER: a POINTS: 1 DIFFICULTY: Challenings NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Social Responsibility: Another Layer of Business Ethics KEYWORDS: Bloom's: Analysis 100. Which country is perceived as the most corrupt country in the 2012 Corruption Perceptions Index? a. Iraq b. Iran c. Somalia d. Singapore ANSWER: c POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Ethical Issues in International Business KEYWORDS: Bloom's: Knowledge 101. Tim Donaghy was a referee for the NBA. Mr. Donaghy began betting in 2003 on NBA games. He also provided tips to other gamblers on who would win games in which he was serving as a referee. Mr. Donaghy’s actions: a. were illegal under federal law, but not an ethical breach. b. were a conflict of interest. c. were not a breach of ethics because he used the money he made for a summer camp for underprivileged children. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: What are the Categories of Ethical Dilemmas?

KEYWORDS: Bloom's: Application 102. Michael Chertoff was the head of the Department of Homeland Security. Mr. Chertoff paid 25 cents to the federal government each time a personal fax came to him at his federal office. Mr. Chertoff’s actions: a. are meant to establish an effective tone at the top. b. are unnecessary because there is no ethical breach when you have no control over who sends faxes. c. are inconsequential for the agency.

d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Creation of an Ethical Culture in Business KEYWORDS: Bloom's: Application 103. “If you think what we’re doing now is bad, you should have seen 10 years ago at this company...” is an example of: a. ethical analysis. b. rationalization. c. comparative or relative ethics. d. both a and c ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Why We Fail to Reach Good Decisions in Ethical Dilemmas KEYWORDS: Bloom's: Application 104. Discuss the following advertising issues and determine whether the ads are ethical.

Mrs. Butterworth's syrup has a label that states there is "Grade A Butter" in the syrup. The fine print a. on the label describes "0.4 percent butter" in the "syrup product."

Carnation Coffeemate Lite is advertised as having "50% LESS FAT." The claim is true but there is b. less than 0.5 grams of fat eliminated from Lite as compared to regular Coffeemate. It is important to understand that the average American consumes 100 grams of fat per day.

ANSWER: The students should address the issues of whether the ad is legal (it is) and then move on to whether it is balanced and how it would make them feel to have a product using these descriptions. The example is similar to the manner in which some grocers display a. strawberries in the store: Only the ones on top are good, and the description or appearance may mislead the customer. The student should also discuss the fallout from such claims when consumers discover the discrepancy: loss of goodwill and public relations problems with resultant effect on sales.

Students should take the same approach as in answer (a) because the advantages of trying to use a health concern to sell products when there is little the product does to help can create a feeling of opportunism on the part of the company. In this case, the ad seems b. worse than the syrup because there are health consequences associated with this advertising. Presently the FDA and FTC are examining the issue of product advertising with respect to health claims and the use of the words lite, light, fat-free, and cholesterolfree.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: What are the Categories of Ethical Dilemmas?

KEYWORDS:

Bloom's: Analysis

105. Harvard University recently sold most of its investments in tobacco companies. The investments were quite profitable for the Harvard endowment. Derek Bok, who was Harvard's president at that time, said the divestiture was prompted by recognition of the dangers of smoking and concern over aggressive marketing tactics to promote tobacco products to teenagers and in countries where the dangers of smoking are not widely known. Bok stated the university was "motivated by a desire not to be associated as a shareholder with companies engaged in significant sales of products that create a substantial and unjustified risk of harm to other human beings." Harvard owned $58 million in tobacco company shares. An investment analyst noted that Harvard's action will have a "strong ripple effect across the country." Evaluate the actions of Harvard and evaluate the conduct of the tobacco companies to this point using both the Blanchard/Peale model and the moral reasoning process.

ANSWER: Neither Harvard nor the tobacco companies are doing anything illegal. Cigarettes are still lawful products in the United States and around the world, so the product is not illegal.

Harvard's actions are a reflection of how the investment makes them feel because of the medical harm to individuals and the aggressive marketing techniques. Under the moral reasoning process, Harvard uses the moral standard that they do not want to be associated with any activity that causes significant harm to other human beings. Data indicate that smoking produces such harm. Without divestiture, Harvard would be unethical since there is harm to individuals. The tobacco firms could apply the same reasoning process but have not.

Their data indicate the harm is not clear and they have not reached the Harvard conclusion.

Furthermore, there are other moral standards such as the freedom to choose on the part of the consumer that creates conflicts for the tobacco companies' moral reasoning process. Their attitude under Blanchard/Peale appears to stop after the question of whether the activity is legal.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: What is Business Ethics?

Resolution of Business Ethical Dilemmas KEYWORDS: Bloom's: Comprehension 106. The breakfast cereal aisle of the grocery store is a delightful place with boxes decorated with Barbie, Ninja Turtles, and Batman. The boxes are filled with toys, special offers, and plenty of sugar in the cereal. Several parent groups are concerned about the marketing techniques, the sugar levels, and the diet of American children. One group proposed regulation on the location of the boxes in the aisles (they should be placed in a way that eliminates the snazzy boxes from the child's view). Discuss the ethics of the cereal manufacturers in their marketing approaches. What action would a firm in the social responsibility school take?

ANSWER: Nothing illegal is being done, but the firms are taking advantage of childhood fantasies and cartoon images to sell cereals that may not be nutritionally sound. The children and their parents are stakeholders, and a socially responsible firm would take independent action or propose regulation regarding advertising constraints and cereal content and the placement of the boxes as temptations in the stores. The attitude would be that good nutrition is good for society and therefore the product should be nutritious.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Social Responsibility: Another Layer of Business Ethics KEYWORDS: Bloom's: Application

107. ABC, Inc. is the manufacturer of a line of bumper stickers and T-shirts that display the phrase "Sex, Drugs, and Rock & Roll." Evaluate the ethical posture of the firm.

ANSWER: The firm is doing nothing illegal. If it is answering to its shareholders, the sales are being made and it is following the Friedman creed. However, the socially responsible firm would pause to consider the effect such a phrase would have on society and the contribution it is making by seeing that the phrase is well distributed. The firm is making a profit, but at what cost?

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG - Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Social Responsibility: Another Layer of Business Ethics KEYWORDS: Bloom's: Analysis 108. The Alabama Attorney General recently filed suit in federal court in Montgomery, Alabama, alleging that Maytag secretly reconditioned defective microwave ovens at its Magic Chef plant in Anniston, Alabama; altered their serial numbers; and sold them as new. Janis Cooper, a vice president for Maytag, says the company is reviewing its procedures at the plant and that Maytag "considers the trust of our customers very important." Regardless of whether the allegations are true, what problems will Maytag experience as a result of the incident?

ANSWER: General loss of consumer trust; public relations difficulties; drop in sales; case is an excellent illustration of how even the taint of unethical behavior can be very costly to a firm.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Importance of Ethics in Business Success and the Costs of Unethical Conduct KEYWORDS: Bloom's: Analysis 109. A bar and restaurant located directly next to the edge of the campus at Arizona State University is called "The Dash Inn." The Inn is a favorite stop for students and is generally very crowded in the afternoon and evenings. When a student uses a credit card to pay his or her tab at the Dash Inn, the receipt for the student and the credit card data have recorded automatically at the top, "The Dash Inn Bookstore." Why do the receipts have this inscription at the top? What ethical problems do you see with this inscription?

ANSWER: The Dash Inn is attempting to help the students disguise from spouses and families their true spending habits. No one is likely to challenge receipts from a bookstore. But it does make the Dash Inn a participant, indeed the instigator, in an ethical breach of giving or allowing false impressions.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: What are the Categories of Ethical Dilemmas?

KEYWORDS: Bloom's: Application 110. Ralph Dewey is an assistant superintendent in the Maple Leaf school district. Mr. Dewey's job is to award contracts for all facilities management. Dewey awarded an asbestos removal contract to his brother's firm. Discuss the ethical issues. What models could have helped Dewey in his decision-making process?

ANSWER: Ralph has a conflict of interest in awarding the contract to his brother's firm.

Tests: Newspaper Test

Could I discuss this with the superintendent?

Is it balanced?

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Resolution of Business Ethical Dilemmas KEYWORDS: Bloom's: Application 111. Anna Woodruff is the purchasing manager for Allied Transport. One of Allied suppliers has just had a Schwinn bicycle delivered to Anna as a gift. What should she do?

ANSWER: Anna has a conflict. Those she awards contracts to are offering compensation.

POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: What are the Categories of Ethical Dilemmas?

KEYWORDS: Bloom's: Application 112. As video games have become more advanced, some of the games have also increased in violence. While the games are rated, many of the advertisements for the games are targeted for a market who are not supposed to buy them under the rating system. Discuss the ethical issues in these marketing strategies.

ANSWER: Students should discuss the social responsibility issues in touting violence in games for younger children and even adults. They might also discuss parental roles, the impact on society of these games, and the ethics of the marketing of the games. Students may also want to discuss whether or not the game companies and marketing companies have and/or use ethics officers.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Social Responsibility: Another Layer of Business Ethics KEYWORDS: Bloom's: Analysis 113. During the 2002 Winter Olympics in Salt Lake City, one of the French judges on the judging panel for the pairs ice skating competition indicated that she felt pressure to vote for the Russian team, the team that was awarded the gold medal for the competition. She indicated that there would be a quid pro quo, that is, the Russian judge would then vote for the French team in the ice dancing competition. Following the award of the medal in the pairs competition, there was international outcry because the silver medal Canadian duo had skated flawlessly whereas the Russian team had several flaws in its performance. The International Olympic Committee (IOC) awarded a second gold medal to the Canadian team and launched an investigation and vowed to reform judging practices and rules. Discuss the ethical issues in this case and be sure to discuss why these types of deals among judges create problems.

ANSWER: This is the introduction of corruption into this system - that of Olympic competition. To the extent that participants believe there is a fixed competition, they will choose to not compete or will begin to try to win using the existing system, thus introducing more corruption. When decisions are not based on merit and performance, the result is either the system collapses from no participation or corruption only increases. The same is true of economic systems, as discussed in the book.

POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Analytic United States - BUSPROG: Ethics TOPICS: What are the Categories of Ethical Dilemmas?

KEYWORDS: Bloom's: Application 114. Discuss some similarities of the countries listed as the most corrupt in the 2012 Corruption Perceptions Index.

ANSWER: The top 5 countries listed are Somalia, Korea (North), Afghanistan, Myanmar, and Uzekistan.

There is a strong correlation between perceived unethical behavior and the lack of economic development in a country.

POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Ethical Issues for International Business KEYWORDS: Bloom's: Knowledge 115. Google was asked by the Justice Department to turn over information about users who were running searches for child pornography. Google refused to turn over the information to the federal government. Discuss the ethical issues Google was grappling with in making its decision.

ANSWER: The two values in conflict are Google’s protection of its users’ privacy – divulging information – and permitting abuse (child pornography is indeed a pernicious activity and society has an interest in protecting children from such predatory activity). Google opted to have privacy as the greater value, but the students can explore the implications of that decision. They might also explore whether Google can get out of the either/or conundrum by perhaps warning users about its cooperation with authorities on federal investigations.

Computer users can then opt for a different avenue for search or take the risk of being identified.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Creation of an Ethical Culture in Business KEYWORDS: Bloom's: Comprehension 116. Sarah Blankenship was traveling for business. She took a cab from the office where she was doing her company assignment to the airport. As she paid the cab driver, she asked for a receipt and the driver insisted that she take two receipts, one that was blank so that she could fill it in and “get a little extra from her company for travel reimbursement.”

Sarah accepted the blank receipt and wonders if there would be any problem in submitting for reimbursement for an extra cab ride. “It wouldn’t be a lot,” she thinks to herself, “just a little bit that I can say was for purposes of getting to dinner one night while I was there.” Which of the following best describes Sarah’s situation? a. The cab driver committed the ethical breach, not Sarah, so she should use the receipt. b. There are many unreimbursed expenses when you travel for your company, so the extra receipt is a way of recouping those expenses. c. If Sarah submits the extra receipts for reimbursement she is taking something that does not belong to her. d. Sarah should save the receipt and use it another time when she forgets to get a receipt.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: What are the Categories of Ethical Dilemmas?

KEYWORDS: Bloom's: Application 117. Yucca Mountain is the proposed location for the disposal of spent nuclear fuel rods from the nuclear plants located in the United States. Who of the following are stakeholders in the decision about whether to open Yucca Mountain? a. Those who live in and around Yucca Mountain. b. The shareholders in nuclear utility plants. c. Those who live around nuclear plants where the rods are stored temporarily. d. a and c e. a, b, and c ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Social Responsibility: Another Layer of Business Ethics KEYWORDS: Bloom's: Analysis 118. President Obama said in a number of speeches advocating his health care plan, “If you like your health care plan, you can keep your health care plan, period.” After the law was passed and as its provisions took effect, about 5 million Americans had their policies canceled because the policies no longer met federal minimum standards for coverage. A provision in the law required insurers to cancel any policies that did not meet those federal standards. Which of the following categories does the President’s statement fall into? a. Giving or allowing a false impression b. Conflict of interest c. Personal decadence d. a, b and c ANSWER: a POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: What are the Categories of Ethical Dilemmas?

KEYWORDS: Bloom's: Application 119. Which of the following models for ethical analysis includes the following question: Could you share what you are about to do with your boss, friends, family? a. Blanchard/Peale b. Laura Nash c. Milton Friedman d. both a and b ANSWER: b POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Ethics

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Critical Thinking Resolution of Business Ethical Dilemmas Bloom's: Knowledge

120. The state troopers in one state have a motto, “Nine you’re fine; ten you’re mine,” which is the standard that they use for pulling over speeders on the state highways. In other words, if the posted speed limit is 55 mph, drivers can drive at a rate up to 64 mph without fear of getting a ticket. Which of the following best describes the ethical culture in the state? a. The troopers are following a standard of positive law. b. The troopers are following a normative standard. c. The troopers are following a headline test. d. The troopers are following the Blanchard/Peale standard.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Ethics STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: What is Ethics?

KEYWORDS: Bloom's: Application

1. A trial court generally has three judges who preside in a case. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Process of Judicial Review KEYWORDS: Bloom's: Knowledge 2. An appellate court's role is to take additional evidence after a trial has ended. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Process of Judicial Review KEYWORDS: Bloom's: Comprehension 3. The trial transcript, trial evidence, and appellate briefs are generally not available to the appellate court. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Process of Judicial Review KEYWORDS: Bloom's: Comprehension 4. A brief is written by the trial judge. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Process of Judicial Review KEYWORDS: Bloom's: Application 5. An appellate court reversal requires a unanimous vote by the reviewing judges. a. True

b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Process of Judicial Review KEYWORDS: Bloom's: Comprehension 6. When a case is remanded, the lower court must conduct additional proceedings. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Process of Judicial Review KEYWORDS: Bloom's: Comprehension 7. The number of appeals to the United States Supreme Court is the same as the number granted certiorari. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Comprehension 8. A plaintiff cannot begin a lawsuit until the court finds there is good cause for filing the suit. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Parties in the Judicial System KEYWORDS: Bloom's: Comprehension 9. The party who appeals a decision is called an appellant. a. True b. False ANSWER: True

POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Parties in the Judicial System KEYWORDS: Bloom's: Knowledge 10. In personam jurisdiction is the authority of a court over the subject matter of the case. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Concept of Jurisdiction KEYWORDS: Bloom's: Knowledge 11. Decisions of the federal district court are reported in the Federal Reporter. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Knowledge 12. Federal district courts are courts of original jurisdiction. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Knowledge 13. There are 13 federal judicial circuits. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy

NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Knowledge 14. Decisions of the U.S. Courts of Appeal are reported in the Federal Supplement. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Knowledge 15. The U.S. Court of Appeals is a court of original jurisdiction. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Knowledge 16. The U.S. Supreme Court has no original jurisdiction. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Comprehension 17. The opinions of the U.S. Supreme Court must be unanimous. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal

TOPICS: KEYWORDS:

The Process of Judicial Review Bloom's: Knowledge

18. State supreme court decisions can be appealed to the U.S. Supreme Court. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The State Court Systems KEYWORDS: Bloom's: Knowledge 19. Small claims courts are state courts of original jurisdiction in which minimal damage suits are tried. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The State Court Systems KEYWORDS: Bloom's: Knowledge 20. Regional reporters carry the opinions of state appellate and supreme court decisions. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The State Court Systems KEYWORDS: Bloom's: Knowledge 21. A court that has subject matter jurisdiction over a case also has in personam jurisdiction over the case. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Concept of Jurisdiction KEYWORDS: Bloom's: Comprehension

22. Long-arm statutes give courts power to take jurisdiction over parties in other states in some cases. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: In Personam Jurisdiction of Courts KEYWORDS: Bloom's: Comprehension 23. The doctrine of "minimum contacts" is one of fairness in extending in personam jurisdiction. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: In Personam Jurisdiction of Courts KEYWORDS: Bloom's: Application 24. On appeal, respondent is another name for appellant. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Parties in the Judicial System KEYWORDS: Bloom's: Comprehension 25. All states have a general trial court of original jurisdiction. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The State Court Systems KEYWORDS: Bloom's: Knowledge 26. The principle of stare decisis requires that all similar cases be decided the same way.

a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Doctrine of Stare Decisis KEYWORDS: Bloom's: Comprehension 27. A court can have in personam jurisdiction over an out-of-state defendant by the defendant's consent. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: In Personam Jurisdiction of Courts KEYWORDS: Bloom's: Application 28. Federal district courts are the general trial courts of the federal system. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Knowledge 29. An appellate court has the authority to order a new trial. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Process of Judicial Review KEYWORDS: Bloom's: Comprehension 30. The International Court of Justice can compel parties to appear before it. a. True b. False

ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The International Courts KEYWORDS: Bloom's: Knowledge 31. The federal courts in the United States have jurisdictional authority over all cases, parties, and disputes in which a U.S. firm is involved. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Application 32. Generally, three judges review a case at the court of appeals level in both the state and federal levels. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Process of Judicial Review KEYWORDS: Bloom's: Application 33. A case that is remanded requires further procedures. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Process of Judicial Review KEYWORDS: Bloom's: Comprehension 34. If any mistake is made in a case, it is reversible error. a. True b. False ANSWER: False

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Process of Judicial Review KEYWORDS: Bloom's: Comprehension 35. State supreme courts have original jurisdiction in some circumstances. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The State Court Systems KEYWORDS: Bloom's: Knowledge 36. Diversity of citizenship and a claim of $75,000 or more and a federal question are required for a federal district court to take jurisdiction on a case. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Comprehension 37. A party can raise new evidence in a case through its brief. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Process of Judicial Review KEYWORDS: Bloom's: Comprehension 38. An appellate court can require that a new trial be held. a. True b. False ANSWER: True POINTS: 1

DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Process of Judicial Review KEYWORDS: Bloom's: Application 39. A reversible error occurs only when evidence rules were violated. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Process of Judicial Review KEYWORDS: Bloom's: Comprehension 40. Oral arguments are not allowed in appellate courts. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Process of Judicial Review KEYWORDS: Bloom's: Knowledge 41. A brief is a witness's testimony at trial. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Process of Judicial Review KEYWORDS: Bloom's: Knowledge 42. The U.S. Courts of Appeal use a writ of certiorari process for appeals. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal The Federal Court System Bloom's: Application

43. Specialty courts exist in both the state and federal systems. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System The State Court Systems KEYWORDS: Bloom's: Knowledge 44. A case in which the constitutionality of the USA Patriot Act is challenged would be brought in state court. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Application 45. The Supreme Court grants certiorari in about 25% of the cases that are appealed to it. Of that number, nearly all have oral arguments and receive a written opinion from the Court. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Knowledge 46. An en banc hearing is one in which all the judges participate. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal The Federal Court System Bloom's: Knowledge

47. Bankruptcy courts are the only courts in the state or federal system that handle bankruptcy declarations and proceedings. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Comprehension 48. Justices of the U.S. Supreme Court are nominated by the President of the United States and are confirmed by the Senate. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Knowledge 49. U.S. Supreme Court cases are generally heard by three judges. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Knowledge 50. U.S. Supreme Court opinions are reported in three different reporter series. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal The Federal Court System Bloom's: Knowledge

51. True small claims courts do not permit lawyers to represent the parties in the proceedings. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The State Court Systems KEYWORDS: Bloom's: Comprehension 52. If a plaintiff’s home country provides an adequate remedy for a wrong, the case cannot be heard in the United States. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The International Courts KEYWORDS: Bloom's: Comprehension 53. A reversible error is: a. any mistake made in a case. b. one that might have affected the outcome of a case. c. determined during a motion for summary judgment. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Process of Judicial Review KEYWORDS: Bloom's: Comprehension 54. Case precedent is: a. always followed. b. followed if it is within the state. c. examined in each case and is always followed. d. part of the doctrine of stare decisis. e. none of the above ANSWER: d

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Doctrine of Stare Decisis KEYWORDS: Bloom's: Comprehension 55. When a case is remanded: a. it is affirmed. b. it is sent back to the trial court. c. it is completed. d. precedent is not being followed. e. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Process of Judicial Review KEYWORDS: Bloom's: Comprehension 56. Dicta is the: a. rule of law in a case opinion. b. case cite. c. discussion of a decision. d. precedent in a case. e. none of the above.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Doctrine of Stare Decisis KEYWORDS: Bloom's: Comprehension 57. Precedent is not followed when: a. the facts of a case can be distinguished. b. a court believes that a change of law is socially or morally mandated. c. technology changes. d. all of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Doctrine of Stare Decisis

KEYWORDS:

Bloom's: Comprehension

58. An attorney: a. must reveal a client's confession of a crime. b. cannot represent a guilty party. c. must see that his/her client's rights are protected. d. can violate the law to protect a client.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Parties in the Judicial System KEYWORDS: Bloom's: Application 59. Which of the following names apply to the party who appeals the trial court decision? a. respondent b. appellant c. appellee d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Parties in the Judicial System KEYWORDS: Bloom's: Knowledge 60. In personam jurisdiction: a. refers to jurisdiction over the parties in a case. b. can be based on the subject matter of the case. c. is based on constitutional standards of residence. d. is only applied in federal courts.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Concept of Jurisdiction KEYWORDS: Bloom's: Comprehension 61. Which of the following is the general trial court of the federal system? a. federal district court b. Court of Claims c. U.S. Court d. none of the above

ANSWER: a POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Knowledge 62. In which of the following cases would there be federal subject matter jurisdiction? a. a case in which the Justice Department is prosecuting for criminal violations of the Sherman Act b. a case in which a Texas resident is suing a Wisconsin company for a refund of $1,000.00 c. a case in which two Arizona partners are suing each other d. a case in which the state attorney general is prosecuting a corporation for violation of state antitrust laws ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Synthesis 63. Which of the following reports the opinions of federal district courts? a. Federal Supplement b. Federal Reporter c. Federal district court opinions are not reported. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Knowledge 64. How many U.S. Courts of Appeal are there? a. nine b. at least one for every state c. thirteen d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Knowledge

65. How many federal district courts are there? a. nine b. at least one for every state c. thirteen d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Comprehension 66. A writ of certiorari: a. is issued for every case appealed to the U.S. Supreme Court. b. applies only to cases of original jurisdiction. c. is an order issuing a decision to hear a case. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Comprehension 67. A small claims court: a. is a court where diversity cases are heard. b. is a court where no attorneys are used. c. is a general jurisdiction court. d. is part of the federal system.

ANSWER: b POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The State Court Systems KEYWORDS: Bloom's: Knowledge 68. Regional reporters: a. are for the federal system. b. include the opinions of state supreme courts. c. include the opinions of the U.S. Supreme Court. d. are the same as the federal reporters.

ANSWER: b

POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The State Court Systems KEYWORDS: Bloom's: Knowledge 69. Which of the following would not be a cite for a U.S. Supreme Court opinion? a. 411 U.S. 292 b. 93 S. Ct. 1011 c. 43 L.Ed.2d 33 d. 798 F.2d 1214 ANSWER: d POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Knowledge 70. In which of the following courts would a trial for violation of the Foreign Corrupt Practices Act be held? a. state trial court b. federal district court c. U.S. Supreme Court since the case involves foreign jurisdictions d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Application 71. The minimum amount required for a federal diversity suit is: a. $10,000. b. $50,000. c. $75,000. d. There is no minimum amount if there is diversity.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Application

72. Which of the following is not a specialized court in the federal system? a. tax court b. bankruptcy court c. probate court d. All of the above are specialty courts in the federal system.

ANSWER: c POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Comprehension 73. Long-arm statutes: a. give state courts automatic jurisdiction over out-of-state defendants. b. have been ruled unconstitutional. c. are simply procedural statutes that still require "minimum contacts" for use. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: In Personam Jurisdiction of Courts KEYWORDS: Bloom's: Synthesis 74. At the U.S. Court of Appeals: a. there is a trial by jury. b. there are three judges. c. witnesses are permitted to testify. d. all of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Application 75. To initiate a lawsuit in the federal court system, the plaintiff would file a complaint in a: a. federal district court. b. U.S. Court of Appeals. c. U.S. Court of Claims. d. U.S. Tax Court.

ANSWER: a POINTS: 1

DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Application 76. Emma Samuels is a resident of St. Johnsbury, Vermont. She was injured in an auto accident when a resident of Burlington, Vermont, struck her car from behind. Emma wishes to bring suit to recover her medical costs and the costs of repair to her car. Emma's suit: a. is properly brought in federal court in Vermont because the drivers were residents of different cities. b. is properly brought in Vermont's general trial court. c. is properly brought in U.S. Court of Claims since two U.S. citizens were involved. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: In Personam Jurisdiction of Courts KEYWORDS: Bloom's: Analysis 77. In the citation 501 F.3d 29, the case can be found on what page? a. 501 b. 3 c. 29 d. There is not enough information given to answer the question.

ANSWER: c POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Knowledge 78. Ralph Waters operates a watch repair business in Mesa, Arizona. He orders most of his parts from out-of-state suppliers. He orders watch faces from a supplier in Escondido, California. The supplier does not have a sales force but relies on catalogues shipped to watch dealers throughout the country as his means of marketing. Ralph installed several of the suppliers' watch faces on his customers' watches. A strange chemical reaction between perspiration and the faces of the watches caused Ralph's customers to develop rashes and nausea, with some requiring hospitalization. Ralph wishes to bring suit to recover damages ($75,000) from the Escondido supplier. Which of the following statements is true? a. Ralph must bring suit in California to gain jurisdiction over the supplier. b. Ralph has a diversity action that can be brought in federal court. c. Ralph will not be able to bring suit in Arizona because there are no contacts in the state. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging

NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Analysis 79. Which of the following suits could be properly heard in federal district court? a. a suit between two contracting parties in one state over a UCC interpretation question b. a suit for damages of $50,000 between a citizen of Oregon and a citizen of Washington c. a suit challenging the constitutionality of a state's death penalty statute d. all of the above ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Analysis 80. Small claims courts are: a. federal specialty courts. b. also known as probate courts. c. also known as courts of claim. d. part of the state court system.

ANSWER: d POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The State Court System KEYWORDS: Bloom's: Knowledge 81. Ralph Watkins, owner of The Steak Pit restaurant in Billings, Montana, is suing Western Cornfed Beef, a Kansas City, Kansas, supplier, for breach of contract. Watkins refuses to pay $22,000 for steaks he claims were never delivered. Where will Watkins properly file suit? a. federal district court in Montana b. federal district court in Kansas c. state court in Montana d. state court in Kansas ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Analysis

82. Cosco Chemical, a U.S. corporation, operates a fertilizer plant in Honduras. An explosion at the plant killed 30 workers and injured 573 residents from the surrounding areas. Lawyers for the victims and their families have brought suit in federal district court in Texas, Cosco's state of incorporation and base of operations. The lawyers maintain the suits should be heard in the United States under U.S. standards. Under the law in Honduras, the greatest amount of compensation each victim could recover would be $400. The suit: a. can be properly heard in U.S. federal district court in Texas. b. must be dismissed for lack of a cause of action. c. must be returned to the courts in Honduras. d. can only be heard in the International Court of Justice.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The International Courts KEYWORDS: Bloom's: Analysis 83. Sandra Laughlin is a reporter for the Philadelphia Tribune. In an article in the Tribune about Justin Bieber, a singer and resident of Canada and Florida, Laughlin wrote an inaccurate statement about the singer's relationship with singer Miley Cyrus. The Philadelphia Tribune is a Pennsylvania newspaper owned by a Pennsylvania corporation. If Bieber wishes to file a libel suit (seeking $100 million in damages) against Laughlin and the Tribune, the suit: a. could be properly brought in federal district court. b. must be brought in Florida. c. must be brought in a state court. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Analysis 84. ValuJet, Inc. is an airline based in Florida. The airline flies from Florida locations to Atlanta to permit passengers to make connections to other airlines at that major hub. A ValuJet plane crashed just outside of Orlando, Florida, killing all 110 occupants aboard the flight. Among the 110 occupants was a family of 4 from Ohio, returning home from a Florida vacation. If the family's survivors wish to file suit against ValuJet, where would a court have jurisdiction over ValuJet? a. Ohio b. Florida c. Delaware d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: In Personam Jurisdiction of Courts: The Authority Over Persons KEYWORDS: Bloom's: Analysis

85. Which of the following is not a court of limited jurisdiction? a. probate court b. small claims court c. federal district court d. All of the above are limited jurisdiction courts.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Application 86. Stare decisis is a Latin term meaning: a. "equitable remedy". b. "let the decision stand". c. "private decision". d. "Congressional action".

ANSWER: b POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Doctrine of Stare Decisis KEYWORDS: Bloom's: Knowledge 87. During the criminal trial for former Governor Fife Symington of Arizona, an elderly member of the jury told the judge that she felt pressured by the other jurors to find him guilty. The judge removed the woman from the jury and Governor Symington was convicted. Which of the following describes the likely result if the governor appeals? a. There is no reversible error because jury deliberations are not part of the trial or evidence. b. There is a reversible error because of the possible prejudice to the governor in the dismissal of the juror. c. Appellate courts cannot reverse on questions about jury deliberations. d. There can be no reversal of the case absent some error in testimony or jury instructions. e. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Process of Judicial Review KEYWORDS: Bloom's: Analysis 88. In which system are bankruptcy courts located? a. Federal court system b. State court system

c. State lesser court system d. Municipal courts e. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Knowledge 89. Which of the following courts is not a court of original jurisdiction? a. U.S. Supreme Court b. City court c. Federal courts of appeals d. Probate court e. All of the above courts have some form of original jurisdiction.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Subject Matter Jurisdiction of Courts KEYWORDS: Bloom's: Synthesis 90. Sarah Sajak was sexually harassed at work. She filed a claim with the EEOC under Title 42 of the United States Code.

The EEOC has given her a right to sue letter, a requirement for her to be able to bring suit for damages for the harassment.

In which court must Sarah file her claim? a. State trial court b. Federal administrative court c. Federal district court d. Federal court of appeals since the agency has heard the case e. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Synthesis 91. If a case is reversed and remanded, it: a. is dismissed with no further proceedings. b. is reversed with no further proceedings. c. requires additional hearings or determinations at the trial court level. d. means that the lower court acted unconstitutionally.

e. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Process of Judicial Review KEYWORDS: Bloom's: Application 92. Which label is appropriate for the party appealing a case? a. respondent b. defendant c. appellant d. either a or c ANSWER: c POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Parties in the Judicial System KEYWORDS: Bloom's: Application 93. Which of the following is an example of a reversible error? a. misapplication of the law by the judge b. refusal to allow material testimony c. trial publicity d. a and b only ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Process of Judicial Review KEYWORDS: Bloom's: Synthesis 94. The U.S. Supreme Court grants certiorari: a. when state courts do not agree on a decision in similar fact patterns. b. when circuit courts do not agree on a decision in similar fact patterns. c. in all cases. d. only on cases tried in federal court.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System

KEYWORDS:

Bloom's: Synthesis

95. During the trial of Dennis Kozlowski, former CEO of Tyco, a juror’s identity was revealed and her picture was printed in two newspapers with stories that depicted her as the holdout in the deliberations. The juror received a threat on her life.

Requiring the juror to continue and deliberate in these circumstances: a. is reversible error. b. is standard procedure. c. is outlawed by in personam jurisdiction. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Process of Judicial Review KEYWORDS: Bloom's: Synthesis 96. Smitty’s is a bait and tackle shop near Lake of the Ozarks, Missouri, owned by Red Smith. Smitty’s has a website, www.smittys.com. Smitty’s Bait Shop is located in the Adirondacks in New York, owned by Buzz Smith, who also runs a catalogue business. When Buzz tried to get the website, www.smittys.com, for use with his catalogue sales, he discovered Smitty’s of Missouri. He filed suit in federal district court in New York for infringement. “Everyone will go to the site and think I don’t have catalogue merchandise! I’ll lose business.” Red says, “I’m in Missouri. How could anyone be confused? And, I don’t sell by catalogue or the Internet. And, I’m not going to New York to defend a pointless lawsuit.” a. Red is correct, New York has no jurisdiction over him. b. Buzz is correct. Red’s Internet site subjects him to New York jurisdiction. c. Neither is correct, the case belongs in state court. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: In Personam Jurisdiction of Courts KEYWORDS: Bloom's: Analysis 97. Xcruise.com is an Internet company that sells discount cruises over the Internet to customers throughout the United States. Xcruise.com has one office, located in Fargo, North Dakota. All of Xcruise.com’s employees, equipment and boats are located in either Miami or Libya. The Bottonskis, residents of Virginia, bought two first-class tickets on Xcruise.com’s Alaska cruise. Mrs. Bottonski was injured when she fell on a wet floor near the dinner buffet. What court is likely to have jurisdiction if Mrs. Bottonski brings suit to recover her $123,000 in medical bills? a. Virginia federal district court b. no court in the U.S.; Libya has jurisdiction c. state court only in North Dakota d. federal district court in North Dakota or Florida ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal In Personam Jurisdiction of Courts Bloom's: Analysis

98. An appeal of an IRS decision against you on your tax return would be heard in: a. state court. b. tax court. c. Federal District Court. d. U.S. Court of Appeal.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Application 99. The U.S. Department of Defense (DOD) is bringing suits against several contractors in Iraq who are alleged to have paid kickbacks to military personnel in order to win contracts. The DOD wants portions of the contract prices paid refunded by the contractors. The DOD suits against the contractors: a. must be heard in the U.S. Supreme Court. b. will be heard in the military courts of justice. c. will be appellate level case trials. d. will be heard in federal district court or the court of claims.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Comprehension 100. Mad Hatters, Inc. is a costume store based in Navajo County, Arizona. It has stores in Navajo, Maricopa, Pima and Pinal counties. Xeon Corporation entered into a contract for Mad Hatters to furnish 75 costumes for an ad campaign.

Xeon has its headquarters in Maricopa County, but has offices in Pima and Navajo Counties. Xeon has failed to pay for the costumes. Mad Hatters has brought suit in Superior Court, the trial court for Arizona. The county in which the suit is held is a question of: a. venue. b. fact. c. federal jurisdiction. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Subject Matter Jurisdiction of Courts: The Authority Over Content

KEYWORDS:

Bloom's: Analysis

101. Which of the following is not true of long-arm statutes? a. they are state jurisdiction statutes b. they are not subject to federal review c. they vary from state-to-state d. all of the above are not true ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: In Personam Jurisdiction of Courts KEYWORDS: Bloom's: Comprehension 102. Which of the following is an issue in subject matter jurisdiction determinations? a. the residence of the defendant b. the nature of the controversy c. the amount of the controversy d. all of the above are issues in subject matter jurisdiction ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Subject Matter Jurisdiction of Courts KEYWORDS: Bloom's: Comprehension 103. A traffic court: a. is a court of federal jurisdiction. b. is a court of limited jurisdiction. c. is an appellate court from small claims. d. both a and b ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The State Court Systems KEYWORDS: Bloom's: Application 104. Which is not part of the National Reporter System? a. Federal Supplement b. Pacific Reporter c. State supreme court decisions d. both a and c

ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The State Court Systems KEYWORDS: Bloom's: Comprehension 105. A lawyer who knows that his client is guilty of a breach of contract: a. must disclose the information to the court. b. commits an ethical violation by representing the client. c. must keep that information confidential. d. both a and b ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Parties in the Judicial System KEYWORDS: Bloom's: Application 106. Mrs. Phillips purchased a glass baking dish manufactured by Anchor Hocking Glass. She purchased the dish at a Thrifty Drug Store in Mesa, Arizona. Anchor Hocking manufactures its glassware in Ohio and distributes its products nationally. When Mrs. Phillips removed the baking dish from her oven (while making a casserole), the dish exploded and Mrs. Phillips was injured. Mrs. Phillips' attorney wants to bring a product liability lawsuit against Anchor Hocking in Arizona. Anchor Hocking does not believe it can be forced to defend a lawsuit in Arizona since it has no offices there.

Can the Arizona courts take jurisdiction?

ANSWER: In Phillips v. Anchor Hocking Glass, the Arizona Courts were permitted to take in personam jurisdiction over Anchor Hocking since: (1) Anchor Hocking distributed its products nationally, (2) the evidence and plaintiff were in Arizona, and (3) it was not unfair to require Anchor Hocking to defend a suit in Arizona since its products were there.

413 P.2d 732 (1966).

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: In Personam Jurisdiction of Courts KEYWORDS: Bloom's: Analysis 107. Diagram a typical state court system.

ANSWER: State Supreme Court

State Court of Appeals General Trial Court Lesser courts

Small claims

Justice of the Peace

City courts

Probate courts

POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The State Court Systems KEYWORDS: Bloom's: Knowledge 108. Allegheny Airlines is incorporated in Delaware and has flights throughout the states of Pennsylvania, Ohio, West Virginia, New Jersey, New York, and Connecticut, and also in Washington, D.C. Wayne Jones, a resident of Las Vegas, Nevada, is severely injured when an Allegheny flight carrying him from Pittsburgh to Johnstown, Pennsylvania, crashes on landing. Jones has damages of over $250,000. In what court can Jones properly bring suit and where?

ANSWER: There is diversity and a claim in excess of $75,000, so federal district court is appropriate.

The location is either Pennsylvania (site of the crash) or Delaware (principal place of business). Allegheny could not be required to defend a lawsuit in Nevada since it has no contacts there.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Analysis 109. Give five reasons why a court may choose not to follow precedent.

ANSWER: (1) Cases are factually distinguishable.

(2) Quality of precedent - may be from another state.

(3) Changes in technology - e.g., Sony case in Chapter 1.

(4) Moral and/or social values change - e.g., abortion.

Changes in society's needs - e.g., searches at airports needed because of increased (5) hijackings.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Doctrine of Stare Decisis KEYWORDS: Bloom's: Comprehension 110. Timberline Lumber, Inc., sued Teal Developers, Inc., because Teal had failed to pay a $43,000 bill owed to Timberline. Both companies are incorporated in Montana and operate only in Montana. Timberline lost at the trial and now wants to appeal the decision. Answer the following questions: a. What court would have jurisdiction over the suit? b. Who is the plaintiff? Who is the defendant? c. On appeal, who is the appellant? d. What grounds would cause the appellate court to reverse?

ANSWER: The case would be brought in the general trial court in Montana. Timberline is the plaintiff and Teal is the defendant. On appeal, Timberline is the appellant. The trial court must have committed a reversible error such as admitting evidence that should not have been admitted or giving incorrect jury instructions or allowing a biased juror to participate.

POINTS: 1

DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The State Court Systems Parties in the Judicial System The Process of Judicial Review KEYWORDS: Bloom's: Analysis 111. Gretta Grietham, a Michigan resident, purchased investment bonds from Lincoln Savings and Loan. Lincoln experienced some setbacks and has now been taken over by the Resolution Trust Corporation of the federal government.

Gretta's bonds are now worthless (she purchased $12,000 of the bonds). Gretta's attorney has advised her that she probably has a chance of recovery from the officers and directors for securities fraud under the 1934 Securities Exchange Act. Lincoln is a California corporation doing business in California with investors all over the country. Where and in what court could Gretta bring her suit?

ANSWER: Grietham has a federal statutory claim and could bring suit in federal district court. She need not have diversity nor the $75,000 for a right based on federal law.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Analysis 112. List international courts with consensual jurisdiction.

ANSWER: International Court of Justice (ICJ) (UN) Court of Justice of European Communities European Court of Human Rights Inter-American Court of Human Rights POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The International Courts KEYWORDS: Bloom's: Knowledge 113. List three ways your case would properly be within the jurisdiction of the federal district court.

ANSWER: United States is a party.

There is a federal question.

There is diversity of citizenship and claims of damages in excess of $75,000.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Knowledge 114. Name three courts in the federal system that are not courts of general jurisdiction.

ANSWER: Bankruptcy court

Court of claims Indian Tribal Court POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Knowledge 115. Adrienne Zhang, a resident of Beijing, China, took provera, a hormone, through tablets called Pro-V plus, manufactured by Eli-Shiley, a U.S. firm. Zhang experienced heart damage and wishes to recover. Where is her suit against Eli-Shiley properly brought and which law applies?

ANSWER: In China, if an adequate product liability remedy exists. If not, in the U.S. with U.S. standards applying.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The International Courts KEYWORDS: Bloom's: Application 116. Jane DeRonnee had carpet installed in her home and the carpet is not flat to the floor. In fact, it has so many waves that she and her friends and guests have been tripping over certain areas of her home. She has tried to have the carpeting fixed and has asked both the carpet retailer and the installer to solve the problem They have both refused. Walk Jane through the correct court system for her case. Explain to her where and how to take her case. Also explain to her what happens if she loses a case along the way.

ANSWER: Jane could take her case to small claims court where citizens can represent themselves. If she does not win there, she generally has a right to an appeal to the general trial court in the state for a trial de novo on the issues. If she loses at the trial court level, she can appeal the decision to the state court of appeals. If she loses there, she can petition to have her case heard by the state supreme court. It may or may not take the case on appeal. And should she lose at the state supreme court level, there is the U.S. Supreme Court. However, we should be honest with Jane. It is unlikely that the U. S. Supreme Court will take up her faulty carpet case. It is neither a social issue question or one that has produced a conflict in the circuits, the two general reasons for the U.S. Supreme Court to hear a case.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The State Court Systems KEYWORDS: Bloom's: Application 117. When would a business selling merchandise over the Internet be required to defend a lawsuit in a state in which it had no offices?

ANSWER: Something more than Internet contact is needed to subject a cyberspace company to the jurisdiction of courts in the states where it has customers: the presence of inventory, property ownership, or the presence of salespeople would be sufficient.

POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: In Personam Jurisdiction of Courts KEYWORDS: Bloom's: Comprehension 118. Describe the role of the London Commercial Court.

ANSWER: The London Commercial Court is a longstanding and respected court of arbitration. This court is chosen by many businesses for resolution dispute because of its experience as well as its understanding of commerce and commercial transactions.

POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The International Courts KEYWORDS: Bloom's: Knowledge DFA, a Kansas cooperative, has its principal place of business in Kansas City, Missouri. Bassett, an international commodities broker and a Canadian corporation, has its principal place of business in Toronto, Ontario. Bassett is not qualified to do business in Missouri; has no agent for service of process, offices, property, bank accounts, telephone listings, or employees there; and does not advertise or promote its business there. Between July 2009 and February 2011, Bassett purchased more than 3.5 million pounds of dairy products from DFA in about 80 transactions totaling $5 million.

The parties did not have a long-term contract, agreeing to each transaction individually by phone. Bassett communicated by phone and email with DFA's Missouri headquarters about delivery and billing. Bassett stopped paying on his account at DFA and DFA sued Bassett in Missouri for failure to pay. The district court dismissed the suit for lack of personal jurisdiction. The total amount due on the account was $220,000. Answer the following three questions based on this fact pattern.

119. Which of the following statements is correct about subject matter jurisdiction? a. Federal courts in the United States would have subject matter jurisdiction. b. Federal courts in the United States do not have subject matter jurisdiction because Bassett is from another country. c. Federal courts do not have jurisdiction because the amount in dispute does not meet the federal minimums for jurisdiction. d. Because this is a contract action and no federal statute is involved, the federal courts do not have jurisdiction.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Federal Court System KEYWORDS: Bloom's: Synthesis 120. Which of the following is correct about in personam jurisdiction? a. The courts of Missouri would have jurisdiction over the case because Bassett did business on a regular basis with a Missouri company. b. The courts of Missouri would not have jurisdiction because Bassett had no presence in the state. c. The terms of the contract would control whether the courts of Missouri had jurisdiction over Bassett. d. No state in the United States would have jurisdiction over Bassett.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: In Personam Jurisdiction of Courts KEYWORDS: Bloom's: Synthesis 121. What type of case is this? a. Small claims b. Court of claims c. Civil matter d. Bankruptcy matter ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: The Federal Court System KEYWORDS: Bloom's: Synthesis 122. The principle of stare decisis forbids a court from changing a doctrine already established judicially. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Doctrine of Stare Decisis KEYWORDS: Bloom's: Synthesis 123. Explain the attorney/client privilege.

ANSWER: The attorney/client privilege allows clients to communicate openly and candidly with their lawyers without the fear that the lawyer will be required to disclose the information revealed.

The information is protected by the lawyer under the rules of client confidentiality. There are only limited exceptions for the lawyer being required to disclose what was discussed, such as the client indicating an intent to commit a crime.

POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: How a Lawsuit Progresses: Discovery KEYWORDS: Bloom's: Comprehension

1. A lawsuit begins with the filing of a complaint or petition. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Complaint KEYWORDS: Bloom's: Knowledge 2. Statutes of limitations are always four years. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Complaint KEYWORDS: Bloom's: Knowledge 3. To be valid, a complaint must have every fact listed in it. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Complaint KEYWORDS: Bloom's: Application 4. A complaint must establish subject matter jurisdiction. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Complaint KEYWORDS: Bloom's: Comprehension 5. Venue is the subject matter jurisdiction of a court. a. True

b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Summons KEYWORDS: Bloom's: Comprehension 6. Specific performance is an equitable remedy. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Complaint KEYWORDS: Bloom's: Application 7. Injunctions are equitable remedies. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Complaint KEYWORDS: Bloom's: Application 8. The summons is the same document as the complaint. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Summons KEYWORDS: Bloom's: Comprehension 9. The complaint and answer are both pleadings. a. True b. False ANSWER: True

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: How Does a Lawsuit Start?

KEYWORDS: Bloom's: Comprehension 10. A default is entered when the defendant counterclaims. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Answer KEYWORDS: Bloom's: Comprehension 11. The plaintiff is the only party in a suit who can counterclaim. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Answer KEYWORDS: Bloom's: Comprehension 12. A motion for judgment on the pleadings is the same as a motion for summary judgment. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Seeking Timely Resolution of the Case KEYWORDS: Bloom's: Comprehension 13. A motion to dismiss must be filed before an answer is filed. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Seeking Timely Resolution of the Case KEYWORDS: Bloom's: Comprehension 14. A motion for summary judgment is appropriate only if there are no issues of fact. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Seeking Timely Resolution of the Case KEYWORDS: Bloom's: Knowledge 15. Interrogatories must be answered in writing and under oath. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: How a Lawsuit Progresses: Discovery KEYWORDS: Bloom's: Knowledge 16. A request for admission that is refused and later proved can carry a penalty of recovery of attorney's fees. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: How a Lawsuit Progresses: Discovery KEYWORDS: Bloom's: Comprehension 17. Depositions are generally taken in the courtroom. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal

TOPICS: KEYWORDS:

How a Lawsuit Progresses: Discovery Bloom's: Comprehension

18. Work product is discoverable. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: How a Lawsuit Progresses: Discovery KEYWORDS: Bloom's: Comprehension 19. Every trial requires a jury. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Comprehension 20. Voir dire is the process of screening prospective jurors. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Knowledge 21. A peremptory challenge is a challenge for cause. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Comprehension

22. During the plaintiff's case, the defendant conducts direct examination. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Comprehension 23. A prima facie case is one that can survive a directed verdict. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Comprehension 24. All hearsay is inadmissible as evidence. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Comprehension 25. Jury instructions explain to jurors how to elect a foreman. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Knowledge 26. A hung jury requires a retrial of the case.

a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Knowledge 27. If a judge grants a motion for a judgment NOV, the effect is a reversal of the jury verdict. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Comprehension 28. Arbitration proceedings have less stringent evidentiary standards than trials. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Types of Alternative Dispute Resolution KEYWORDS: Bloom's: Knowledge 29. In mediation, the disputing parties use a third party as a go-between to facilitate negotiations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Types of Alternative Dispute Resolution KEYWORDS: Bloom's: Knowledge 30. A mini-trial is a public method of dispute resolution. a. True b. False

ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Types of Alternative Dispute Resolution KEYWORDS: Bloom's: Knowledge 31. Early neutral evaluation is a means of alternative dispute resolution used prior to discovery. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Types of Alternative Dispute Resolution KEYWORDS: Bloom's: Knowledge 32. Rent-a-judge facilities are private operations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Types of Alternative Dispute Resolution KEYWORDS: Bloom's: Knowledge 33. Summary jury trials offer the perspective of a jury with a shortened version of the case. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Types of Alternative Dispute Resolution KEYWORDS: Bloom's: Knowledge 34. The results of an arbitration hearing are generally binding. a. True b. False ANSWER: True POINTS: 1

DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Types of Alternative Dispute Resolutions KEYWORDS: Bloom's: Knowledge 35. The results of mediation are generally binding. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Types of Alternative Dispute Resolutions KEYWORDS: Bloom's: Knowledge 36. In arbitration, the parties each have two arbitrators on the arbitration panel. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Types of Alternative Dispute Resolutions KEYWORDS: Bloom's: Knowledge 37. For evidentiary purposes, accountants' work product and attorneys' work product are treated the same. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Knowledge 38. Interrogatories are given under oath. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal How a Lawsuit Progresses: Discovery Bloom's: Knowledge

39. There is an absolute right to a jury trial in civil cases. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Knowledge 40. The effect of a counterclaim is to have the defendant also suing the plaintiff. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Answer KEYWORDS: Bloom's: Comprehension 41. In some states, unanimous jury verdicts are not required. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Knowledge 42. Rent-a-judge hearings are private hearings arranged by the parties to a dispute. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Types of Alternative Dispute Resolution

KEYWORDS:

Bloom's: Knowledge

43. Medarb is a combination of a trial and mediation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Types of Alternative Dispute Resolutions KEYWORDS: Bloom's: Knowledge 44. The results of a minitrial are always binding. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Types of Alternative Dispute Resolutions KEYWORDS: Bloom's: Knowledge 45. The parties select the arbitrator for arbitration. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Types of Alternative Dispute Resolutions KEYWORDS: Bloom's: Knowledge 46. The Federal Arbitration Act (FAA) permits mandatory arbitration in consumer contracts but has yet to be tested in litigation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Types of Alternative Dispute Resolutions KEYWORDS: Bloom's: Knowledge

47. The International Chamber of Commerce (ICC) is a private court. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of International Disputes KEYWORDS: Bloom's: Knowledge 48. The new discovery rules require lawyers and the parties to voluntarily disclose relevant information at the beginning of the discovery process. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: How a Lawsuit Progresses: Discovery KEYWORDS: Bloom's: Knowledge 49. Jury consultants are used before, during, and after trial. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Knowledge 50. There are constitutional and numerical limits on peremptory challenges. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Knowledge

51. Instructions for the jury are given by the lawyers in the case during their closing arguments. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Comprehension 52. A motion for a judgment NOV is heard by a court of appeals. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Comprehension 53. Under the new discovery rules, work product must also be turned over to the other parties in a case. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: How a Lawsuit Progresses: Discovery KEYWORDS: Bloom's: Comprehension 54. E-mail cannot be obtained during discovery. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: How a Lawsuit Progresses: Discovery KEYWORDS: Bloom's: Comprehension 55. A deposition can be used at trial. a. True

b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: How a Lawsuit Progresses: Discovery KEYWORDS: Bloom's: Knowledge 56. A summons is served on a defendant and a subpoena is served on a witness. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Types of Alternative Dispute Resolutions The Summons KEYWORDS: Bloom's: Comprehension 57. A directed verdict can occur immediately after the pleadings are filed. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Comprehension 58. Devices such as a Blackberry or an iPhone are exempt under the rules for business discovery in litigation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: How a Lawsuit Progresses: Discovery KEYWORDS: Bloom's: Application 59. Junk science can be excluded from evidence at trial. a. True b. False

ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Comprehension 60. Arbitration is not allowed when federal statutory rights are involved. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Types of Alternative Dispute Resolution KEYWORDS: Bloom's: Comprehension 61. An arbitration clause that requires a consumer to travel to another state for the arbitration hearing is void. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Types of Alternative Dispute Resolutions KEYWORDS: Bloom's: Comprehension 62. The rules of the AAA require the parties to be represented by an attorney. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Types of Alternative Dispute Resolutions KEYWORDS: Bloom's: Knowledge 63. In general it is okay for jurors to perform internet research concerning the case they are involved in during the case. a. True b. False ANSWER: False POINTS: 1

DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Application 64. Spoilation is the destruction of evidence that is needed in a case. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: How a Lawsuit Progresses: Discovery KEYWORDS: Bloom's: Knowledge 65. It is quite common for courts to overturn an arbitration award. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Types of Alternative Dispute Resolutions KEYWORDS: Bloom's: Knowledge 66. Mandatory arbitration is unconstitutional. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Types of Alternative Dispute Resolutions KEYWORDS: Bloom's: Knowledge 67. Which of the following is the first document filed in a lawsuit? a. complaint b. answer c. pleadings d. none of the above ANSWER: a POINTS: 1

DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Complaint KEYWORDS: Bloom's: Comprehension 68. Which of the following is not included in a complaint? a. statement of subject matter jurisdiction b. request for damages c. statement of venue d. a counterclaim e. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Complaint KEYWORDS: Bloom's: Comprehension 69. Which of the following is not a form of equitable relief? a. injunction b. money damages c. specific performance d. rescission of a contract e. All of the above are forms of equitable relief.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Complaint KEYWORDS: Bloom's: Knowledge 70. Which of the following accurately describes a summons? a. initial document filed in a suit b. served on the defendant c. need not be served so long as it is filed d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Summons KEYWORDS: Bloom's: Knowledge

71. A counterclaim is: a. made by a defendant. b. part of the complaint. c. part of the interrogatories. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Answer KEYWORDS: Bloom's: Knowledge 72. A default results when: a. the plaintiff fails to serve a summons. b. the defendant fails to file an answer in a timely fashion. c. a counterclaim is filed. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Answer KEYWORDS: Bloom's: Comprehension 73. This is the famous class action lawyer who is now in prison for attempted bribery of a federal judge. a. Russell Crowe b. Dickie Scruggs c. Zachary Scruggs d. Jeffrey Wigand ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Complaint KEYWORDS: Bloom's: Knowledge 74. A motion for summary judgment is: a. granted only if there are no factual issues. b. appropriate if there are no issues of law. c. decided by a jury. d. none of the above ANSWER: a

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Seeking Timely Resolution of the Case KEYWORDS: Bloom's: Comprehension 75. Which of the following is not a form of discovery? a. interrogatories b. requests for admissions c. pretrial conference d. depositions e. All of the above are forms of discovery.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: How a Lawsuit Progresses: Discovery KEYWORDS: Bloom's: Knowledge 76. Which of the following would not be discoverable in a contract suit requesting lost profits as damages? a. income tax returns of the business b. orders of merchandise c. expense records d. work product ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: How a Lawsuit Progresses: Discovery KEYWORDS: Bloom's: Application 77. Which of the following is a true statement about depositions? a. They are generally held in a courtroom. b. They are not taken under oath. c. They must be preceded by interrogatories. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: How a Lawsuit Progresses: Discovery KEYWORDS: Bloom's: Knowledge

78. Peremptory challenges: a. are challenges for cause. b. are generally limited in each case. c. require specific reasons for use. d. require proof of bias or prejudice of the juror. e. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Comprehension 79. Once a plaintiff has established a prima facie case: a. the case is won. b. the case can survive a directed verdict motion by the defendant. c. the defendant cannot present contradictory evidence. d. a judgment NOV is granted. e. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Comprehension 80. Jury instructions: a. are not given in all cases. b. explain the application of law to juries. c. are developed unilaterally by the judge. d. explain how a foreman is elected.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Comprehension 81. A motion for judgment NOV: a. is a motion for judgment notwithstanding the verdict. b. can only be made by the plaintiff. c. is made only before the verdict is returned.

d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Comprehension 82. Mediation is: a. the same as arbitration. b. used frequently in international disputes. c. regulated by the American Arbitration Association. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of International Disputes KEYWORDS: Bloom's: Comprehension 83. Voir dire is: a. the process for screening prospective jurors. b. the same as venue. c. used if peremptory challenges are planned. d. the same as a judgment NOV. e. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Comprehension 84. A summons: a. is served on the plaintiff. b. can be served by an officer of the court or by private licensed firms. c. need not be served if the complaint has been filed. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal

TOPICS: KEYWORDS:

The Summons Bloom's: Comprehension

85. Interrogatories: a. are served on nonparties only. b. must be answered under oath. c. must be used before a deposition can be scheduled. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: How a Lawsuit Progresses: Discovery KEYWORDS: Bloom's: Comprehension 86. ______ is replacing ______ as the preferred method of business dispute resolution. a. Litigation; arbitration b. Arbitration; mediation c. Mediation; arbitration d. Litigation; mediation ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Types of Alternative Dispute Resolution KEYWORDS: Bloom's: Comprehension 87. The party conducting cross-examination is: a. the party who did not call the witness. b. the party who called the witness. c. involved in voir dire. d. always the judge.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Comprehension 88. The time limit for a defendant to file an answer is: a. the statute of limitations. b. two years for personal injury suits. c. 20 to 30 days in most states.

d. four years for contract suits.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Answer KEYWORDS: Bloom's: Knowledge 89. Closing arguments are: a. presented by the judge. b. part of the jury instructions. c. presented by the plaintiff's attorney only. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Knowledge 90. A complaint filed in a lawsuit could not contain which of the following? a. a claim for money damages b. a claim for equitable remedies c. a claim for an injunction d. a counterclaim ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Complaint KEYWORDS: Bloom's: Comprehension 91. The ______ is the largest ADR provider in the country for commercial disputes. a. National Arbitration Forum b. American Arbitration Forum c. American Arbitration Association d. American Arbitration Forum ANSWER: c POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Types of Alternative Dispute Resolution

KEYWORDS:

Bloom's: Knowledge

92. A motion for judgment on the pleadings can be granted: a. if the complaint does not state a cause of action. b. if there are no factual issues. c. any time during the course of the trial. d. all of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Seeking Timely Resolution of the Case KEYWORDS: Bloom's: Application 93. A motion to dismiss can be granted: a. any time throughout the case. b. only after the plaintiff's case has been presented. c. only after the defendant's case has been presented. d. only if summary judgment is also appropriate.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Seeking Timely Resolution of the Case KEYWORDS: Bloom's: Application 94. Sam Echols was injured when he was struck in a crosswalk by a car driven by Ceila Jones. Echols' lawyer suspects that Ms. Jones was not wearing her contact lenses at the time of the accident as she is required to do by law. After Echols' lawyer files suit, how can she find out whether Ms. Jones was wearing her contact lenses? a. by subpoenaing Ms. Jones b. by a request to produce c. by a deposition of Ms. Jones d. The information is privileged and nondiscoverable.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: How a Lawsuit Progresses: Discovery KEYWORDS: Bloom's: Application 95. Sam Wasterson is the CEO of Galant, Inc. Galant is being sued by Webtech, a competitor, for antitrust violations.

Webtech's CEO says that he met with Wasterson three times in 1993. He explains, "Check his calendar. Check his secretary's logs!" The meetings are a critical part of the Webtech case. Webtech's lawyers: a. will not be able to obtain the calendar or logs because of the privilege.

b. will obtain the calendar and logs through mandatory discovery or a request for production. c. will have to show the relevance of the logs and calendars before they can get them. d. cannot obtain the calendar and logs because of privacy limitations.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: How a Lawsuit Progresses: Discovery KEYWORDS: Bloom's: Application 96. If privacy is an important requirement for resolution of a company's disputes, which of the following methods would you recommend? a. mediation b. rent-a-judge c. arbitration d. All of the above are private and would serve the company's needs.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Types of Alternative Dispute Resolution KEYWORDS: Bloom's: Application 97. The purpose of the new mandatory discovery provisions is to: a. remove the element of surprise from litigation. b. make litigation more of a quest for the truth. c. minimize discovery times and costs. d. All of the above are reasons mandatory discovery was adopted.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: How a Lawsuit Progresses: Discovery KEYWORDS: Bloom's: Synthesis 98. When is a motion for a judgment NOV granted? a. after the plaintiff has presented its case b. when the weight of the evidence is contrary to the jury's verdict c. when the pleadings of the plaintiff are insufficient to state a cause of action d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Comprehension 99. Hearsay: a. is never admissible in court. b. is unreliable evidence. c. can be used on cross-examination. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Comprehension 100. Which of the following methods of arbitration allows the parties input on the decision-maker(s)? a. peer review b. arbitration c. mediation d. all of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Types of Alternative Dispute Resolution KEYWORDS: Bloom's: Knowledge 101. Which of the following cannot be obtained during discovery in a case? a. e-mail from the defendant company's server b. attorney's notes for the defendant company c. medical records of an injured plaintiff d. defendant company internal memos e. All of the above can be obtained during discovery.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: How a Lawsuit Progresses: Discovery KEYWORDS: Bloom's: Application 102. Choose the answer that reflects the proper sequence of events in civil procedure:

a. complaint, subpoena, deposition, answer, interrogatories, summons b. complaint, deposition, answer, counterclaim, affirmative defense c. complaint, directed verdict, summary judgment, summons, answer d. complaint, summons, answer, counterclaim, discovery e. discovery, complaint, summons, answer, counterclaim ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: When You Are In Litigation KEYWORDS: Bloom's: Synthesis 103. Which of the following is a suggested policy on executive smartphone use? a. A mandatory password requirement for smartphones. b. A stated policy on deleting messages on smartphones. c. Smartphone configuration and archiving policies. d. All of the above.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: How a Lawsuit Progresses: Discovery KEYWORDS: Bloom's: Application 104. Which of the following methods of alternative dispute resolution involves a hearing? a. arbitration b. mediation c. negotiated settlement d. settlement conference e. All of the above involve hearings.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Types of Alternative Dispute Resolution KEYWORDS: Bloom's: Comprehension 105. Spoilation is: a. litigation over contaminated food. b. destruction of evidence needed for litigation. c. following stare decisis and dismissing a case. d. none of the above ANSWER: b

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: How a Lawsuit Progresses: Discovery KEYWORDS: Bloom's: Comprehension 106. The best means for obtaining access to a defendant company’s e-mail in litigation over an atmosphere of harassment is: a. deposition. b. summons. c. request for production. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: How a Lawsuit Progresses: Discovery KEYWORDS: Bloom's: Application 107. Jane has been dunned by her creditors for payment of her credit card bills. “But I have disputes over some of those charges, and I want to go to court under the Fair Credit Billing Act.” One of her creditors points out to Jane that there was an arbitration clause in the terms and conditions given to her when she was given her credit card. “Credit card rights are given by federal law. I don’t have to go to arbitration!” a. Jane is correct; federal credit laws prohibit arbitration. b. Jane is incorrect; she can be required to go to arbitration. c. Arbitration applies only to Truth-in-Lending Act issues. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Types of Alternative Dispute Resolutions KEYWORDS: Bloom's: Synthesis 108. Which of the following may not be included in the answer to a complaint? a. admission b. counterclaim c. denial d. all can be included ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal The Answer Bloom's: Comprehension

109. Sanctions for discovery abuse: a. are payments or a type of fine or penalty for not disclosing evidence. b. are unconstitutional. c. cannot include cash payments. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: How a Lawsuit Progresses: Discovery KEYWORDS: Bloom's: Knowledge 110. Investment banker, Frank Quattrone, sent an e-mail around to his employees reminding them about their e-mails and to “clean up those files.” The e-mail was sent when the SEC was investigating Mr. Quattrone’s employer, Credit Suisse First Boston. The destruction of the e-mails: a. could constitute spoilation. b. could constitute obstruction of justice. c. is fine if it is routine. d. both a and b ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: How a Lawsuit Progresses: Discovery KEYWORDS: Bloom's: Synthesis 111. The standard for admitting expert testimony in a trial is: a. the judge must find the expert is reliable. b. the judge must fine that the expert’s testimony is relevant. c. all expert testimony is admitted. d. both a and b ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Comprehension 112. My E-Medicine, Inc. is a company that offers prescriptions over the Internet. The company has a worldwide

customer base. A company based in France has alleged that My E-Medicine is selling a generic drug that violates the French company's patent. The company has filed suit against My E-Medicine in France and has sought to use the U.S. Marshal in the United States to serve process for the suit. Which of the following best describes the rights of My EMedicine? a. My E-Medicine can be required to go to France to defend the lawsuit because it sells its products there. b. My E-Medicine has violated the Computer Fraud and Abuse Act. c. My E-Medicine can challenge the jurisdiction of the U.S. Marshals here in federal district court. d. My E-Medicine is not responsible for the patent infringement of another company. e. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Issues in International Litigation KEYWORDS: Bloom's: Synthesis 113. When is a motion for a directed verdict properly made? a. after the defendant has filed its answer b. after summary judgment has been granted c. after the plaintiff has presented its case d. only at the appellate court level ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Comprehension 114. Amanda Reiss was injured at a wedding reception at a private home. Amanda tripped over a piece of rebar that was sticking from the end of one portion of a sidewalk leading to the front door. Amanda’s lawyer believes that the homeowners were aware of the rebar problem and that other guests to the home had tripped over it but not been injured.

How can Amanda’s lawyer get the information about the homeowner’s knowledge? a. he cannot because they are not required to talk with Amanda’s lawyers b. he can depose the homeowners c. he can depose others who have been guests d. both b and c ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: How a Lawsuit Progresses: Discovery KEYWORDS: Bloom's: Application 115. What are the sanctions for the failure to admit facts made through a request for admissions?

a. judgment is awarded against the party who failed to admit the facts later proven b. the cost of proving the facts not admitted may be assessed against the party who failed to admit those facts c. the case is dismissed d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: How a Lawsuit Progresses: Discovery KEYWORDS: Bloom's: Comprehension 116. Jack Knighton is an employee of PRG Consulting. He has been called for jury duty. One of PRG’s clients is Renar Corporation. Renar is the defendant in the case for which Jack has been called for the jury panel. The attorney for the plaintiff who is suing Renar: a. could have Jack struck from the panel for cause. b. cannot have Jack struck just because his company has the defendant as a client. c. has no recourse because the jury is a wild card in litigation. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Analysis 117. Who conducts cross-examination when the defendant is presenting its case? a. the defendant because the defendant always does cross-examination b. the plaintiff c. the judge because the burden of proof has shifted d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Knowledge 118. A prima facie case: a. is one that has met the elements of proof. b. is one that is dismissed following a motion for a directed verdict. c. is a term that applies in criminal law only. d. both a and c ANSWER: a

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Knowledge 119. What type of scientific/expert testimony requires a higher standard of review before it can be used in court? a. any academic studies b. any studies developed for use at trial c. any studies in an area in which experts differ d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Knowledge 120. If there is a hung jury: a. the case must be dismissed. b. the judge finds in favor of the defendant. c. the case can be retried. d. the judge can grant summary judgment.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Comprehension 121. Realty Partners, Inc. is being sued by a buyer who bought a home listed by Realty Partners. Realty earned a commission on the sale. The buyer is suing because the house has termites. Realty had obtained an inspector's report that described the home as "termite-free." Realty has brought the inspector into the lawsuit (added inspector as a crossclaimant). What type of information does Realty need? How can it be obtained?

ANSWER: Through discovery process: interrogatories, requests for production of documents, requests for admission, deposition of inspector.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: How a Lawsuit Progresses: Discovery KEYWORDS: Bloom's: Application 122. List the information that will be required to file a valid complaint on a breach of contract suit.

ANSWER:

(1) (2) (3)

Court and subject matter jurisdiction Venue Statement of facts - when contract entered into and its provisions; what was not performed Claim for damages - money and/or equitable relief such as change in behavior

(4) POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Complaint KEYWORDS: Bloom's: Knowledge 123. Outline the steps involved in litigation.

ANSWER: (1) Complaint (2) Service of summons and complaint (3) Answer Counterclaim (4) Motion for judgment on the pleadings (5) Discovery a. Interrogatories b. Depositions c. Requests for production d. Requests for admission (6) Pretrial conference (7) Trial Jury selection Opening statements Plaintiff's case Defendant's case Directed verdict motion Closing statements Jury instructions Jury deliberations Jury verdict Motion for judgment NOV Motion for a new trial Appeal POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: When You Are In Litigation KEYWORDS: Bloom's: Knowledge 124. Explain the differences between arbitration and litigation.

ANSWER: Arbitration Private Faster Less stringent procedural rules Relaxed rules of evidence Can be nonbinding

Litigation Public Slow moving Must follow procedure exactly Rules of evidence apply Results are binding

Expert can hear case No specific expertise - just a trial judge POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Types of Alternative Dispute Resolution When You Are In Litigation KEYWORDS: Bloom's: Comprehension 125. What is a hung jury and what is its effect?

ANSWER: A hung jury results when the jurors cannot agree on a verdict. The case must then be retried.

POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Comprehension 126. Describe the role of jury selection consultants.

ANSWER: These firms are used to help lawyers select those jurors who will be most sympathetic to their case. The firms use demographic data and attitude surveys to assist in selection. They can also be used during the trial to assist in the presentation of the case based on jurors' responses to lawyers, evidence, and witnesses.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Comprehension 127. List and describe the forms of alternative dispute resolution other than arbitration.

ANSWER: Mediation: Third party intervenes in an attempt to bring the disputing parties together.

Rent-a-judge: Private court used to hear case and reach a decision.

Private trial where each side presents the heart of its case for a third party Mini-trial: to review and offer a decision or resolution.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Types of Alternative Dispute Resolution KEYWORDS: Bloom's: Comprehension 128. Name and describe three types of motions that can be made prior to trial.

ANSWER: Motion to dismiss: Made when there is no cause of action stated in the complaint or when a court lacks jurisdiction.

Motion for judgment on the pleadings: Made when even if everything in the pleadings is correct, there is no cause of action stated.

Motion for summary judgment: Made when there are no factual issues, only a dispute of law.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Seeking Timely Resolution of the Case KEYWORDS: Bloom's: Analysis 129. Joan Evans has rented a storage locker at Storage 'R' Us for the past two years. She has discovered another storage locker facility that is nearby is climate-controlled, and only costs a few dollars more per month to rent. Joan has decided to end her lease at Storage 'R' Us and move her things to the climate-controlled facility. The management at Storage 'R' Us has refused to refund Joan's $35 security deposit. Joan's contract provides that if she sweeps out her locker and no damage is done, the deposit will be returned. Joan has swept the locker, and there is no damage in her unit. What suggestions can you give Joan for resolving the dispute?

ANSWER: Evans could try small claims court. She could have her case heard and need not have an attorney. Evans could also try a mediator or could possibly use a private court such as rent-ajudge. The important thing is to resolve the dispute without great expense since the amount involved is so small. But Evans will still have the opportunity to enforce her rights through the courts if other efforts fail.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Types of Alternative Dispute Resolution KEYWORDS: Bloom's: Evaluation 130. Explain the jurisdiction of courts within one nation over businesses from other nations.

ANSWER: If the business is operating, entering into contracts, or advertising in a country, it is subject to that country's regulations and laws and also its court's jurisdiction.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Issues in International Litigation KEYWORDS: Bloom's: Comprehension 131. Discuss the issues for businesses concerning potential litigation and portable devices such as smartphones and laptops.

ANSWER: Smartphones and laptops can be used outside of a physical workplace and may be treated as a personal device instead of a work device. In the event of litigation, the messages and other communications may be obtained by the opposing party. Companies need to be aware of its legal responsibilities and develop policies that protect the company and follow the legal requirements.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: How a Lawsuit Progresses: Discovery KEYWORDS: Bloom's: Application

132. What are the differences between arbitration and mediation?

ANSWER: Arbitration Mediation hearing discussions evidence recommendations decision no decision POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Types of Alternative Dispute Resolution KEYWORDS: Bloom's: Analysis 133. Discuss why mediation is replacing arbitration as the preferred method of business dispute resolution.

ANSWER: Arbitration has become thought of as too similar to litigation; since many businesses shifted to arbitration to avoid litigation, this is not viewed as a positive sign for business.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Types of Alternative Dispute Resolutions KEYWORDS: Bloom's: Analysis 134. List the types of costs a company involved in litigation experiences. List the costs that can result if litigation is not pursued.

ANSWER: Costs of litigating:

Legal costs Time costs (downtime) Image costs Capital costs Costs of not litigating:

Loss of copyright/tradename protection Public relations damages Maybe existence of the company POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Litigation versus ADR: The Issues and Costs KEYWORDS: Bloom's: Evaluation 135. Flozell Adams is a professional football player formerly with the Dallas Cowboys. He submitted a claim in arbitration against his agent, Roosevelt Barnes (according to the terms of their contract for fees and the union rules for settlement of player disputes with agents). He said Barnes owed him because of overpayment on his contracts that Barnes negotiated for him with the Cowboys. Adams was notified of the binding arbitration hearing date. When he arrived, he said he was unaware of his right to counsel and asked for a postponement of the hearing so that he could retain counsel.

His request was denied. The arbitrator found for Barnes for the contract for the eight seasons Adams played for the Cowboys. Barnes did not owe any money to Adams. In fact, the arbitrator found that Adams owed Barnes fees for his contracts for three of the Cowboys’ seasons. Adams then filed suit to have the arbitration award set aside because he said

the arbitrator was biased and that the arbitrator ignored the statute of limitations on some of the contracts. Which of the following best describes what the court can do about the arbitration award? a. Arbitration awards can be set aside if the finding is inconsistent with the law. b. Arbitration awards are rarely set aside. c. Arbitration awards can be set aside if the losing party feels the arbitrator was biased. d. Arbitration awards can be set aside only after an actual trial is held.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Types of Alternative Dispute Resolutions KEYWORDS: Bloom's: Evaluation 136. A jury selection firm working for a plaintiff in a slip-and-fall case culled through the jurors’ Facebook pages and found that one of the jurors had dated the plaintiff. Which of the following is correct about the plaintiff’s rights during jury selection? a. The juror can be removed for cause. b. Lawyers are not permitted to use information placed on Facebook for purposes of striking jurors. c. The juror cannot be removed for cause, but the plaintiff’s lawyer could use a peremptory challenge. d. The juror can be struck with a peremptory challenge, but the lawyer will have to give a reason.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Resolution of a Lawsuit: The Trial KEYWORDS: Bloom's: Analysis 137. John Redmond was not paid for trim carpentry work that he did for Brenda Knighton in her home. Ms. Knighton does not dispute that Redmond did the work, but she says that he waited too long to file the suit because the time for suit is measured from the time the work began, which was over 4 years ago, and not from the time she failed to pay, which was two years ago. The statute of limitations in their state is four years. Which of the following is a correct statement? a. The case must be dismissed because of the statute of limitations. b. The case qualifies for a directed verdict. c. The case can be decided on a summary judgment motion. d. The case can be dismissed on a judgment on the pleadings.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Seeking Timely Resolution of the Case KEYWORDS: Bloom's: Evaluation

1. Article I of the U.S. Constitution establishes the executive branch of government. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The U.S. Constitution KEYWORDS: Bloom's: Knowledge 2. Article III of the U.S. Constitution establishes the judicial branch of government. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The U.S. Constitution KEYWORDS: Bloom's: Knowledge 3. The executive branch of the federal government has no enforcement authority. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The U.S. Constitution KEYWORDS: Bloom's: Knowledge 4. The Bill of Rights contains the Commerce Clause. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The U.S. Constitution KEYWORDS: Bloom's: Knowledge 5. The Bill of Rights covers freedom of speech. a. True

b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The U.S. Constitution KEYWORDS: Bloom's: Knowledge 6. The Commerce Clause authorizes Congress to regulate interstate and international commerce. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Commerce Clause KEYWORDS: Bloom's: Knowledge 7. If the underlying activity Congress attempts to regulate is not economic in nature, authority for such regulation is not part of the Commerce Clause. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Commerce Clause KEYWORDS: Bloom's: Comprehension 8. The Supreme Court uses the direct and immediate effect test in reviewing congressional regulation of interstate commerce. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Commerce Clause KEYWORDS: Bloom's: Comprehension 9. States can never regulate interstate commerce. a. True

b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Commerce Clause KEYWORDS: Bloom's: Analysis 10. State regulation of commerce is controlled by both the commerce and supremacy clauses. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Commerce Clause State versus Federal Regulation of Business - Constitutional Conflicts: Preemption and the Supremacy Clause KEYWORDS: Bloom's: Analysis 11. One state can impose a tax on a corporation's property if the corporation does any business in the state. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Constitutional Standards for Taxation of Business KEYWORDS: Bloom's: Comprehension 12. A state cannot tax catalogue sales made to residents in the state from firms located outside the state. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Constitutional Standards for Taxation of Business KEYWORDS: Bloom's: Application 13. In supremacy clause cases, legislative intent of Congress is examined. a. True

b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: State versus Federal Regulation of Business - Constitutional Conflicts: Preemption and the Supremacy Clause KEYWORDS: Bloom's: Knowledge 14. In supremacy clause cases, the pervasiveness of the regulatory scheme is examined. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: State versus Federal Regulation of Business - Constitutional Conflicts: Preemption and the Supremacy Clause KEYWORDS: Bloom's: Comprehension 15. The states' police powers are subject to a balancing test. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Commerce Clause KEYWORDS: Bloom's: Comprehension 16. During President Obama’s State of the Union address in 2009, Justice Alito was captured on camera visibly disagreeing with the President about the outcome of the Citizens United case. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: First Amendment Rights and Corporate Political Speech KEYWORDS: Bloom's: Evaluation 17. Corporate political speech is afforded the same First Amendment protection as individual political speech.

a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: First Amendment Rights and Corporate Political Speech KEYWORDS: Bloom's: Comprehension 18. The Fifth and Fourteenth Amendments provide procedural due process protections for corporations and individuals. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Due Process KEYWORDS: Bloom's: Comprehension 19. An unconstitutionally vague statute cannot be a basis for criminal prosecution. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Substantive Due Process KEYWORDS: Bloom's: Comprehension 20. Substantive due process is the same as procedural due process. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Due Process Substantive Due Process KEYWORDS: Bloom's: Comprehension 21. The First Amendment does not cover corporate ads on ballot propositions. a. True

b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: First Amendment Rights and Corporate Political Speech KEYWORDS: Bloom's: Application 22. Corporate political speech enjoys less First Amendment protection than individual political speech. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: First Amendment Rights and Corporae Political Speech KEYWORDS: Bloom's: Comprehension 23. Procedural due process rights exist in administrative, civil, and criminal proceedings. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Due Process KEYWORDS: Bloom's: Comprehension 24. A state law that covers all businesses cannot give in-state businesses an advantage over out-of-state businesses. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Commerce Clause KEYWORDS: Bloom's: Comprehension 25. Advertising by professionals is permitted because of First Amendment protections. a. True b. False ANSWER: True

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: First Amendment Protection for Advertising KEYWORDS: Bloom's: Comprehension 26. Corporations cannot make political contributions because of First Amendment constraints. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: First Amendment Rights and Corporate Political Speech KEYWORDS: Bloom's: Comprehension 27. The U.S. Supreme Court has always found interstate commerce is involved regardless of how small the business or its impact. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Commerce Clause KEYWORDS: Bloom's: Synthesis 28. The U.S. Supreme Court has prohibited regulation of advertising by professionals. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: First Amendment Protection for Advertising KEYWORDS: Bloom's: Application 29. Chief Justice Roberts not only clerked for former Chief Justice Rehnquist but also succeeded him as Chief Justice of the Supreme Court. a. True b. False ANSWER: True

POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Commerce Clause KEYWORDS: Bloom's: Knowledge 30. The Ollie’s Barbeque case and the Morrison case have nothing in common legally because one involved interstate commerce and the other case involved intrastate commerce. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Commerce Clause KEYWORDS: Bloom's: Comprehension 31. The First Amendment prohibits state regulation of false advertising. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: First Amendment Protection for Advertising KEYWORDS: Bloom's: Application 32. To be constitutional, federal statutes regulating commerce within a state must involve some economic activity. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Commerce Clause KEYWORDS: Bloom's: Synthesis 33. There are no limitations on what constitutes an effect on interstate commerce for purposes of constitutionality of a federal statute. a. True b. False ANSWER: False

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Commerce Clause KEYWORDS: Bloom's: Synthesis 34. Federal regulation of the Internet is unconstitutional under the Commerce Clause. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Commerce Clause KEYWORDS: Bloom's: Application 35. California cannot impose taxes on a corporation that is incorporated in Arizona and doing business in California and thirty-two other states. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Constitutional Standards for Taxation of Business KEYWORDS: Bloom's: Comprehension 36. A statute that requires only out-of-state milk companies to undergo additional testing for their products is unconstitutional. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Commerce Clause KEYWORDS: Bloom's: Application 37. So called “soft money” donations are protected under the First Amendment. a. True b. False ANSWER: True

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: First Amendment Rights and Corporate Political Speech KEYWORDS: Bloom's: Knowledge 38. The Fifth Amendment and Fourteenth Amendment are the “due process” amendments. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Due Process Substantive Due Process KEYWORDS: Bloom's: Comprehension 39. Citizens United involves the genesis of the sub-prime loan scandals. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: First Amendment Rights and Corporate Political Speech KEYWORDS: Bloom's: Analysis 40. McCain-Feingold refers to the Bipartisan Campaign Reform Act of 2002. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: First Amendment Rights and Corporate Political Speech KEYWORDS: Bloom's: Knowledge 41. The Nike dispute dealt with the right of a company to publish editorials and letters to the editor in its defense. a. True b. False ANSWER: True POINTS: 1

DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: First Amendment Protection for Advertising KEYWORDS: Bloom's: Application 42. States have authority over international commerce that comes within their borders and can circumvent U.S. treaties. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Commerce Clause KEYWORDS: Bloom's: Knowledge 43. Taxes on sales across the Internet will be subject to constitutional protections and constraints. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Constitutional Standards for Taxation of Business KEYWORDS: Bloom's: Knowledge 44. The Internet Tax Freedom Act of 1998 prohibits sales tax on Internet transactions. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Constitutional Standards for Taxation of Business KEYWORDS: Bloom's: Analysis 45. The Commerce Clause was the basis for federal authority for passing and enforcing the Civil Rights Act. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal The Commerce Clause Bloom's: Analysis

46. In those areas in which federal laws and regulations are extensive and detailed, the likelihood is that the Supremacy Clause precludes state regulation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: State versus Federal Regulation of Business - Constitutional Conflicts: Preemption and the Supremacy Clause KEYWORDS: Bloom's: Synthesis 47. A state law that exempts in-state businesses from additional licensing and inspections but that applies to out-of-state businesses is not a proper exercise of police powers. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Commerce Clause KEYWORDS: Bloom's: Synthesis 48. Requiring farmers shipping goods from outside the state to use only in-state companies for transportation is not a proper exercise of the police power. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Commerce Clause KEYWORDS: Bloom's: Application 49. Advertising is commercial speech and cannot be limited because of First Amendment protections. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: First Amendment Protection for Advertising KEYWORDS: Bloom's: Application 50. An unconstitutionally vague statute is a violation of substantive due process rights. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Substantive Due Process KEYWORDS: Bloom's: Knowledge 51. Which of the following sections of the U.S. Constitution establishes the judicial branch of government? a. Article I b. Article II c. Article III d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The U.S. Constitution KEYWORDS: Bloom's: Knowledge 52. Which of the following is currently the test for determining whether conduct is or is not interstate commerce? a. direct and immediate effect test b. affectation doctrine c. regulation of goods and not businesses d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Commerce Clause KEYWORDS: Bloom's: Synthesis 53. The city of Mesa has developed a street improvement plan that will add lanes to one of the major north/south corridors. Because of the addition of the lanes, businesses along the corridor will lose frontage. However, none of the businesses will be required to move. Which of the following statements is true? a. The city need not compensate the businesses since they will still remain intact.

b. The city must compensate the businesses for taking. c. The city cannot take land for this purpose. d. The city can attach "0" value to the frontage.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Eminent Domain: The Takings Clause KEYWORDS: Bloom's: Application 54. The Supremacy Clause: a. controls whether Congress or the states have the authority to regulate commerce. b. gives Congress full authority to regulate all areas of commerce. c. is never applied in state regulation cases. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: State versus Federal Regulation of Business - Constitutional Conflicts: Preemption and the Supremacy Clause KEYWORDS: Bloom's: Comprehension 55. Which of the following is not a requirement for a valid state tax? a. Tax cannot discriminate against interstate business. b. Tax cannot apply to businesses in interstate commerce. c. There must be a sufficient nexus between the state and the business being taxed. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Constitutional Standards for Taxation of Business KEYWORDS: Bloom's: Application 56. The state of Montana, in response to "outsiders" controlling ranch properties, has passed a statute that requires 6 months of residency before an individual can purchase 40 or more acres of land. The statute is: a. a legitimate exercise of state powers. b. an unconstitutional burden on interstate commerce. c. constitutional because the statute applies only to intrastate lands. d. constitutional because all buyers must be residents.

ANSWER: b POINTS: 1

DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Commerce Clause KEYWORDS: Bloom's: Application 57. Which of the following is not a relevant issue examined in a preemption issue? a. legislative history b. level of detail in the federal regulation c. benefits of federal regulation d. degree of conflict e. All of the above are relevant issues.

ANSWER: e POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: State versus Federal Regulation of Business - Constitutional Conflicts: Preemption and the Supremacy Clause KEYWORDS: Bloom's: Application 58. The police power of the states: a. has no federal limitations. b. can extend to interstate business. c. has been severely curtailed in recent years. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Commerce Clause KEYWORDS: Bloom's: Knowledge 59. The balancing test: a. is one applied in supremacy issue cases. b. is one applied in state regulation of interstate commerce. c. involves the exercise of state taxation powers. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Commerce Clause KEYWORDS: Bloom's: Comprehension

60. The First Amendment: a. does not afford protection for corporate political speech. b. does not permit regulation of corporate advertising. c. provides limited protection for corporate political speech. d. is applied differently to commercial speech. e. none of the above ANSWER: e POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Application of the Bill of Rights to Business KEYWORDS: Bloom's: Application 61. In administrative proceedings, procedural due process requires: a. a trial in which the party charged can be heard. b. notice of hearing. c. right to an attorney. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Due Process KEYWORDS: Bloom's: Synthesis 62. Advertising by lawyers: a. can be prohibited in the interest of protecting the public. b. enjoys no First Amendment protections. c. can be regulated but not prohibited. d. none of the above.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: First Amendment Protection for Advertising KEYWORDS: Bloom's: Synthesis 63. Corporate political speech: a. enjoys full First Amendment protection. b. can be regulated. c. can be prohibited. d. none of the above

ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: First Amendment Rights and Corporate Political Speech KEYWORDS: Bloom's: Synthesis 64. A new statute passed by the state of Vermont prohibits the sale of any maple syrup not produced in Vermont anywhere in Vermont. The legislators maintain that the statute is for the health and welfare of Vermont residents because the state of Vermont regulates producers to ensure quality and sanitation standards. The new statute is: a. constitutional as an exercise of the health and safety regulatory powers of the state. b. constitutional as a control of intrastate commerce. c. constitutional because it applies only to sales in the state. d. unconstitutional because of its excessive approach.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: The Commerce Clause KEYWORDS: Bloom's: Application 65. Which of the following is not part of the amendments to the U.S. Constitution? a. freedom of speech b. supremacy clause c. due process d. privacy ANSWER: b POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The U.S. Constitution KEYWORDS: Bloom's: Knowledge 66. The Bellotti doctrine gives corporations: a. less First Amendment protections for political speech than individuals have. b. the same First Amendment protections for political speech that individuals have. c. more First Amendment protections for political speech than individuals have. d. no First Amendment protections for political speech than individuals have.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking

TOPICS: KEYWORDS:

First Amendment Rights and Corporate Political Speech Bloom's: Synthesis

67. Which of the following is not a right protected in the Bill of Rights? a. noninterference with contracts b. freedom of speech c. right to privacy d. right to due process ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: The U.S. Constitution KEYWORDS: Bloom's: Analysis 68. Which two amendments to the U.S. Constitution provide for equal protection? a. First and Fourth b. Fourth and Fifth c. First and Fifth d. Fifth and Fourteenth ANSWER: d POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Due Process Substantive Due Process KEYWORDS: Bloom's: Knowledge 69. Under the Commerce Clause, the authority to regulate foreign commerce is given to: a. Congress. b. the executive branch. c. the individual states. d. only the Senate.

ANSWER: a POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Commerce Clause KEYWORDS: Bloom's: Knowledge 70. Police power is: a. the states' authority to bypass the Fifth Amendment. b. the states' authority to conduct searches under the Fourth Amendment.

c. government agencies' authority to conduct a search of private property at any time. d. the states' power to pass laws to promote public welfare and health and safety .

ANSWER: d POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Commerce Clause KEYWORDS: Bloom's: Comprehension 71. Which justice was seen on camera disagreeing with President Obama during his State of the Union address in 2009? a. Justice Roberts b. Justice Scalia c. Justice Alito d. Justice Thomas ANSWER: c POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: First Amendment Rights and Corporate Political Speech KEYWORDS: Bloom's: Knowledge 72. The state of Arizona has just passed a mandatory seat belt law that will require anyone traveling in Arizona to put on his/her seat belt. Several travelers from other states that do not have such seat belt laws have brought suit challenging the constitutionality of the Arizona law as an undue burden on interstate commerce. What test will the court apply in reviewing the statute? a. the apportionment test b. the impairment test c. the balancing test d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: The Commerce Clause KEYWORDS: Bloom's: Application 73. What authority would the state of Arizona claim for passing a mandatory seat belt law requiring anyone traveling in Arizona to put on his/her seat belt? a. preemption clause b. police power c. the nexus power d. none of the above ANSWER: b

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: The Commerce Clause KEYWORDS: Bloom's: Analysis 74. Spiegel, Inc., has a catalog merchandise return facility in Nevada. Spiegel employs many phone operators for processing return requests, and merchandise is returned to the facility and stored there for later dispatch. The state of Nevada has proposed taxing Spiegel's full inventory based on the theory that it could have passed through the Nevada facility. Spiegel's main warehouse is in Chicago, Illinois. Nevada: a. has the power to tax Spiegel's full inventory because of its location in the state. b. has the power to tax Spiegel so long as all merchants in Nevada are taxed the same way. c. has properly apportioned its tax since it only applies to inventory and not income. d. does not have the authority under the U.S. Constitution to tax Spiegel's full inventory.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Constitutional Standards for Taxation of Business KEYWORDS: Bloom's: Analysis 75. The purpose of the Supremacy Clause is to: a. resolve conflicts of federal and state law by declaring the federal law supreme. b. resolve conflicts of federal and state law by declaring state law supreme. c. allow Congress to preempt all state regulation of interstate commerce. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: State versus Federal Regulation of Business - Constitutional Conflicts: Preemption and the Supremacy Clause KEYWORDS: Bloom's: Comprehension 76. Which case ruled that when acting as a private person even the president of the United States is not above the law? a. Citizen’s United b. Nixon v. Administrator of General Services c. Clinton v. Jones d. Altria Group ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Critical Thinking The U.S. Constitution Bloom's: Synthesis

77. Which of the following actions by a corporation would enjoy full First Amendment protection (i.e., could not be regulated)? a. a media campaign by a tobacco company against a cigarette tax increase b. a media campaign for soap that inaccurately labels the soap "hypoallergenic" c. advertising by an attorney that is misleading with respect to the fees charged for services d. a mailing that contains offers for the sale of fraudulent securities ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: First Amendment Protection for Advertising KEYWORDS: Bloom's: Analysis 78. Which of the following would not be a taking for purposes of eminent domain? a. the condemnation of land for use in a low-income housing project b. the requirement that beach-front land owners allow public access to the beach through their lots c. the placement of a 4" × 6" cable box on the roof of an apartment building by a public cable firm d. All of the above are takings.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Eminent Domain: The Takings Clause KEYWORDS: Bloom's: Analysis 79. The rights of land owners in eminent domain are protected by the: a. First Amendment. b. Fifth Amendment. c. Fourteenth Amendment. d. Fourth Amendment.

ANSWER: b POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Eminent Domain: The Takings Clause KEYWORDS: Bloom's: Knowledge 80. Substantive due process rights: a. no longer exist.

b. have been changed to procedural due process rights. c. are found in criminal procedure statutes. d. prevent laws that take property without reason and justification.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Substantive Due Process KEYWORDS: Bloom's: Knowledge 81. The state of Arizona has just passed a law requiring that oranges shipped into the state from growers located outside of the state meet certain minimum size requirements. The size requirements do not apply to oranges grown in Arizona. The new Arizona statute is: a. a permissible regulation of commerce. b. permissible so long as the statute promotes the health and welfare of the state's residents. c. an impermissible regulation of interstate commerce. d. constitutional if there is a regulatory protest means available.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: The Commerce Clause KEYWORDS: Bloom's: Analysis 82. South Dakota is the location for many national banks' credit card operations. How much income tax could the state of South Dakota collect on the banks that operate their credit card divisions there? a. South Dakota could collect tax on the banks' full income. b. South Dakota cannot collect income tax unless the banks are headquartered or incorporated there. c. South Dakota cannot collect any income tax from foreign corporations. d. South Dakota can collect income taxes from earnings on the credit card operations.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Constitutional Standards for Taxation of Business KEYWORDS: Bloom's: Analysis 83. The state of Wyoming has just passed a law requiring all cars entering the state to be equipped with side air bags. The Wyoming requirement: a. is constitutional because it does not apply to commerce. b. is unconstitutional. c. is constitutional so long as Wyoming residents are subject to the same rule. d. is constitutional if side airbags are technologically feasible.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: The Commerce Clause KEYWORDS: Bloom's: Analysis 84. Congress passed a law permitting those who were the victims of hate crimes to bring suit in federal district court to recover from the perpetrators of the hate crimes. Such a statute: a. is a legitimate exercise of Congressional authority. b. is an unconstitutional expansion of the Commerce Clause. c. is constitutional so long as the state agrees. d. is constitutional so long as there is an economic impact of hate speech. e. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: The Commerce Clause KEYWORDS: Bloom's: Analysis 85. Congress passed a law prohibiting any organization from spending money on ads against ballot propositions. The legislative history shows that Congress found that organizations spend far too much money on these ads and regular citizens' voices cannot be heard and disseminated against such powerful communication. The statute: a. is an unconstitutional violation of the First Amendment. b. is constitutional so long as the factual findings are adequate. c. is constitutional because there are no money limits, only a prohibition. d. is constitutional if it applies to corporations as well as nonprofits. e. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: First Amendment Rights and Corporate Political Speech KEYWORDS: Bloom's: Analysis 86. Which of the following pairs is incorrect? a. Article III of the U.S. Constitution - the Courts b. The Bill of Rights - First Ten Amendments to the U.S. Constitution c. The Fifth Amendment - due process d. The First Amendment - substantive due process e. The Fourteenth Amendment - due process ANSWER: d

POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The U.S. Constitution KEYWORDS: Bloom's: Knowledge 87. Where in the U.S. Constitution are the provisions governing a student's right to a hearing prior to suspension from school? a. First Amendment b. Commerce Clause c. Article III d. Article II e. Fifth Amendment ANSWER: e POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Due Process KEYWORDS: Bloom's: Comprehension 88. A company is incorporated in Pennsylvania and has offices in Michigan, Ohio, West Virginia and Indiana. Which states may tax the business? a. Pennsylvania only b. Michigan, Ohio, West Virginia, Indiana c. only those states in which it has physical contact with the customers d. only those states which recognize other states' taxation policy e. Pennsylvania, Michigan, Ohio, West Virginia and Indiana proportionately ANSWER: e POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Constitutional Standards for Taxation of Business KEYWORDS: Bloom's: Synthesis 89. For state regulation of interstate commerce to be constitutional: a. the state’s purpose must be to protect the public’s health and safety. b. the state cannot place an undue burden on interstate commerce. c. either a or b d. both a and b ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal The Commerce Clause Bloom's: Comprehension

90. LL Bean has warehouse facilities in Maine, Nevada, Washington, Idaho, Utah, and North Dakota. a. Any states in which LL Bean does business can tax the warehouse inventory. b. Any states in which LL Bean has warehouses can tax LL Bean on all of its inventory. c. Any state in which LL Bean has warehouses can tax LL Bean on the inventory in that state. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Constitutional Standards for Taxation of Business KEYWORDS: Bloom's: Application 91. Son-of-Sam laws: a. deal with political contributions by corporations. b. provide for taxation differences on interstate vs. intrastate commerce. c. prevent perpetrators from profiting from their crimes. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: First Amendment Rights and Profits From Sensationalism KEYWORDS: Bloom's: Synthesis 92. The Bipartisan Campaign Reform Act: a. regulates soft money use. b. regulates PACs. c. outlawed think tanks. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: First Amendment Rights and Corporate Political Speech KEYWORDS: Bloom's: Comprehension 93. The Bipartisan Campaign Reform Act is more commonly referred to as the _____ law. a. Violence Against Women b. McCain-Feingold

c. PAC Pre-emption d. Rainbow Coalition ANSWER: b POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: First Amendment Rights and Corporate Political Speech KEYWORDS: Bloom's: Knowledge 94. Which of the following areas has Congress preempted? a. auto vehicle safety standards b. aircraft routes c. both a and b d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: State versus Federal Regulation of Business - Constitutional Conflicts: Preemption and the Supremacy Clause KEYWORDS: Bloom's: Application 95. Which areas of commercial speech are fully and constitutionally regulated? a. political donation b. corporate campaigns on issues with referenda c. speech on social issues d. All of the above are fully and constitutionally regulated.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: First Amendment Rights and Corporate Political Speech KEYWORDS: Bloom's: Application 96. Jamie has been accused of plagiarizing his sociology term paper from an Internet site. His professor has given him a failing grade and there is no right to a hearing or an appeal. Jamie asks, “What rights do I have?” a. Some form of due process: hearing or vote or right of appeal to an administrator or board. b. No rights because Jamie goes to a private school. c. No rights because it is the teacher’s decision only. d. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Procedural Due Process KEYWORDS: Bloom's: Application 97. Which of the following qualifies as a presence in a state for purposes of collecting sales tax from an Internet merchant? a. having an office in the state b. having an employee who works in the state c. owning or leasing property in the state d. All of the above constitute a qualifying presence.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Constitutional Standards for Taxation of Business KEYWORDS: Bloom's: Application 98. In which of the following areas of constitutional law is the balancing test used? a. state police powers b. Congressional regulation of commerce c. preemption d. The balancing test is used in all of the above areas of constitutional law.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Commerce Clause KEYWORDS: Bloom's: Comprehension 99. In which of the following areas of constitutional law is the nexus test used? a. state police powers b. state regulation of commerce c. state taxation of commerce d. All of the above areas use the nexus test.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Constitutional Standards for Taxation of Business KEYWORDS: Bloom's: Comprehension 100. State and local governments can exercise eminent domain under the Kelo decision:

a. only when there is a clear public purpose use proposed for the land being taken. b. if there is a plan for economic development or revitalization. c. only if the land will be used by another public entity. d. both a and c ANSWER: b POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Eminent Domain: The Takings Clause KEYWORDS: Bloom's: Comprehension 101. Contributions to PACs are protected by: a. the due process clause. b. the First Amendment. c. various state laws, but not protected at the federal level. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: First Amendment Rights and Corporate Political Speech KEYWORDS: Bloom's: Knowledge 102. Janis Hoffman was involved in a tailgate brawl that took place in the parking lot of State U just prior to one of State’s football games. Janis and others have charges pending with the county attorney. State U has filed charges against Janis and the others for violation of State U’s code of conduct that prohibits disorderly conduct on university property. She has been suspended for a semester. When she requested a hearing she was told that the charges by the county were sufficient proof for her university misconduct charges. a. State U officials are correct; the criminal charges will give Janis her due process. b. State U officials must still provide Janis with a hearing on the University charges. c. The University charges will not stand until Janis is convicted. d. both b and c ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Procedural Due Process KEYWORDS: Bloom's: Synthesis 103. The State of Louisiana's Sunday closing law provides that "all stores, shops, saloons, and all places of public business, licensed under the law of Louisiana or under any parochial or municipal law, shall be closed on Sunday." The statute had 25 exemptions including drug stores, hotels, restaurants, theaters, the 1984 Exposition, and stores occupying a space of 1,500 square feet or less. Home Depot wishes to challenge the closing law on its constitutionality. What constitutional provisions would apply?

ANSWER:

The state is using its police power, but the statute may have the effect of favoring small local businesses over the large interstate chains. Also, the effect may raise issues of substantive due process - a right is taken away without discussion. See for full details: Home Depot Inc. v.

Guste, 773 F.2d 616 (5th Cir. 1985).

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Commerce Clause KEYWORDS: Bloom's: Application 104. The city of Renton, Washington, has passed an ordinance that prohibits adult motion picture theaters from locating within 1,000 feet of any residential zone, single- or multiple-family dwelling, church, park, or school. Several businesses have brought suit challenging the constitutionality of the ordinance. What would be the basis for such a suit? Discuss possible results.

ANSWER: The businesses brought the challenge alleging the regulation was: (1) an infringement upon their First Amendment rights, and (2) an excessive exercise of the police power.

The Court upheld the regulation - the speech itself was not prohibited - only the time, place, and manner were regulated. The Court also found a legitimate state interest in the regulation (near homes) of pornography. See City of Renton v. Playtime Theaters, Inc., 475 U.S. 41 (1986).

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: The Commerce Clause KEYWORDS: Bloom's: Analysis 105. Trailer-on-flatcar (TOFC or "piggyback") service is a form of mixed train and truck transportation that enables a carrier to transport a trailer and its contents over rail on a flatcar and then to haul the trailer on the highway. The shipment remains within the trailer during the entire journey. The Interstate Commerce Commission (ICC) prohibits states from regulating this mode of shipment since the ICC has extensive regulations in the rail and interstate trucking industry.

Discuss the constitutional implications of this decision.

ANSWER: Students should discuss the issues of preemption and interstate commerce, state police power, and so forth. See ICC v. Texas, 479 U.S. 450 (1987).

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Commerce Clause KEYWORDS: Bloom's: Application 106. The Lake Nixon Club near Little Rock, Arkansas, had a racial restriction on the use of its 232-acre amusement area, which included areas for swimming, boating, sunbathing, picnicking, miniature golf, and snack bars. Discuss how an interstate commerce connection might be found so that the federal civil rights act could be used to invalidate the restriction.

ANSWER: Students should compare to Ollie's Barbecue - food shipments, interstate travelers, supplies, and so on. See Daniel v. Pane, 395 U.S. 298 (1969).

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: The Commerce Clause KEYWORDS: Bloom's: Analysis 107. Discuss the ruling and the importance of Citizens United.

ANSWER: Parts of the BCRA violates the First Amendment even for corporations. Section 441b is an outright ban on political speech. Justice Kennedy said for the Supreme Court that is unlawful because the First Amendment confirms the right to think for ourselves. “The civic discourse belongs to the people and the government may not prescribe the means used to conduct it.”

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: First Amendment Rights and Corporate Political Speech KEYWORDS: Bloom's: Analysis 108. The state of Arizona follows a merit review process of proposed securities offerings. The Securities Division reviews proposed offerings to look for problems with fraud. This review is done in addition to the SEC review at the federal level.

The state regulators have recently issued an interpretation that provides the state can stop all stock offerings of any firms doing business in Arizona - even if the stock will not be sold to Arizona residents. Can the regulators constitutionally exercise this power?

ANSWER: In Arizona Corporation Commission v. Media Products, Inc., 736 P.2d 527 (Az. 1989), the Arizona Supreme Court said no. Such an exercise of power was preempted by federal securities laws, and Arizona could not regulate all securities offerings from its state.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: State versus Federal Regulation of Business - Constitutional Conflicts: Preemption and the Supremacy Clause KEYWORDS: Bloom's: Analysis 109. The state of Arizona has passed a tax reform bill that taxes property owners at a specified rate with the exception of mines and utilities. Both mines and utilities are assigned a higher rate of tax for their properties. A state legislator commented on the bill, "In some of these small towns, without the higher rate of taxation for mines and utilities, the schools in these towns would suffer because the property is worth nothing and there are no property tax dollars coming in.

We have to tax these area's wealthiest citizens at a different rate and those citizens happen to be the mining companies and the public utilities." Is the tax constitutional?

ANSWER: In this case, the Arizona Court of Appeals held that the method of taxation, while certainly motivated by proper concerns, singled out particular businesses for higher tax rates. While business property in general could be taxed at higher rates, the legislature could not single out particular taxpayers for payment of higher rates. The taxation scheme was declared unconstitutional as violative of the equal protection clause.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal Constitutional Standards for Taxation of Business Bloom's: Comprehension

110. The state of Arizona has passed a law requiring state agencies to conduct their business with the public in both Spanish and English. A voters' referendum repealed the law and several citizens' groups brought suit challenging the referendum as a violation of their U.S. Constitutional rights. What would be the basis of their suit?

ANSWER: Due process; equal rights - fifth and fourteenth amendments.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Application of the Bill of Rights to Business KEYWORDS: Bloom's: Comprehension 111. Match the following with the correct letter: (1) Article III (2) Fifth Amendment (3) First Amendment (4) Fourteenth Amendment a. Due process protection at the state level b. Due process protection at the federal level c. Freedom of speech d. Federal court system ANSWER: 1 = d, 2 = b, 3 = c, 4 = a POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The U.S. Constitution KEYWORDS: Bloom's: Knowledge 112. Explain why a federal statute that permits federal suits against defendants who have committed crimes against women is unconstitutional while civil rights laws are considered constitutional.

ANSWER: The underlying economic distinction is critical. The civil rights issues address economic activity such as restaurants and hotels and their impact on interstate commerce. The crimes against women are non-economic based.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: The Commerce Clause KEYWORDS: Bloom's: Evaluation 113. Analyze and discuss why the top corporate and trade PACs are the top political contributors.

ANSWER: The top PAC contributors are all involved in markets that are regulated by the government. It makes sense that these groups would want to influence the elections and opinions of those who will pass legislation concerning their industries. From the 2007-2008 data, The National

Association of Realtors, International Brotherhood of Electrical Workers, AT&T, American Bankers Association, and the National Beer Wholesalers Association are the top 5 contributors in total dollar amounts. All of these PACs represent highly regulated markets.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: First Amendment Rights and Corporate Political Speech KEYWORDS: Bloom's: Analysis 114. Bailey’s Brake Service, a bit of an eyesore at a main intersection near the faltering downtown area of Mesa, Arizona, was a family-founded, owned and operated business that had been open in its existing location since 1970. Lenhardt’s True Value Hardware store was also a longstanding Mesa business with a location south and east of Bailey’s and a desire for a better location as well as a professed desire to revitalize Mesa’s downtown area. The Lenhardts had purchased the property abutting Bailey’s but felt that the street-facing Bailey’s property was necessary for its location, location, location.

The city fathers and mothers were in favor of condemnation of the Bailey use, a taking by eminent domain, followed by a “reissuing” of the once Bailey property to Lenhardt’s for its construction of a new and much less eyesoreish retail establishment on the site: Randy Bailey challenged the taking of his business as unconstitutional. Discuss the issues in his case and challenge to the city’s taking by eminent domain.

ANSWER: Students should apply the doctrine of Kelo and note the following:

1.

2.

3.

The U.S. Supreme Court now permits takings for purposes of economic development.

Such a taking requires that there be an economic development plan in place so that property is not simply transferred from one private party to another.

There must be adequate compensation.

In this case, Bailey won – the court refused to uphold the taking, but it was the Arizona Supreme Court and there were issues with whether there was an adequate economic development plan in place that required replacement of Bailey’s.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Eminent Domain: The Takings Clause KEYWORDS: Bloom's: Application 115. A federal statute makes it a felony to engage in any commercial act involving the “cruelty, wounding, or killing” of an animal or depicting anything being to an animal that is prohibited by law. Robert Stevens ran a website that sold films of dog fighting, many of which were films done in Japan where such activity is not illegal. He was convicted of violating the federal statute. Stevens appealed his case on the grounds that his First Amendment rights were violated because the statute was overly broad. What theory of constitutional law would Stevens be using in his appeal? a. Procedural due process b. The Commerce Clause c. Substantive due process d. The Fifth Amendment ANSWER: c

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Substantive Due Process KEYWORDS: Bloom's: Analysis 116. Karen Bartlett was given a generic version of Sulindac, an anti-inflammatory drug. The result was that she developed toxic epidermal necrolysis, a disease that disfigured and blinded her. She brought suit alleging that there were warnings that should have been put on the generic version of the drug because issues with the skin infections were being reported. However, the manufacturer to Sulindac did not have FDA approval to place the warning on the product. The jury awarded Ms. Bartlett $21 million, and the generic manufacturer appealed the decision. Which of the following theories would be the best approach for the generic manufacturer to take in order to have the verdict reversed? a. The Commerce Clause b. Preemption c. Due process because of the excessive size of the verdict d. Substantive due process ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: State versus Federal Regulation of Business - Constitutional Conflicts: Preemption and the Supremacy Clause KEYWORDS: Bloom's: Evaluation 117. Jane Stevenson was removed as head cheerleader from her high school cheer squad because she violated one of the school rules by drinking alcohol on the team bus as the team and cheer squad traveled to an away game. Jane feels she has an explanation and defense for what happened. Which of the Constitution might provide her with a review of her dismissal as head cheerleader? a. States rights b. Substantive due process c. First Amendment d. Procedural due process ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Procedural Due Process KEYWORDS: Bloom's: Application 118. Which of the following enjoy full First Amendment protections? a. Video games b. Yelling "Fire!" in a crowded theater when there is no fire c. Commercial advertisement d. all of the above

ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: The U.S. Constitution KEYWORDS: Bloom's: Synthesis

1. Before administrative agencies' rules become law, there must be congressional approval. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What are Administrative Agencies?

KEYWORDS: Bloom's: Comprehension 2. An administrative agency is neither a legislative nor a judicial body. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What are Administrative Agencies?

KEYWORDS: Bloom's: Knowledge 3. Administrative agencies can exist at any level of government. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What are Administrative Agencies?

KEYWORDS: Bloom's: Knowledge 4. Administrative agencies are created by some legislative body. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What are Administrative Agencies?

KEYWORDS: Bloom's: Knowledge 5. An enabling act is an act approving rules promulgated by an administrative agency. a. True

b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Knowledge 6. Administrative agencies serve as courts for hearings on rule violations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Roles of Administrative Agencies KEYWORDS: Bloom's: Knowledge 7. The Privacy Act is part of the Administrative Procedures Act. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Knowledge 8. The Freedom of Information Act is part of the Administrative Procedures Act. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Knowledge 9. Under a Freedom of Information Act request, a member of the public can obtain all information in the files of a federal agency. a. True b. False

ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Knowledge 10. Reverse FOIA suits are suits by agencies to stop disclosures. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Knowledge 11. The Federal Privacy Act restricts the free exchange of information among federal agencies. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Knowledge 12. Law enforcement agencies are exempt from the Federal Privacy Act. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Comprehension 13. The Government in the Sunshine Act is often referred to as an open-meeting law. a. True b. False ANSWER: True POINTS: 1

DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Knowledge 14. The Government in the Sunshine Act applies to all federal administrative agencies. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Comprehension 15. Through deregulation the total number of pages of published federal regulations has decreased each year since 1985. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Knowledge 16. The Federal Register Act is part of the Administrative Procedures Act. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Knowledge 17. The U.S. Government Manual contains information on national and regional agency offices. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal Laws Governing Administrative Agencies Bloom's: Knowledge

18. The Code of Federal Regulations contains all the regulations of federal agencies. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Knowledge 19. The Federal Register is a daily update of changes and proposed changes in the Code of Federal Regulations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Knowledge 20. Formal rule making requires publication of proposed rules. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Knowledge 21. Informal rule making does not require publication of proposed rules. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction

KEYWORDS:

Bloom's: Comprehension

22. To withstand challenges, proposed agency rules must be supported by some studies or evidence. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Comprehension 23. The Regulatory Flexibility Act allows agencies flexibility in rule making by not requiring publication of proposed rules. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Knowledge 24. During the public comment period for a proposed rule, only affected businesses can make comments. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Comprehension 25. Hearings are required in all federal rule proposals. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Comprehension

26. Once a rule is proposed, it cannot be withdrawn. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Comprehension 27. Because of Earl Devaney’s ethical stances as Inspector General for the Department of Interior he has never held another position with the federal government. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What are Administrative Agencies?

KEYWORDS: Bloom's: Synthesis 28. The substantial evidence challenge cannot be used in cases where formal rule-making procedures were followed. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Comprehension 29. An ultra vires challenge is a challenge of the agency's jurisdictional authority on a rule. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Comprehension

30. A sunset law creates an agency for a limited time period. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Knowledge 31. Hearings conducted by agencies for enforcement purposes need not provide due process for the parties. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Business Rights in Agency Enforcement Action KEYWORDS: Bloom's: Knowledge 32. Many federal agencies use licensing as a means of enforcement. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Business Rights in Agency Enforcement Action KEYWORDS: Bloom's: Knowledge 33. A consent decree is similar to a nolo contendere plea. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Business Rights in Agency Enforcement Action KEYWORDS: Bloom's: Comprehension 34. An ex parte contact is prohibited in administrative hearings. a. True

b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Business Rights in Agency Enforcement Action KEYWORDS: Bloom's: Synthesis 35. Administrative agencies do not permit intervenors to appear in hearings. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Business Rights in Agency Enforcement Action KEYWORDS: Bloom's: Synthesis 36. The decision of an administrative law judge can be appealed to the agency heads. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Business Rights in Agency Enforcement Action KEYWORDS: Bloom's: Comprehension 37. Appeals of federal administrative agency decisions go to federal district court. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Business Rights in Agency Enforcement Action KEYWORDS: Bloom's: Comprehension 38. Administrative remedies must be exhausted before a court will review agency actions. a. True b. False ANSWER: True

POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Business Rights in Agency Enforcement Action KEYWORDS: Bloom's: Comprehension 39. Due process rights before an administrative agency require that formal trials be held before rights are taken away. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Business Rights in Agency Enforcement Action KEYWORDS: Bloom's: Knowledge 40. The Federal Register System includes the Federal Register, the Code of Federal Regulations, and the United States Code. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Knowledge 41. Inspections are a means of enforcement for administrative agencies. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Business Rights in Agency Enforcement Action KEYWORDS: Bloom's: Knowledge 42. Inspections by administrative agencies require a search warrant unless the business owner gives permission. a. True b. False ANSWER: True POINTS: 1

DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Business Rights in Agency Enforcement Action KEYWORDS: Bloom's: Comprehension 43. Under the FOIA, agencies are not permitted to charge for copying costs. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Knowledge 44. Under the federal sunshine laws, agency staff members may hold meetings without notice. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Knowledge 45. The Federal Register Act is part of the Administrative Procedures Act. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Knowledge 46. Both formal and informal rulemaking processes include public hearings. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal The Functions of Administrative Agencies and Business Interaction Bloom's: Knowledge

47. An ultra vires challenge to an administrative regulation is one brought on the grounds of procedural error. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Comprehension 48. By law, there are exactly twelve independent agencies that report to the Office of the President. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What are Administrative Agencies?

KEYWORDS: Bloom's: Knowledge 49. Informal rulemaking is not permitted for promulgation of rules. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Informal Rulemaking KEYWORDS: Bloom's: Comprehension 50. An FOIA request can be denied if national security information is involved. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies

KEYWORDS:

Bloom's: Application

51. Law enforcement purposes are an exception to the prohibited exchanges of information among agencies under the Federal Privacy Act. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Knowledge 52. Only businesses can provide input during the comment period of rulemaking. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Application 53. Federal agencies do not have the authority to issue fines. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Business Rights in Agency Enforcement Action KEYWORDS: Bloom's: Knowledge 54. Only businesses can provide input in the formal rulemaking process. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Application

55. A public comment period must be a minimum of 30 days. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Knowledge 56. Licensing and inspection are the only enforcement tools of administrative agencies. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Business Rights in Agency Enforcement Action KEYWORDS: Bloom's: Knowledge 57. The United States has about as many or fewer administrative agencies as does its major trading partners. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Role of Administrative Agencies in the International Market KEYWORDS: Bloom's: Knowledge 58. An agency that fails to investigate the issues before proposing a rule has acted arbitrarily and capriciously. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Synthesis 59. An agency's withdrawal of a rule without factual support for its need for withdrawal has acted arbitrarily and

capriciously. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Comprehension 60. The Government in the Sunshine Act requires advance notice of agency meetings and hearings. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Knowledge 61. Comment periods are not required for modifications of rules, only new rules. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Comprehension 62. Only consumers have rights of comment during the public comment period. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Application 63. The Code of Federal Regulations is published every business working day. a. True

b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Knowledge 64. The 30-day comment period can be waived for emergency rulemaking. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Comprehension 65. The withdrawal of rulemaking without substantial evidence can be challenged as arbitrary and capricious action on the part of an agency. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Comprehension 66. Appeals of federal agency decisions to courts of appeal require a grant of certiorari. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Business Rights in Agency Enforcement Action KEYWORDS: Bloom's: Synthesis 67. All administrative agencies: a. are at the federal level. b. promulgate regulations.

c. are created by the U.S. President. d. are under sunset laws.

ANSWER: b POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What are Administrative Agencies?

KEYWORDS: Bloom's: Knowledge 68. Enabling acts: a. are regulations of administrative agencies. b. are nonlegislative provisions. c. establish administrative agencies and their authority. d. must contain sunset provisions.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Knowledge 69. The Administrative Procedures Act includes: a. the Freedom of Information Act. b. the Federal Register Act. c. zero-base budgeting. d. enabling legislation.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Comprehension 70. An FOIA request: a. is a request made by a citizen for agency information. b. is an intergovernmental agency request for information about citizens. c. can request any information in an agency's file. d. may not require the payment of copy fees.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal

TOPICS: KEYWORDS:

Laws Governing Administrative Agencies Bloom's: Comprehension

71. Which of the following is not exempt from an FOIA request? a. national defense or foreign policy information b. internal agency policies on copy charges c. trade secrets d. investigation records ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Comprehension 72. A reverse FOIA suit is: a. one brought by an administrative agency. b. a suit to stop disclosure of information. c. not available at the federal level. d. a suit brought by an agency against another agency.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Comprehension 73. The Federal Privacy Act: a. prohibits release of information (by public agencies) on individuals. b. does not apply to all agencies. c. provides a disclosure exemption for law enforcement purposes. d. does not cover medical records.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Comprehension 74. The Government in the Sunshine Act: a. is often called an open-meeting law. b. applies to federal agencies whose heads are appointed by Congress. c. requires all agency meetings to be public.

d. applies to congressional committee meetings.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Comprehension 75. Formal rulemaking differs from informal rulemaking in: a. public notice is required for formal rulemaking not informal. b. a public comment period is needed for formal rulemaking but not informal. c. no modification period exists in formal rulemaking. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Synthesis 76. Which of the following is not grounds for challenging an administrative regulation? a. arbitrary and capricious b. lack of substantial evidence c. ultra vires d. lack of a congressional hearing ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Funcions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Comprehension 77. Enforcement of federal administrative regulations: a. is a function of the executive branch. b. is a function of the Justice Department. c. is part of the agency's role. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Business Rights in Agency Enforcement Action

KEYWORDS:

Bloom's: Comprehension

78. A consent decree is: a. comparable to a not guilty plea. b. comparable to a nolo contendere plea. c. a guilty plea to agency charges. d. not made public.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Business Rights in Agency Enforcement Action KEYWORDS: Bloom's: Analysis 79. Sanctions that can be imposed by agencies include: a. injunctions. b. fines. c. loss of license. d. all of the above ANSWER: d POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Business Rights in Agency Enforcement Action KEYWORDS: Bloom's: Knowledge 80. Appeals from federal administrative agency decisions go: a. to federal district court. b. to U.S. Court of Appeals. c. directly to the U.S. Supreme Court. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Business Rights in Agency Enforcement Action KEYWORDS: Bloom's: Knowledge 81. The Federal Privacy Act: a. is the same as the Regulatory Flexibility Act. b. does not apply to medical and employment histories. c. is part of the Administrative Procedures Act. d. applies to all law enforcement information exchanges.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Knowledge 82. The Federal Register Act is: a. not part of the Administrative Procedures Act. b. an act that provides for publication of the United States Code. c. the same as the Regulatory Flexibility Act. d. the act that covers the registration of meetings.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Knowledge 83. The National Transportation Safety Board has proposed a new regulation that would require children under the age of two to be strapped into car seats in their own seats on airplanes. Currently, children under the age of two are nonpaying passengers who ride on their parents' laps. What opportunities will airlines and parents have for input on the proposed rule? a. They can write their congressional representatives. b. They can send in comment letters to the NTSB. c. They can seek a presidential veto. d. They can go to court to block the proposal.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Function of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Application 84. The public comment period: a. need not be 30 days if there a formal hearings. b. need not be 30 days if the Regulatory Flexibility Act is followed. c. need not be 30 days in the case of an emergency. d. must always be 30 days.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal The Functions of Administrative Agencies and Business Interaction Bloom's: Comprehension

85. Ralph Watkins is the president of Animal Crackers, Inc. Animal Crackers operates childrens' clothing stores. Ralph has just received notice of charges by the Federal Trade Commission (FTC) against Animal Crackers for deceptive advertising. Watkins wishes to know the company's rights. Which of the following statements is true? a. Animal Crackers is entitled to a jury trial. b. Animal Crackers could dispose of the matter through a consent decree. c. Animal Crackers is facing criminal charges. d. Animal Crackers will have a 30-day comment period.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Business Rights in Agency Enforcement Action KEYWORDS: Bloom's: Synthesis 86. Which of the following meetings would be subject to the open-meeting provisions of the federal Sunshine laws? a. a meeting of the staff attorneys of the SEC enforcement division b. a meeting of the division heads of the Federal Trade Commission c. a meeting of the nine justices of the U.S. Supreme Court d. a meeting of three of the five commissioners of the Federal Aviation Administration ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Knowledge 87. Which of the following is not an example of an enabling act? a. Government in the Sunshine Act b. Securities Exchange Act of 1934 c. Federal Trade Commission Act d. Occupational Safety and Health Act ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What are Administrative Agencies?

KEYWORDS: Bloom's: Synthesis 88. Which of the following is not part of the Administrative Procedures Act?

a. Freedom of Information Act b. Federal Privacy Act c. Government in the Sunshine Act d. Federal Register Act ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Synthesis 89. Which of the following is not an exemption from FOIA requests? a. investigation records b. product safety tests c. personnel files d. bank reports ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Comprehension 90. Which of the following is not an exemption for following the disclosure requirements under the Federal Privacy Act? a. medical records b. FBI investigations c. SEC stock-trading records d. Congress ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Application 91. Notice of a proposed federal regulation in The Federal Register need not contain: a. the name of the proposing agency. b. the statutory authority for promulgating the rules. c. the environmental impact of the proposal. d. the language or the proposed rule or a summary.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate

NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Knowledge 92. The Regulatory Flexibility Act: a. created the process of hybrid rule making. b. requires publication of rule notices in trade magazines. c. requires a six-month comment period in formal rule making. d. allows regulators to promulgate rules without prior notice.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Knowledge 93. A court challenge to a promulgated rule based on the theory that the agency exceeded its authority is: a. a substantial evidence challenge. b. an arbitrary and capricious challenge. c. an ultra vires challenge. d. all of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Comprehension 94. Ex parte contacts are: a. contacts with a member of a different political party during rule making. b. contacts with an individual who has not made comments on a proposed rule. c. unilateral contacts with an ALJ. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Business Rights in Agency Enforcement Action KEYWORDS: Bloom's: Analysis 95. Andrew Flint is the CEO of a small, publicly held company based in Idaho Falls, Idaho. Flint earned $76,000 last year as CEO. Investors in Flint's firm are earning nearly 15 percent on their shares. Flint has learned that the SEC is

considering a proposed rule mandating salary studies for all publicly held firms. Flint has priced such studies and has estimates ranging from $27,000 to $40,000. Flint would like the SEC to understand his firm's position. Which of the following statements is true? a. Flint will need to hire a lawyer to present evidence to the SEC. b. Flint can challenge the rule only after promulgation. c. Flint's challenge must be made in court. d. Flint can simply write to the SEC to voice his concerns.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Application 96. Four of the five commissioners for the Federal Trade Commission were working late one evening in their Washington, D.C. offices. The four were catching up on their electronic mail. The four soon discovered each others' presence on electronic mail. One commissioner wrote to the other three, "Let's get some business done so long as we're all here. We could resolve that unfair competition case that's pending for next month. We can iron out our differences via e-mail." The electronic exchanges of the commissioners would: a. be protected because they are internal agency actions. b. violate the Government in the Sunshine Act open meeting laws. c. be considered law enforcement issues and would be protected from open-meeting laws. d. not be a meeting without some staff members present.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Analysis 97. Which is not a role administrative agencies play? a. rule making b. enforcement c. adjudication d. Administrative agencies play all of the above roles.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Comprehension 98. Addison Winchell is the CEO of a printing firm located in Lexington, Kentucky. The state office of environment quality has proposed a rule mandating the use of soy inks and recycled paper by all printers in the state. Winchell says the

expense will put him out of business. What can Winchell do? a. Provide comments to the proposed rule. b. Go directly to court with a constitutional challenge. c. Present evidence if a trade group supports him. d. All of the above.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Application 99. Choose the answer with the proper order for administrative rulemaking. a. study of the problem, notice of rulemaking, public comment period, promulgation b. study of the problem, public comment period, notice of rulemaking, promulgation c. notice of proposed rulemaking, study of the problem, public comment period, promulgation d. notice of proposed rulemaking, public comment period, study of the problem, promulgation e. notice of proposed rulemaking, consent decree, public comment period, study of the problem, promulgation ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Synthesis 100. What is the difference between formal rulemaking and informal rulemaking? a. Formal requires notice while the latter are simply immaterial changes to rules. b. Formal requires a public comment period and informal rulemaking does not. c. Formal requires public hearings and informal does not. d. Formal requires Government in the Sunshine notices and informal does not. e. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Comprehension 101. Choose the answer with the correct order for administrative agency enforcement proceedings. a. charges, consent decree, hearing, appeal b. charges, information gathering, consent decree, fines c. charges, hearing, findings and decision, administrative agency decision, judicial appeal d. charges, hearing, findings and decision, judicial appeal

e. charges, hearing, consent decree, judicial appeal ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Business Rights in Agency Enforcement Action KEYWORDS: Bloom's: Synthesis 102. What is the effect of a consent decree? a. The agency's charges are dismissed with no sanctions. b. The party makes no admissions as to conduct. c. There is still judicial appeal from a consent decree. d. It is no longer available under the Regulatory Flexibility Act. e. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Business Rights in Agency Enforcement Action KEYWORDS: Bloom's: Synthesis 103. Which law simplified rulemaking for businesses? a. Regulatory Flexibility Act b. Freedom of Information Act c. Administrative Procedures Act d. both a and b e. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Knowledge 104. Zero-base budgeting: a. means the Congress has “sunseted” an agency. b. means that an agency does not automatically receive its previous year’s base budget. c. is unconstitutional. d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking

STATE STANDARDS: TOPICS: KEYWORDS:

United States - OH - AICPA: BB-Legal The Functions of Administrative Agencies and Business Interaction Bloom's: Knowledge

105. Where could a business find notices of proposed rules? a. The Code of Federal Regulations b. The Federal Register c. industry trade publications d. both b and c ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Knowledge 106. The FDA had approved a new diet drug for the market. The agency pulled the approval and the drug off the market because a staff member said, “This drug didn’t work for me.” The manufacturer of the drug could challenge the FDA action: a. as arbitrary and capricious. b. on the basis of a failure to follow ADA procedures. c. lack of substantial evidence. d. any of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Comprehension 107. John Forsyth is the head of the Securities Exchange Commission. There are new rules pending before the SEC that would require lawyers to blow the whistle on their clients. The American Bar Association, which is opposed to the legislation, has just offered Mr. Forsyth’s son a full scholarship to the law school of his choice. a. The in-kind contribution to his son is a violation of the law. b. A scholarship to Mr. Forsyth would be illegal, but not to his son. c. The ABA has not violated any law if there is no connection between the proposed rule and the scholarship. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Comprehension

108. Choose the one with the correct ordering of rulemaking functions from among the following: a. enabling statute, comment period, studies of issues, promulgation b. enabling statute, studies of issues, promulgation, comment period c. enabling statute, studies of issues, comment period, promulgation d. None of the above is in correct order.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Synthesis 109. If a company challenges a penalty imposed by an administrative agency, which of the following is the correct order for its appeal? a. ALJ, agency commissioners, judicial challenge b. judicial challenge, ALJ, agency commissioners c. agency commissioners, ALJ, judicial challenge d. None of the above is in the correct order.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Business Rights in Agency Enforcement Action KEYWORDS: Bloom's: Synthesis 110. The Federal Maritime Commission approved the charter for an inter-island ferry service in Hawaii but did so without a study of the environmental impact of adding the ferry service. Federal agencies are required to determine environmental impacts of all actions. The airlines that fly between the islands wish to challenge the ferry approval by the Maritime Commission. What grounds could they use? a. arbitrary and capricious b. failure to comply with statutory procedures c. favoritism d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Evaluation 111. The Department of Homeland Security has been given the responsibility for the construction of a fence along the border between the United States and Mexico. The Department has not followed the 30-day comment rule on the composition and location of the proposed fence. The Department:

a. has not complied with the rulemaking requirements and cannot proceed with the fence. b. can allow as short of a comment time as it wants as long as there is notice. c. does not have an enabling statute to allow for a comment period. d. does not need to follow comment periods for building a fence.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Application 112. Who did President Obama appoint to oversee the spending under the American Reinvestment and Recovery Act? a. Hillary Clinton b. Mike Espy c. Earl Devaney d. Richard Scrushy ANSWER: c POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: What are Administrative Agencies?

KEYWORDS: Bloom's: Knowledge 113. The FTC has proposed a series of regulations to require disclosure of repair/accident history in the sale of used cars.

The Classic Car Club believes that historical vehicles (1960 and earlier) should be exempt from the requirements. What can the club do to voice its concerns?

ANSWER: Send letter during public comment period; appear at public hearings if they are held; voice objections before promulgation.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Application 114. Why is the Code of Federal Regulations not solely online to save money and time?

ANSWER: Students may want to respond about the history of publishing the regulations, the process of passing regulations including comment periods, the cost (including environmental) of printing each year, and the time delay of publication in print.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - AICPA: BB-Risk Analysis STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Synthesis

115. Benzene is a colorless, aromatic liquid used in manufacturing a variety of products including motor fuels, solvents, detergents, pesticides, and other organic materials. Benzene is a toxic substance and rapid inhalation can be fatal.

Exposure has also been shown to lead to various types of nonmalignant diseases such as blood disorders (including leukemia).

OSHA passed a regulation limiting maximum benzene exposure for employees. OSHA set a 1 ppm maximum, even though the medical evidence only discussed exposures at 10 ppm and more. The petroleum industry wishes to challenge the regulation. Can they do so? On what basis?

ANSWER: First, they can voice their concerns during the promulgation. Second, they can challenge the regulation in court by establishing that it is arbitrary and capricious or not supported by substantial evidence. An ultra vires challenge is inappropriate since OSHA can clearly regulate industrial hazards. However, the regulation is much more stringent than the level of exposure required for the documented medical effects. See Industrial Union v. American Petroleum, 448 U.S. 607 (1980).

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Application 116. Given deregulation in several major industries, why has the total amount of regulations still increased virtually every year?

ANSWER: Other areas, such as environmental and occupational safety, have greatly increased in the amount of regulations. These increases combined with other governmental regulations have caused this result.

POINTS: 1 DIFFICULTY: Challenging NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Analysis 117. Discuss the Administrative Procedures Act and its amendments and purpose.

ANSWER: Passed in 1946 to establish uniform procedures for rule making. FOIA - Freedom of Information Act - is an amendment that allows individuals to request information from federal agencies. (There are nine exemptions, including trade secret information.) Federal Privacy Act - amendment that limits exchange of information on individuals among agencies requires notification unless for law enforcement purposes. Government in the Sunshine Act 1976 amendment often called the open-meeting law; applies to agencies with heads appointed by the president; requires advance public notice before agency heads meet; except for executive session, the meetings are public.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Knowledge

118. The FTC regulates advertising and has discovered a company advertising a diet pill that, when swallowed, breaks into "thousands of particles, each acting like a tiny magnet" to which fat cells are instantly attracted. The magnets are then eliminated through the digestive system. The FTC has brought a complaint against the company, and the company wants to know what action the FTC can take against it.

ANSWER: The FTC can obtain an injunction to stop the ads from running; the FTC can propose a consent decree in which the company will agree to stop advertising and selling the product; the decree could also include an order for refunds and fines and penalties for the ad. The FTC could also go to court to obtain these remedies if the decree is not signed.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Business Rights in Agency Enforcement Action KEYWORDS: Bloom's: Application 119. Name the three government publications covered under the Federal Register Act. ANSWER: The Federal Register; the U.S. Government Manual; and the Code of Federal Regulations.

POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Laws Governing Administrative Agencies KEYWORDS: Bloom's: Knowledge 120. The FDA has proposed rules that would classify cigarettes as a medical device and thereby severely restrict the types of advertising that could be used. What forms and types of feedback would the tobacco companies have during the rulemaking process by the FDA? ANSWER: The companies could provide the usual forms of input during rulemaking. However, the tobacco companies could (and have) challenged the authority of the FDA to regulate tobacco.

The ultra vires challenge to the FDA's authority is ongoing.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Application 121. Discuss the ways a business could challenge a promulgated agency rule.

ANSWER: By establishing that the rule was ultra vires, by establishing that the rulemaking process was flawed, or by establishing that the rulemaking was arbitrary and capricious.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Application

122. Describe the roles of administrative agencies.

ANSWER: Provide due process and expertise. Afford faster relief. Accomplish social goals.

POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Roles of Administrative Agencies KEYWORDS: Bloom's: Knowledge 123. Discuss what made Earl Devaney such an ethical standout in the federal government.

ANSWER: The answer may include Mr. Devaney’s work as Inspector General with the Department of Interior (DOI), the reorganization of DOI, and his appointment to oversee the spending under the American Reinvestment and Recovery Act. In general, his commitment to ethical behavior, his unwillingness to accommodate unethical behavior even when that behavior was entrenched, and his willingness to speak out about ethical violations despite personal risk is noteworthy.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: What are Administrative Agencies?

KEYWORDS: Bloom's: Comprehension 124. The National Park service withdrew its proposed rules on the use of snowmobiles in national parks. Describe any legal issues that might exist in its withdrawal of the rules.

ANSWER: Just as an agency cannot make rules without studies, public comment and support, it cannot withdraw rules without the same procedural compliance.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Application 125. What is an ultra vires act?

ANSWER: An ultra vires act is action by an agency that goes beyond its powers.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Knowledge 126. The Department of Homeland Security has asked the Internal Revenue Service for the tax returns of U.S. citizens who have been identified as having ties to terrorist organizations. The IRS has declined to turn over the tax returns.

Discuss the rights of the individuals and the authority of the two agencies.

ANSWER: The exchange of information is prohibited unless the Department of Homeland Security is engaged in law enforcement activity. In this situation, the Department is charged with

enforcement of the anti-terrorist laws and it may be able to do so with access to financial information. The IRS need not seek permission from the individuals because of the law enforcement purpose.

POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Analytic United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Critical Thinking TOPICS: Laws Governing Administrative Agencies Roles of Administrative Agencies KEYWORDS: Bloom's: Analysis Congress passed the Nursing Mothers Law in 2010, a law that requires employers to give nursing mothers break time and private space for pumping breast milk for their babies. On January 3, 2011, the Department of Labor published proposed rules in the Federal Register.

127. The Nursing Mothers Law: a. is the enabling legislation. b. must be enforced by Congress. c. must first be published in the Federal Register before any rules can be proposed. d. is part of the Government in the Sunshine Act. ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Diversity STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Knowledge 128. Where else would the proposed regulations need to be published? a. The only requirement is that the regulations be published in the Federal Register. b. They must be published in any trade magazine of affected industries. c. They must be published in the Congressional Record. d. They must be published first in the Code of Federal Regulations.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Diversity STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Knowledge 129. What is the minimum time period for comments that the Department of Labor must allow? a. 180 days b. 120 days c. 60 days

d. 30 days ANSWER: d POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States - BUSPROG: Diversity STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Knowledge 130. Who is allowed to submit comments on the proposed rules? a. Only employers b. Only employers affected by the rules c. Only nursing mothers d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Application 131. How can comments be submitted? a. By letter b. Only by testimony at a public hearing c. Only by Congressional testimony d. Only through depositions ANSWER: a POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: The Functions of Administrative Agencies and Business Interaction KEYWORDS: Bloom's: Application 132. If the Department of Labor decides to change the content and approach of the proposed rules based on feedback, which of the following is correct? a. The Department must return to Congress to get approval for the proposed changes to the original rules. b. The Department must allow 90 days for comments on the proposed changes to the original rules. c. The Department must publicize the proposed changes in the original rules and allow a comment period. d. Because the rules could not be promulgated, Congress can revoke the Nursing Mothers Law. ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal

TOPICS: KEYWORDS:

The Functions of Administrative Agencies and Business Interaction Bloom's: Application

The U.S. Lacey Act prohibits U.S. businesses from importing products from other countries when those products are illegal in that country. For example, when it was originally passed, U.S. hat manufacturers were importing feathers from countries where the harvesting of those resources was illegal. Based on an investigation, the U.S. federal government believed that Gibson Guitar has imported ebony wood from Madagascar, and the harvesting of ebony wood is prohibited in Madagascar. The U.S. Fish & Wildlife Service arrived at Gibson Guitar headquarters and requested access to all of its records.

133. Under federal law, Gibson is: a. Not subject to searches and seizures by a federal regulatory agency, only law enforcement officials. b. Required to allow entry or can demand a search warrant and then must allow entry. c. Not subject to federal law enforcement because the wood is imported from another country. d. Required to allow the search and no warrant is required.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Business Rights in Agency Enforcement Action KEYWORDS: Bloom's: Synthesis 134. What remedies would the U.S. Fish & Wildlife Service have available for violations of the Lacey Act? a. Injunctions b. Fines c. Penalties d. all of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking STATE STANDARDS: United States - OH - AICPA: BB-Legal TOPICS: Business Rights in Agency Enforcement Action KEYWORDS: Bloom's: Comprehension