The Legal Environment Today 8th Edition By Miller, Cross TEST BANK

Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 1. In a brief filed in Lea's suit against Mica in a state court, Neil, Lea's attorney, cites, Ole! Cafe v. Pan Foods Corp., an unpublished opinion. With respect to the persuasiveness of unpublished opinions, most states a. allow their courts to consider such opinions. b. do not allow their courts to consider such opinions. c. impose certain hierarchical rankings. d. require their courts to consider such opinions.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Common Law Tradition LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal TOPICS: CHAPTER 1---ONLINE DEVELOPMENTS: HOW THE INTERNET HAS EXPANDED PRECEDENT KEYWORDS: Bloom's: Application 2. In a brief filed in Gene's suit against Hoyt in a federal court, Ilsa, Gene's attorney, cites, Jon v. Klint, an unpublished opinion. According to a ruling of the United States Supreme Court, the judge in Gene's suit a. may consider the unpublished opinion persuasive. b. must apply the unpublished opinion as binding. c. must ignore the unpublished opinion. d. must issue a judgment in Hoyt's favor.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Common Law Tradition LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal TOPICS: CHAPTER 1---ONLINE DEVELOPMENTS: HOW THE INTERNET HAS EXPANDED PRECEDENT KEYWORDS: Bloom's: Application 3. Ira is a judge in a court of equity. In this court, Ira may bar a suit if it is not filed within a proper time under the doctrine known as a. equitable limitations. b. equitable maxims. c. laches. d. limitation de baris.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: The Common Law Tradition LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal TOPICS: CHAPTER 1---LANDMARK IN THE LEGAL ENVIRONMENT: EQUITABLE PRINCIPLES AND MAXIMS KEYWORDS: Bloom's: Application 4. Keisha is a state court judge. A statute of limitations limits a. the amount of a judgment that Keisha can issue in any one case. b. the length of a trial in Keisha's court. c. the number of cases that Keisha is permitted to hear. d. the time during which a certain suit can be brought in Keisha's court.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Common Law Tradition LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal TOPICS: CHAPTER 1---LANDMARK IN THE LEGAL ENVIRONMENT: EQUITABLE PRINCIPLES AND MAXIMS KEYWORDS: Bloom's: Application 5. Bly is a judge in a country that follows a common law system. In this system, Bly's application of a principle of law to a certain set of facts must be adhered to by a. all judges in courts of inferior rank. b. all other judges. c. no other judges. d. only those judges who elect to apply it.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Classifications of Law LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking TOPICS: CHAPTER 1---BEYOND OUR BORDERS: NATIONAL LAW SYSTEMS KEYWORDS: Bloom's: Application 6. Arno is judge in a country that follows a civil law system. In Arno's court, the primary source of law consists of a. administrative decisions. b. a statutory code. c. case precedents. d. the laws of other nations.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Classifications of Law LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking TOPICS: CHAPTER 1---BEYOND OUR BORDERS: NATIONAL LAW SYSTEMS KEYWORDS: Bloom's: Application 7. Global Enterprises Corporation (GEC) engages in what some unhappy ex-employees and disgruntled consumers consider to be bad corporate behavior. These individuals post "horror stories" about GEC on rogue Web sites. By providing a forum for complaints, the potential for damage to the reputation of any corporation via the Internet has a. decreased. b. increased. c. neither decreased nor increased. d. both decreased and increased.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Global Business Ethics LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Ethics - AACSB Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking TOPICS: CHAPTER 2---ONLINE DEVELOPMENTS: CORPORATE REPUTATIONS UNDER ATTACK KEYWORDS: Bloom's: Application 8. World Investment & Trading, Inc. (WIT), encourages its employees to build trust with its customers and other companies. Unfounded complaints and exaggerated charges leveled against WIT online would most likely be regarded by a court as a. an expression of fact. b. a form of speech protected by the First Amendment. c. an inappropriate online disclosure. d. libelous.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Global Business Ethics LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Ethics - AACSB Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking TOPICS: CHAPTER 2---ONLINE DEVELOPMENTS: CORPORATE REPUTATIONS UNDER ATTACK KEYWORDS: Bloom's: Application Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 9. Khalil and Jasmin sign a prenuptial agreement that provides for any dispute to be arbitrated according to Islamic law.

When a dispute arises over the parties' marital property in Iowa, Jasmin files a suit in an Iowa state court to contest the arbitration provision. According to rulings in other states' courts in similar cases, the provision will most likely be a. enforced. b. rewritten to remove the Islamic law clause. c. struck down as outside the common legal framework of our society. d. suspended while the court considers an equitable result.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: The State and Federal Court Systems LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal TOPICS: CHAPTER 3---BEYOND OUR BORDERS: ISLAMIC LAW COURTS ABROAD AND AT HOME KEYWORDS: Bloom's: Application 10. Ahsan and Imani want to obtain a divorce and divide their marital property according to the principles of sharia.

Officially recognized sharia courts with the full power of equivalent courts within a judicial system to rule on issues of divorce and financial disputes between couples have been sanctioned in a. Canada. b. Great Britain. c. the United States. d. no Western jurisdiction.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: The State and Federal Court Systems LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal TOPICS: CHAPTER 3---BEYOND OUR BORDERS: ISLAMIC LAW COURTS ABROAD AND AT HOME KEYWORDS: Bloom's: Application 11. Business Credit Company files a suit against City Developers, Inc., and seeks, as part of dis-covery, certain electronic documents in City Developers’s possession. City Developers did not preserve the requested data—e-mail mes-sages among employees. The court is not likely to sanction City Developers if a. the data was not saved because there was no reasonable anticipation of litigation. b. the e-documents were destroyed when the suit was filed. c. the e-mail messages were trashed when the discovery request was made. d. the e-mail system was wiped clean to avoid revealing incriminating evidence.

ANSWER: a Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© POINTS: 1 DIFFICULTY: Moderate REFERENCES: Following a State Court Case LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 3---ONLINE DEVELOPMENTS: THE DUTY TO PRESERVE E-EVIDENCE FOR DISCOVERY KEYWORDS: Bloom's: Application 12. In Smartphone Games Inc.’s suit against Thermopylae Apps Corporation, Thermopylae seeks to discover electronically stored information (ESI) that should be in Smartphone’s possession. If Smartphone did not preserve the ESI despite a clear duty to do so, the company should most likely a. ask the court to sanction Thermopylae for an unreasonable request. b. reconstruct the ESI to the best of its ability. c. refuse to provide the ESI on the ground that it is confidential. d. settle the dispute.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Following a State Court Case LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 3---ONLINE DEVELOPMENTS: THE DUTY TO PRESERVE E-EVIDENCE FOR DISCOVERY KEYWORDS: Bloom's: Application 13. According to the ruling of the United States Supreme Court in Gibbons v. Ogden, as used in the Constitution's commerce clause, commerce means a. all business dealings. b. all business dealings that affect more than one state. c. most business dealings that affect more than one state. d. only business dealings that affect all of the states.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Commerce Clause LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AACSB Communication LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking TOPICS: CHAPTER 4---LANDMARK IN THE LEGAL ENVIRONMENT: GIBBONS V. OGDEN (1824) KEYWORDS: Bloom's: Application

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 14. In terms of the power of Congress, John Marshall's decision in Gibbons v. Ogden a. delegated the power. b. increased the power. c. made no changes. d. reduced the power.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Commerce Clause LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AACSB Communication LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking TOPICS: CHAPTER 4---LANDMARK IN THE LEGAL ENVIRONMENT: GIBBONS V. OGDEN (1824) KEYWORDS: Bloom's: Application 15. Trending Topix, Inc., is dissatisfied with its rankings in Google, Inc.’s search results and files a suit, seeking an injunction. The court is most likely to rule that under the First Amendment, search results on Google are a. protected opinions. b. not protected if they are “unfair” in ranking the search results. c. not protected if the search engine uses a computerized algorithm. d. subject to limited protection as commercial speech.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Business and the Bill of RIghts LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 4---ONLINE DEVELOPMENTS: DO COMPUTERS HAVE FREE SPEECH RIGHTS? KEYWORDS: Bloom's; ApplIcation 16. FastBreak Ltd. is dissatisfied with its ranking in Google Inc.’s search results. FastBreak files a suit against Google, seeking an injunction. Google argues that its search results are constitutionally protected speech. FastBreak’s best argument against Google’s position is that a. the First Amendment protects humans against state censorship and protecting a computer’s speech is not related to that purpose. b. the trillions of decisions made by computers each day do not all constitute protected speech. c. computerized algorithms, which generate computer language, do not constitute speech. d. search results constitute commercial speech, for which the First Amendment provides only limited protection.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Business and the Bill of RIghts Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 4---ONLINE DEVELOPMENTS: DO COMPUTERS HAVE FREE SPEECH RIGHTS? KEYWORDS: Bloom's: Application 17. Jennifer, a sophomore at West High School, posts suggestive—but not pornographic or obscene—photos of herself on Facebook. The images do not identify the school and require “friend” status to be viewed. Jennifer intends the photos to be humorous, and this is how her friends understand them. Under the First Amendment, West can most likely a. suspend or otherwise punish Jennifer for posting the photos. b. require that Jennifer remove the photos but not punish her. c. require that Jennifer remove the photos and punish her. d. not punish Jennifer or restrict her posts.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Business and the Bill of Rights LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 4---INSIGHT INTO ETHICS: SHOULD VULGAR FACEBOOK PHOTOS RECEIVE FIRST AMENDMENT PROTECTION? KEYWORDS: Bloom's: Application 18. Devon, a senior at Central High School, participates in a social media forum on which he posts destructive, bullying lies about Beau, a fellow student. Beau’s parent complains to Central officials. Under the First Amendment, Central can most likely a. punish Devon for the posts. b. transfer Beau to a different school. c. require that all students’ future posts be made on the school’s public Web site. d. post an official note calling Devon’s posts “juvenile and silly.”

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Business and the Bill of Rights LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 4---INSIGHT INTO ETHICS: SHOULD VULGAR FACEBOOK PHOTOS RECEIVE FIRST AMENDMENT PROTECTION? KEYWORDS: Bloom's: Application 19. Paoli asserts against River City a claim based on allegedly conflicting rights and protections stemming from the U.S. Constitution. In this case, the role of the United States Supreme Court is to a. decline to review the claim due to the conflict.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. defuse the conflict by eliminating rights or protections. c. designate a lower court to make a decision. d. determine the appropriate balance.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Business and the Bill of Rights LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking TOPICS: CHAPTER 4---BEYOND OUR BORDERS: THE IMPACT OF FOREIGN LAW ON THE UNITED STATES SUPREME COURT KEYWORDS: Bloom's: Application 20. Clark appeals a decision in his suit against Dona, grounded on rights provided in the U.S. Constitution, to the United States Supreme Court. The task of the Court to interpret and give meaning to those rights is made more difficult because a. foreign laws affect the legal environment unpredictably. b. government's role alters with each new election. c. parties' expectations vary with each step in the judicial process. d. society's perceptions and needs change over time.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Business and the Bill of RIghts LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking TOPICS: CHAPTER 4---BEYOND OUR BORDERS: THE IMPACT OF FOREIGN LAW ON THE UNITED STATES SUPREME COURT KEYWORDS: Bloom's: Application 21. In the United States, the freedoms of speech and press are strongly protected. To have a complaint heard by a sympathetic court and effect a greater chance of winning, a plaintiff might file a defamation lawsuit in a. England or Wales. b. New York. c. Saudi Arabia. d. the United States.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Intentional Torts against Persons LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© TOPICS: KEYWORDS:

CHAPTER 5---BEYOND OUR BORDERS: "LIBEL TOURISM" Bloom's: Application

22. Libel tourism is a. enforcing a foreign libel judgment against a writer in the United States. b. financing terrorist groups with damages awarded in foreign libel cases. c. forum shopping on an international scale. d. restricting the free speech of international tourists.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Intentional Torts against Persons LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal TOPICS: CHAPTER 5---BEYOND OUR BORDERS: "LIBEL TOURISM" KEYWORDS: Bloom's: Application 23. Chad hosts Durango, a social networking site. Eagle’s Nest, a rival site, hires Frank to pepper Durango with stories that raise questions about the site’s privacy policy. Durango might most successfully sue Eagle’s Nest for a. wrongful interference with a business relationship. b. trespass to property. c. negligence. d. none of the choices.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Intentional Torts against Persons LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 5---ONLINE DEVELOPMENTS: FACEBOOK USES PRIVACY CONCERNS TO “SMEAR” GOOGLE KEYWORDS: Bloom's: Application 24. Grace hosts Harvest, a social networking site. Idle Fields, a competitive site, hires Jeb to anonymously post on Harvest stories that question its privacy practices. Harvest might most successfully sue Idle Fields for a. slander of quality. b. intentional infliction of emotional distress. c. false imprisonment. d. none of the choices.

ANSWER: a POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Moderate REFERENCES: Intentional Torts against Persons LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 5---ONLINE DEVELOPMENTS: FACEBOOK USES PRIVACY CONCERNS TO “SMEAR” GOOGLE KEYWORDS: Bloom's: Application 25. Jack initiates a sequence of events that results in an injury to Kay. According to the New York Court of Appeals in Palsgraf v. Long Island Railroad Co., the question of whether Jack was negligent with respect to Kay depends on whether Kay's injury was reasonably foreseeable to a. a bystander. b. an insurance company. c. Jack. d. Kay. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Negligence LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AACSB Communication LOCAL STANDARDS: United States - OH - Default City - AICPA Legal TOPICS: CHAPTER 5---LANDMARK IN THE LEGAL ENVIRONMENT: PALSGRAF V. LONG ISLAND RAILROAD CO. (1928) KEYWORDS: Bloom's: Application 26. Lora initiates a sequence of events involving Mike that results in an injury to Nell. According to the New York Court of Appeals in Palsgraf v. Long Island Railroad Co., if Lora was negligent with respect to Mike, Lora a. is solely liable for Nell's injury. b. is not liable for Nell's injury. c. may be liable for Nell's injury⎯ this is a separate issue. d. shares liability with Mike for Nell's injury.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Negligence LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AACSB Communication LOCAL STANDARDS: United States - OH - Default City - AICPA Legal TOPICS: CHAPTER 5---LANDMARK IN THE LEGAL ENVIRONMENT: PALSGRAF V. LONG ISLAND RAILROAD CO. (1928) KEYWORDS: Bloom's: Application

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 27. According to the United States Supreme Court in Miranda v. Arizona, an individual must be apprised of certain of his or her rights whenever the individual is a. arraigned in a court. b. imprisoned in a jail. c. sentenced for a crime. d. taken into custody.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Criminal Procedures LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AACSB Communication LOCAL STANDARDS: United States - OH - Default City - AICPA Legal TOPICS: CHAPTER 6---LANDMARK IN THE LEGAL ENVIRONMENT: MIRANDA V. ARIZONA (1966) KEYWORDS: Bloom's: Application 28. According to the United States Supreme Court in Miranda v. Arizona, an individual must be apprised of certain of his or her rights a. after any questioning. b. at any time during questioning. c. only in the absence of questioning. d. prior to any questioning.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Criminal Procedures LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AACSB Communication LOCAL STANDARDS: United States - OH - Default City - AICPA Legal TOPICS: CHAPTER 6---LANDMARK IN THE LEGAL ENVIRONMENT: MIRANDA V. ARIZONA (1966) KEYWORDS: Bloom's: Application 29. An extensive hacking operation uncovered in 2013 and linked to the “Comment Crew” involved the theft of hundreds of terabytes of data and intellectual property. The goal of the attacks was to a. help Chinese companies compete against U.S. and foreign firms. b. conduct diplomatic espionage. c. acquire prepackaged hacking software on the Internet. d. publicize a certain sophisticated, organized, and well-funded gang of cyber mercenaries.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Cyber Crime LEARNING OBJECTIVES: LO-5 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 6---ONLINE DEVELOPMENTS: EVEN SMARTPHONES ARE VULNERABLE TO CYBER ATTACKS KEYWORDS: Bloom's: Application 30. Recent advances have fostered the growth of a relatively new industry to profit from crime. Statistics show that criminals have learned it is easier, less risky, and more profitable to a. rob banks using traditional means. b. steal via the Internet. c. engage in legitimate activities such as stock trading via the Internet. d. sell their stories to movie, music, and TV producers or video-game makers.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Cyber Crime LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 6---ONLINE DEVELOPMENTS: EVEN SMARTPHONES ARE VULNERABLE TO CYBER ATTACKS KEYWORDS: Bloom's: Application 31. Officials with the U.S. Department of Homeland Security search the laptops and smart phones of Diego, a Mexican citizen, and Ethan, a U.S. citizen, when they cross the border between the United States and Mexico. Diego and Ethan object to the search. The most likely basis for their objection is that the search constitutes a. an invasion of privacy. b. a breach of contract. c. a breach of the principle of comity. d. a breach of the act of state doctrine.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Introduction LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 7---BEYOND OUR BORDERS: BORDER SEARCHES OF YOUR ELECTRONIC DEVICES KEYWORDS: Bloom's: Application 32. When Maja, an attorney and a U.S. citizen, crosses the border between the United States and Canada, she expects the U.S. Department of Homeland Security to search her laptop. To avoid disclosing confidential client data during the search, Maja could a. keep client files on a device that she does not take abroad. b. carry client files abroad only in hard copy.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© c. refuse to consent to a border search of her laptop. d. assert her right to be free from unwarranted government intrusion.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Introduction LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 7---BEYOND OUR BORDERS: BORDER SEARCHES OF YOUR ELECTRONIC DEVICES KEYWORDS: Bloom's: Application

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 1. Robyn creates the Web site StudyBuddy.com where students can collect and share class notes. Claiming trademark infringement, Test Notes, Inc., sends Robyn a cease-and-desist letter. Robyn believes that Test Notes’s claim has no merit, but she lacks the resources for a prolonged legal battle with the company. Robyn’s best option is most likely to a. describe the problem on social media. b. cease and desist. c. represent herself in the dispute with Test Notes. d. transfer ownership of StudyBuddy.com to Test Notes.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Trademarks LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 8---ONLINE DEVELOPMENTS: USING ONLINE SHAME IN TRADEMARK DISPUTES KEYWORDS: Bloom's: Application 2. Rich Tavern Brewing Corporation threatens Small Pub Artisanal Ale Company with a suit for trademark infringement.

The suit is described on Facebook and Twitter, where large companies’ threats to sue small companies for trademark infringement are generally met with a. displeasure. b. donations. c. offers of legal representation at no charge. d. none of the choices.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Trademarks LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 8---ONLINE DEVELOPMENTS: USING ONLINE SHAME IN TRADEMARK DISPUTES KEYWORDS: Bloom's: Application 3. Pay-to-Buy.com, Inc., obtains a patent on an online payment system. The patent is vaguely worded and overly broad. In evaluating the patent, a court is most likely to a. have difficulty, resulting in Pay-to-Buy being targeted by patent trolls. b. apply the patent broadly. c. issue a vaguely worded protection order. d. hold that Pay-to-Buy’s business practices are illegal.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: Patents LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 8---INSIGHT INTO ETHICS:THE EMERGENCE OF PATENT TROLLS KEYWORDS: Bloom's: Application 4. Money2Play Corporation does not make or sell products or services but buys a patent and asserts it against New Functions, Inc., a start-up applications company, demanding licensing fees and threatening an infringement suit. Because of these threats, New Functions is most likely to a. have difficulty in attracting investors. b. target other firms with patent litigation to obtain investment capital. c. cease and desist. d. collect more capital to fund its operations than without the threats.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Patents LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 8---INSIGHT INTO ETHICS: THE EMERGENCE OF PATENT TROLLS KEYWORDS: Bloom's: Application 5. To pay for her education, Chu Hua has her friends and family buy and ship CDs, DVDs, and books legally produced in Hong Kong to her for resale in the United States. The U.S. owners of the copyrights on the items file a suit against Chu Hua, alleging copyright infringement. She asserts the first sale doctrine in defense. According to a decision of the United State Supreme Court in a similar case, the court in this case should rule that the first sale doctrine a. applies only to works that are made in the United States. b. requires offering “good” prices on the products made abroad. c. prohibits the importation of a work “without the authority of the owner.” d. allows the first purchase-owner of a work legally produced and acquired abroad to sell it in the United States without the copyright owner’s permission.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Copyrights LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 8---BEYOND OUR BORDERS: TEXTBOOKS PURCHASED ABROAD KEYWORDS: Bloom's: Application 6. Nguyen has her family buy and ship textbooks legally produced in Vietnam to her for resale in the United States. The U.S. owners of the copyrights on the items file a suit against Nguyen, alleging infringement. Applying a decision of the Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© United State Supreme Court in a similar case, the court in this case is most likely to rule in favor of Nguyen on the basis that a. U.S. copyright law does not apply to works that are made outside the United States. b. Nguyen offered “good” prices for the books. c. Nguyen imported the books “with the authority of the owner” (her family). d. the first sale doctrine applies in these circumstances.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Copyrights LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 8---BEYOND OUR BORDERS: TEXTBOOKS PURCHASED ABROAD KEYWORDS: Bloom's: Application 7. Nero files a suit against Omar. Before the case goes to trial, they enter into a settlement agreement that stipulates “neither party will disclose the terms to anyone” except their attorneys. Nero tells Pilar, his significant other, that he is satisfied with the result. Pilar repeats Nero’s comments in a post on Facebook. On learning of the post, Omar asks a court to invalidate the agreement. Most likely, the court will hold that the agreement is a. no longer enforceable because Nero breached it. b. enforceable because Pilar is not a party to it. c. enforceable because Nero’s comments are outside the agreement. d. enforceable because Nero did not criticize the terms.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Social Media LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 9---INSIGHT INTO ETHICS: BOASTING ON FACEBOOK CAN HAVE CONSEQUENCES KEYWORDS: Bloom's: Application 8. Cargo Carrier Company files a suit against Distribution & Transport Inc. (D&T). Before the case goes to trial, they enter into a settlement agreement that includes a confidentiality clause. Cargo announces its satisfaction with the terms to its employees. Elron, an employee, posts comments about the terms on Twitter. On discovering the posts, D&T asks a court to invalidate the agreement. Most likely, the court will hold that the agreement is a. no longer enforceable because Cargo breached it. b. enforceable because Elron is not a direct party to it. c. enforceable because Elron’s’s posts are outside the agreement. d. enforceable because Cargo did not criticize the agreement.

ANSWER: a POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Moderate REFERENCES: Social Media LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 9---INSIGHT INTO ETHICS: BOASTING ON FACEBOOK CAN HAVE CONSEQUENCES KEYWORDS: Bloom's: Application 9. Click & Mortar, Inc., collects and amasses considerable information about its customers. Under President Obama’s proposed Consumer Privacy Bill of Rights, without giving consumers choices about what data are collected and how it is used, Click & Mortar can a. collect the information without violating consumers’ privacy. b. pass the information that it collects on to its affiliates. c. use this information to predict what a consumer might want. d. none of the choices.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Privacy LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 9---ONLINE DEVELOPMENTS: A CONSUMER PRIVACY BILL OF RIGHTS KEYWORDS: Bloom's: Application 10. Retail MarkUp, Inc., collects and amasses considerable information about its customers. Under President Obama’s proposed Consumer Privacy Bill of Rights, Retail MarkUp will have to a. do nothing different. b. use the data for marketing or delete the data from its servers. c. pass the information on to the government and no other third party. d. allow consumers to set limits on the information collected about them.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Privacy LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 9---ONLINE DEVELOPMENTS: A CONSUMER PRIVACY BILL OF RIGHTS KEYWORDS: Bloom's: Appllication 11. University of St. Bart (USB) offers classes online. Enrollment is carried out online. USB asks each enrolling student Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© to agree that any dispute will be resolved by arbitration and to indicate assent by clicking a box to make “Signed by ESignature” appear on a signature line. Most likely, this agreement is a. misleading. b. valid. c. invalid without further proof that the student assented to it. d. invalid without a facsimile of an actual signature on the signature line.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: E-Contracts LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 10---ONLINE DEVELOPMENTS: THE VALIDITY OF E-SIGNATURES ON AGREEMENTS WITH ONLINE COLLEGES AND UNIVERSITIES KEYWORDS: Bloom's: Application 12. Apex University (AU) offers classes online. AU asks each student enrolling online to agree to submit any dispute to arbitration and to indicate assent by clicking a box. AU claims that it is the cheapest undergraduate program in the United States. Beth enrolls in the program but later charges AU with fraud based on its “cheapest” claim. Beth could pursue her claim a. in a court. b. in an arbitration proceeding. c. nowhere. d. anywhere.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: E-Contracts LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 10---ONLINE DEVELOPMENTS: THE VALIDITY OF E-SIGNATURES ON AGREEMENTS WITH ONLINE COLLEGES AND UNIVERSITIES KEYWORDS: Bloom's: Application 13. Sports Fit Company sponsors the "$100,000 Game" in which contestants compete in ten separate athletic events over a period of weeks. Sports Fit announces that the winner of each event will be awarded $5,000 with the "Ultimate Champion"⎯ the winner of the most events⎯ awarded $50,000. If the "$100,000 Game" is treated as a unilateral contract, Sports Fit can a. cancel the contest or alter its terms at any time. b. not modify the terms of the contest after it begins. c. reduce the amount of the event prizes but not the grand prize. d. reduce the amount of the grand prize but not the event prizes.

ANSWER: b Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© POINTS: 1 DIFFICULTY: Moderate REFERENCES: Types of Contracts LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal TOPICS: CHAPTER 10---INSIGHT INTO ETHICS: IS IT RIGHT FOR A COMPANY TO CHANGE THE PRIZE OFFERED IN A CONTEST? KEYWORDS: Bloom's: Application 14. GPS Devices Inc. sponsors a "Finders Keepers!" contest in which Erwin and other entrants agree to race to certain locales to win small prizes and collect clues that lead to the "Grand Lost Treasure," which the first finder will be awarded.

GPS reserves the right to cancel the contest or change its terms at any time. If Erwin challenges this reservation in court, the court will most likely hold that GPS can a. cancel the contest or alter its terms at any time. b. not modify the terms of the contest after it begins. c. reduce the amount of the small prizes but not the grand prize. d. reduce the amount of the grand prize but not the small prizes.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Types of Contracts LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal TOPICS: CHAPTER 10---INSIGHT INTO ETHICS: IS IT RIGHT FOR A COMPANY TO CHANGE THE PRIZE OFFERED IN A CONTEST? KEYWORDS: Bloom's: Application 15. Brigit pretends to be “Chyna” online, fooling D’Antoni into believing that Chyna is his friend. D’Antoni can recover damages from Brigit for the hoax on the ground of fraudulent misrepresentation if a. D’Antoni can prove an actual injury. b. Chyna is not in fact a “real” person but a totally fake persona. c. Brigit and D’Antoni’s online relationship is “purely personal.” d. D’Antoni sent gifts to “Chyna” totaling at least $10,000.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Voluntary Consent LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 11---ONLINE DEVELOPMENTS: “CATFISHING”: IS THAT ONLINE “FRIEND” WHO YOU THINK IT IS? KEYWORDS: Bloom's: Application Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning©

16. Evita pretends to be “Faith” online, fooling Garth into believing that Faith is his friend. When Garth learns the truth, he is embarrassed and feels humiliated. But he cannot recover damages because he cannot prove an actual injury, which is a requirement for recovery in these circumstances on the ground of a. mistake. b. fraudulent misrepresentation. c. undue influence. d. unconscionability.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Voluntary Consent LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 11---ONLINE DEVELOPMENTS: “CATFISHING”: IS THAT ONLINE “FRIEND” WHO YOU THINK IT IS? KEYWORDS: Bloom's: Application 17. Ilsa and Janis agree to a contract. Later, Ilsa alleges that her performance is impossible or at best impracticable because of circumstances unforeseen at the time the contract was formed. Frieda files a suit, claiming breach. In the United States, if the court agrees with Eva, the most likely remedy is a. damages. b. reformation. c. rescission. d. specific performance.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Performance and Discharge LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal TOPICS: CHAPTER 11---BEYOND OUR BORDERS: IMPOSSIBILITY OR IMPRACTICABILITY OF PERFORMANCE IN GERMANY KEYWORDS: Bloom's: Application 18. Klint and Lorenz agree to a contract. Later, Klint alleges that his performance is impossible or at best impracticable because of circumstances unforeseen at the time the contract was formed. Hans files a suit, claiming breach. In Germany, if the court agrees with Klint, the most likely remedy is a. damages. b. reformation. c. rescission. d. specific performance.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Performance and Discharge LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal TOPICS: CHAPTER 11---BEYOND OUR BORDERS: IMPOSSIBILITY OR IMPRACTICABILITY OF PERFORMANCE IN GERMANY KEYWORDS: Bloom's: Application 19. Management Tech Company uses an online behavioral test provided by Norm Testing Service to assess the employability of job applicants. The agreement between Management Tech and Norm Testing for the use of the test most likely provides that if Management Tech breaches the terms and conditions, Norm Testing can a. cancel the contract. b. do nothing. c. require that Management Tech re-administer the test. d. mandate that any affected applicants be hired.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Damages LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 11---INSIGHT INTO ETHICS: THE EFFECT OF BREACHING AN ONLINE TESTING SERVICE’S TERMS OF USE KEYWORDS: Bloom's: Application 20. Prep Charter School uses an online test provided by Quality Tests, Inc., to assess the probability that an adolescent is chemically dependent. The agreement between Prep Charter and Quality for the use of the test most likely provides that if Prep Charter breaches its duties under the agreement, Quality will suffer a. immediate and irreparable damages. b. no harm. c. compensatory, consequential, punitive, and nominal damages. d. liquidated and quasi-contractual damages.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Damages LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 11---INSIGHT INTO ETHICS: THE EFFECT OF BREACHING AN ONLINE Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning©

KEYWORDS:

TESTING SERVICE’S TERMS OF USE Bloom's: Application

21. Fleet Feet, an online travel company, buys blocks of rooms from Grande Hotel, a hotel in Hyper City, at a wholesale rate. Fleet Feet resells the rooms to consumers at a retail rate. One recent effort by cities to collect taxes from e-commerce has focused on a. hotels that sell blocks of rooms at wholesale rates. b. non-resident consumers who reserve rooms in in-state hotels. c. online travel companies. d. the dire financial straits of the cities during the latest recession.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Scope of Articles 2 and 2A LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal TOPICS: CHAPTER 12---ONLINE DEVELOPMENTS: TAXING WEB PURCHASES KEYWORDS: Bloom's: Application 22. Tour Vista, an online travel company, buys blocks of rooms from Skyview Towers, a hotel in River City, at a wholesale rate. Tour Vista resells the rooms to consumers at a retail rate. In recent efforts to collect taxes from ecommerce, some cities claim that hotel occupancy taxes should be assessed and remitted directly to the cities based on a. the dire financial straits of the cities during the latest recession. b. the retail rates of the rooms. c. the states of residency of the consumers who reserve the rooms. d. the wholesale rates of the rooms.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Scope of Articles 2 and 2A LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal TOPICS: CHAPTER 12---ONLINE DEVELOPMENTS: TAXING WEB PURCHASES KEYWORDS: Bloom's: Application 23. Wing Hon Ltd., a Chinese company, makes drywall that Veranda Homes Corporation, a U.S. firm, imports and sells to contractors and consumers in the United States. The drywall causes electrical and other problems in newly built homes.

Potentially liable parties include a. Wing Hon and Veranda Homes. b. the Chinese and U.S. governments. c. the consumers who bought the drywall. d. none of the choices.

ANSWER: a Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© POINTS: 1 DIFFICULTY: Moderate REFERENCES: Product Liability LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 12---BEYOND OUR BORDERS: IMPOSING PRODUCT LIABILITY AS FAR AWAY AS CHINA KEYWORDS: Bloom's: Application 24. Canada Clay Ltd., a Canadian company, makes roofing tiles that Don’s Asphalt & Tile Inc. imports and sells to contractors in the United States. Structures on which the tiles are laid suffer leaks and other weather-related damage. To hold Canada Clay liable requires proof that the tiles were a. delivered in a safe condition. b. defective when they left Canada Clay’s hands. c. mishandled by the contractors. d. substantially changed after they were sold.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Product Liability LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 12---BEYOND OUR BORDERS: IMPOSING PRODUCT LIABILITY AS FAR AWAY AS CHINA KEYWORDS: Bloom's: Application 25. West Virginia enacts a statute that requires labels on video games to warn parents when “the range of options available to a player includes killing and maiming the image of a human being.” Game makers file a suit against the state to block the enforcement of this statute. According to a decision of the United State Supreme Court in a case involving a similar statute, the court in this case should rule that the statute a. legitimately extends restrictions on sex-based content to violence in video games. b. violates the First Amendment’s guarantee of freedom of speech. c. fairly imposes market-share liability on makers of violent games. d. merely replaces the voluntary rating system currently in use.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Product Liability LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 12---INSIGHT INTO ETHICS: WARNING LABELS FOR VIDEO GAMES KEYWORDS: Bloom's: Application Cengage Learning Testing, Powered by Cognero

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26. North Carolina enacts a statute that requires a label on a video game to warn parents when “the range of options available to a player include dismem-bering or sexually assaulting the image of a human being.” In a challenge to the statute by game makers, the state asks a federal court to enforce the statute. The state fails to show that the statute is justified by a compelling government interest or that it is narrowly tailored to serve that interest. The court is most likely to a. hold that the statute is unconstitutional and refuse to enforce it. b. expand the label’s warning to include other forms of violence. c. impose market-share liability on makers of violent video games. d. replace the voluntary rating system currently in use.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Product Liability LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 12---INSIGHT INTO ETHICS: WARNING LABELS FOR VIDEO GAMES KEYWORDS: Bloom's: Application 27. The U.S. Bankruptcy Court for the District of Arizona uses online live chatting as part of a strategic initiative to educate the public about bankruptcy. Those who have used the live chat services include a. individuals interested in filing for bankruptcy without an attorney. b. paralegals. c. real estate lawyers who have expanded into bankruptcy law. d. all of the choices.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Bankruptcy Law LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 13---ONLINE DEVELOPMENTS: LIVE CHATTING WITH YOUR STATE’S BANKRUPTCY COURT KEYWORDS: Bloom's: Application 28. Suki, a paralegal, works for Thao, an attorney. Before filing a bankruptcy petition for Thao on behalf of a client in the U.S. Bankruptcy Court for the District of Arizona, Suki has a question about the filing. Suki can access a chat box via the court’s Web site and a. contact other paralegals, attorneys, and their clients quickly. b. get verbal responses to questions in not less than ten minutes. c. leave voice messages. d. send and receive text messages.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Bankruptcy Law LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 13---ONLINE DEVELOPMENTS: LIVE CHATTING WITH YOUR STATE’S BANKRUPTCY COURT KEYWORDS: Bloom's:Application

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 1. Heinz Kirche, GmbH, is a German Gesellschat mit beschranker, or "company with limited liability." A significant difference between a GmbH and a U.S. limited liability company (LLC) is that a. German law imposes many restrictions on the operations of GmbHs. b. German law imposes no restrictions on the operations of GmbHs. c. U.S. law requires an LLC to have an operating agreement. d. U.S. law requires that an LLC be owned by shareholders.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Limited Liability Companies LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal TOPICS: CHAPTER 14---BEYOND OUR BORDERS: LIMITED LIABILITY COMPANIES IN FOREIGN NATIONS KEYWORDS: Bloom's: Application 2. Forms of business organizations that limit the liability of their owners are available to businesspersons around the world. Among the features that such firms have in common, in most nations a. articles of organization must be filed to form the enterprise. b. one of the owners must be a foreign entity. c. the organization can have an unlimited number of owners. d. the owners are not required to choose persons to manage the business.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Limited Liability Companies LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal TOPICS: CHAPTER 14---BEYOND OUR BORDERS: LIMITED LIABILITY COMPANIES IN FOREIGN NATIONS KEYWORDS: Bloom's: Application 3. Taco-Taco Pizza, Inc., offers entrepreneurs the opportunity to operate a franchise under the Taco-Taco Pizza trade name as a member of a select group of dealers. To possible investors, Taco-Taco Pizza makes claims about the earnings potential of a franchise. For those claims, the franchisor must have a. a hypothetical basis. b. a reasonable basis. c. an actual basis. d. no basis.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: Franchises LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 14---INSIGHT INTO ETHICS: SHOULD FRANCHISORS HAVE TO GIVE PROSPECTIVE FRANCHISEES INFORMATION ABOUT POTENTIAL EARNINGS? KEYWORDS: Bloom's: Application 4. Korean Hot Dogs Inc. offers entrepreneurs the opportunity to operate a franchise under the Korean Hot Dogs trade name as a member of a select group of dealers that engage in retail fast food sales. To potential investors, the franchisor must provide a. actual earnings figures. b. hypothetical earnings figures. c. projected earnings figures. d. none of the choices.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Franchises LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 14---INSIGHT INTO ETHICS: SHOULD FRANCHISORS HAVE TO GIVE PROSPECTIVE FRANCHISEES INFORMATION ABOUT POTENTIAL EARNINGS? KEYWORDS: Bloom's: Application 5. Pond Stock Inc. is a start-up fishery with prospects but no profits as of yet. Pond Stock may be most likely to obtain financing successfully by a. applying to banks, which are generally willing to lend to start-ups. b. approaching foreign governments, under which investment laws are less strict than in the United States. c. attracting venture capital, of which there is more than enough available. d. crowdfunding.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Formation and Powers LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 15---ONLINE DEVELOPMENTS: THE NEW ERA OF CROWDFUNDING KEYWORDS: Bloom's: Application 6. Screenworx Inc. is a start-up film production firm with prospects but no profits as of yet. Under the JOBS Act, Screenworx and other similarly situated companies can look for financing by advertising investment opportunities to a. the public.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. accredited investors only. c. unaccredited investors only. d. banks and venture capitalists but not through crowd funding sites.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Formation and Powers LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 15---ONLINE DEVELOPMENTS: THE NEW ERA OF CROWDFUNDING KEYWORDS: Bloom's: Application 7. Drew, an officer of Energy Resources Inc., uses special software to help identify employees who might commit embezzlement. One reason for Drew’s use of this software may be to avoid liability for a. embezzlement. b. negligence. c. violation of the business judgment rule. d. violation of the duty of loyalty.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Directors and Officers LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 15---INSIGHT INTO ETHICS: SOFTWARE TO HELP OFFICERS SPOT POTENTIAL EMBEZZLERS KEYWORDS: Bloom's: Application 8. Odell, an officer of Professional Sportsgear Corporation, uses special software to help identify employees who might commit embezzlement and other wrongful acts. The software performs this function by a. scanning e-mail for certain words and phrases. b. looking for anomalies in the firm’s financial records. c. recording phone calls for a third party’s review. d. archiving all electronic communication as potential evidence.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Directors and Officers LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© TOPICS: KEYWORDS:

CHAPTER 15---INSIGHT INTO ETHICS: SOFTWARE TO HELP OFFICERS SPOT POTENTIAL EMBEZZLERS Bloom's: Application

9. Roshini is a shareholder of Satsui, Ltd., a Japanese firm. Roshini brings a derivative action against the company. If the action is unsuccessful, Satsui a. can sue Roshini for damages. b. must pay Roshini's legal fees. c. must apologize to Roshini. d. must accept Roshini's apology in lieu of costs, fees, or damages.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Shareholders LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Diversity LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking TOPICS: CHAPTER 15---BEYOND OUR BORDERS: DERIVATIVE ACTIONS IN OTHER NATIONS KEYWORDS: Bloom's: Application 10. Eduard is a shareholder of Deutsche Internationale, a German firm. In Germany a. most claims against firms are alleged in shareholders' derivative suits. b. the law does not provide for derivative litigation. c. derivative actions can only challenge directors' actions that shareholders could not legally ratify. d. if a derivative action is unsuccessful, a firm can sue the plaintiff.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Shareholders LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Diversity LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking TOPICS: CHAPTER 15---BEYOND OUR BORDERS: DERIVATIVE ACTIONS IN OTHER NATIONS KEYWORDS: Bloom's: Application 11. AdGraphix Inc. hires permalancers. From AdGraphix’s perspective, the advantages of employing these individuals include a. paying workers’ compensation. b. providing healthcare benefits. c. letting permalancers go quickly and without cost. d. avoiding IRS worker-classification regulations.

ANSWER: c Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© POINTS: 1 DIFFICULTY: Moderate REFERENCES: Agency Relationships LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 16---INSIGHT INTO ETHICS: SHOULD SMALL BUSINESSES BE ALLOWED TO HIRE “PERMALANCERS”?

KEYWORDS: Bloom's: Application 12. Game Apps Corporation hires independent contractors instead of employees. If these workers are determined to have been misclassified, Game Apps may be liable for a. a seniority and tenure system. b. back payroll taxes. c. copyright and trademark royalties. d. job reinstatement.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Agency Relationships LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 16---INSIGHT INTO ETHICS: SHOULD SMALL BUSINESSES BE ALLOWED TO HIRE “PERMALANCERS”?

KEYWORDS: Bloom's: Application 13. Nikita, an employee-agent of Operational Processes, Inc., is authorized to access company trade secrets. Nikita downloads those secrets onto a thumb drive. She then quits Operational’s employ and goes to work for Quantum Analysis, Inc., an Operational competitor, with whom she shares the secrets. With respect to the agent’s duty of loyalty to her principal, this is a. unethical, but not illegal. b. neither unethical nor illegal. c. illegal, but not unethical. d. unethical and illegal.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Duties of Agents and Principals LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 16---ONLINE DEVELOPMENTS: WHAT HAPPENS WHEN AN AGENT BREACHES COMPANY POLICY ON THE USE OF ELECTRONIC DATA? Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS:

Bloom's: Application

14. Armand, an employee of Big Data Corporation, is authorized to access company trade secrets. Armand downloads those secrets onto a thumb drive. He then quits Big Data’s employ and goes to work for Cloud Analytics, Inc., a Big Data competitor, with whom he shares the secrets. Under the court’s interpretation of the Computer Fraud and Abuse Act (CFAA) in United States v. Nosal, Armand’s use of the secrets is a. a civil violation of the CFAA. b. not a violation of the CFAA. c. a criminal violation of the CFAA. d. an unethical violation of the CFAA. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Duties of Agents and Principals LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 16---ONLINE DEVELOPMENTS: WHAT HAPPENS WHEN AN AGENT BREACHES COMPANY POLICY ON THE USE OF ELECTRONIC DATA? KEYWORDS: Bloom's: Application 15. Geo Global Corporation, a U.S. firm, requires its employee Marcy to stay connected with work after office hours through a smartphone. In the United States, Marcy and other employees who are required to use mobile devices after work may have a valid claim to overtime wages if they a. are not exempt under the overtime regulations of the Fair Labor Standards Act. b. are not reimbursed by their employers for the use. c. are supplied with the devices by their employers. d. do business with international contacts.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Wages, Hours, and Layoffs LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 17---BEYOND OUR BORDERS: BRAZIL REQUIRES EMPLOYERS TO PAY OVERTIME FOR USE OF SMARTPHONES AFTER WORK HOURS KEYWORDS: Bloom's: Application 16. Porto Bella Ltd., a Brazilian firm, requires its employee David to stay connected with work after office hours through a smartphone. In Brazil, David and other employees who are required to use mobile devices after work are a. entitled to receive overtime wages. b. prohibited from receiving overtime wages. c. considered overworked and underpaid.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© d. paid by their government for staying connected.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Wages, Hours, and Layoffs LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 17---BEYOND OUR BORDERS: BRAZIL REQUIRES EMPLOYERS TO PAY OVERTIME FOR USE OF SMARTPHONES AFTER WORK HOURS KEYWORDS: Bloom's: Appllication 17. Roboto Robotics Inc. creates an internal social media network using enterprise social networking software and systems. The advantages of an internal social media network include a. obtaining real-time information about important issues. b. mass e-mailings. c. employees’ posts of personal notes. d. “white noise.”

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Employee Privacy Rights LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Technology United States - BUSPROG: Reflective TOPICS: CHAPTER 17---ONLINE DEVELOPMENTS: SOCIAL MEDIA IN THE WORKPLACE COME OF AGE KEYWORDS: Bloom's: Application 18. PowerSoft Corporation creates an internal social media network using enterprise social networking software and systems. Concerns about the use of an internal social media network include how to a. keep the data safe. b. make the data public. c. provide access to all files to all employees. d. maintain a personal, lively, and entertaining tone.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Employee Privacy Rights LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Technology United States - BUSPROG: Reflective TOPICS: CHAPTER 17---ONLINE DEVELOPMENTS: SOCIAL MEDIA IN THE WORKPLACE Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning©

KEYWORDS:

COME OF AGE Bloom's: Application

19. Casino Club requires its female employees to wear make-up. Male employees are not required to wear make-up but must “look neat.” Dhara, a bartender at the club under an at-will employment contract, is fired for not complying with the make-up rule. Under the court’s ruling on similar facts in Jesperson v. Harrah’s Operating Co., Dhara is most likely entitled to a. reinstatement. b. no relief. c. damages. d. an injunction against the enforcement of Casino’s “lookism” rule.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 18---INSIGHT INTO ETHICS: APPEARANCE-BASED DISCRIMINATION KEYWORDS: Bloom's: Application 20. Jim is shorter than Kevin, and Lonna is less attractive than Merilyn. Research shows that compared with taller men and more attractive individuals, Jim will likely make less income and Lonna will receive poorer performance reviews and a lower salary. Appearance-based discrimination has been barred by a. Michigan and at least six cities. b. none of the choices. c. all of the states. d. the federal government.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 18---INSIGHT INTO ETHICS: APPEARANCE-BASED DISCRIMINATION KEYWORDS: Bloom's: Application

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 1. MetaRay, Inc., and Nucleo Corporation are the only suppliers in their market. They agree to coordinate their production so as to limit output and charge a higher price. Under the Sherman Antitrust Act of 1890, this is a. a permissible restraint of trade. b. a prohibited restraint of trade. c. not a restraint of trade and permitted. d. not a restraint of trade but prohibited.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Sherman Antitrust Act LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal TOPICS: CHAPTER 23---LANDMARK IN THE LEGAL ENVIRONMENT: THE SHERMAN ANTITRUST ACT OF 1890 KEYWORDS: Bloom's: Application 2. Banners, Inc., has the power to control the market for its product. Crest Corporation and Delphic Shield Industries, Inc., agree to limit their competitiveness to increase their profits. The Sherman Antitrust Act of 1890 prohibits restraints on trade and commerce that originate from a. any lack of balance in the nation's economy. b. business combinations and conspiracies, and certain monopolistic practices. c. business combinations and conspiracies only. d. certain monopolistic practices only.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Sherman Antitrust Act LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal TOPICS: CHAPTER 23---LANDMARK IN THE LEGAL ENVIRONMENT: THE SHERMAN ANTITRUST ACT OF 1890 KEYWORDS: Bloom's: Application 3. The U.S. Department of Justice files a suit against Random House, Inc., and other major book publishers, charging that they conspired to fix the prices of e-books. One result of limiting e-book price competition is that consumers a. pay more for e-books than they otherwise would have paid. b. pay less for e-books than they otherwise would have paid. c. have fewer choices of books to buy. d. have more choices of books to buy.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: Section 1 of the Sherman Act LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Critical Thinking United States - BUSPROG: Reflective TOPICS: CHAPTER 23---ONLINE DEVELOPMENTS: THE JUSTICE DEPARTMENT GOES AFTER E-BOOK PRICING KEYWORDS: Bloom's; Comprehension 4. Penquin Ltd. agrees with Apple Corporation to use the “agency” model of setting prices and paying commissions on the sales of e-books for iPads. Under this model, publishers a. agree to sell e-books exclusively through certain “agents.” b. match Amazon.com’s e-book prices. c. price e-books below cost to sell more e-book readers. d. set their own prices.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Section 1 of the Sherman Act LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Critical Thinking United States - BUSPROG: Reflective TOPICS: CHAPTER 23---ONLINE DEVELOPMENTS: THE JUSTICE DEPARTMENT GOES AFTER E-BOOK PRICING KEYWORDS: Bloom's: Comprehension 5. Deutsche Werke, GmbH., a German firm, is harmed by a price-fixing scheme engineered by Collider Industries, S.A., an international cartel. The European Union is most likely to a. do nothing. b. actively pursue Collider and impose criminal penalties. c. actively pursue Collider and impose civil penalties. d. contact Collider and issue a reprimand but impose no penalties.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: U.S. Antitrust Laws in the Global Context LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 23---BEYOND OUR BORDERS: THE EUROPEAN UNION’S EXPANDING ROLE IN ANTITRUST LITIGATION KEYWORDS: Bloom's: Comprehension 6. Etoile Metrics, S.A., a French software firm, is harmed by an exclusive-dealing scheme engineered by Flash Search, Inc., a U.S. software firm. Compared to U.S. laws, the European Union’s laws a. define less conduct as anticompetitive.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. define more conduct as anticompetitive. c. declare the same conduct—not more or less—to be anticompetitive. d. include less detailed provisions on monopolization.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: U.S. Antitrust Laws in the Global Context LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Critical Thinking United States - BUSPROG: Reflective TOPICS: CHAPTER 23---BEYOND OUR BORDERS: THE EUROPEAN UNION’S EXPANDING ROLE IN ANTITRUST LITIGATION KEYWORDS: Bloom's: Comprehension 7. Haruo commits a civil violation of federal securities laws. An enforcement action against Haruo can be brought by a. the National Securities Markets Agency. b. the Securities and Exchange Commission. c. the Securities Enforcement Remedies Administration. d. the U.S. Department of Justice.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Introduction LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal TOPICS: CHAPTER 24---LANDMARK IN THE LEGAL ENVIRONMENT: THE SECURITIES AND EXCHANGE COMMISSION KEYWORDS: Bloom's; Application 8. Wiley trades in securities on a regional securities exchange. These trades are subject to regulation by a. the National Securities Markets Agency. b. the Securities and Exchange Commission. c. the Securities Enforcement Remedies Administration. d. the U.S. Department of Justice.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Introduction LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal TOPICS: CHAPTER 24---LANDMARK IN THE LEGAL ENVIRONMENT: THE SECURITIES AND EXCHANGE COMMISSION Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS:

Bloom's: Application

9. Raoul is a senior executive at Securities Investment Corporation, a U.S. company. Teo is a Securities Investment shareholder. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, shareholders have the right to vote on executive compensaiton for senior executives at a. every public U.S. company. b. every public and private U.S. company. c. every U.S. company that grants shareholders the right. d. no U.S. company.

ANSWER: a POINTS: 1 DIFFICULTY: Moderater REFERENCES: Corporate Governance LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 24---INSIGHT INTO ETHICS: SHAREHOLDER “SAY-ON-PAY” KEYWORDS: Bloom's: Application 10. At Global Holdings Inc., the shareholders cast a vote on executive compensaiton for senior executives. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, this vote is binding on a. Global’s board of directors only. b. Global’s senior executives only. c. Global’s board of directors, senior executives, and shareholders. d. none of the choices.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Corporate Governance LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective TOPICS: CHAPTER 24---INSIGHT INTO ETHICS: SHAREHOLDER “SAY-ON-PAY” KEYWORDS: Bloom's: Application

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© True / False 1. There is really no reason to be acquainted with business laws and government regulations, except to pass this

test. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Introduction QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Risk Analysis LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 12:41 AM QUESTION ID: JFND-GTB3-EIBU-RT1D QUESTION GLOBAL ID: 2. Law consists of enforceable rules governing relationships among individuals and between individuals and

their society. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Introduction QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 12:32 AM QUESTION ID: JFND-GTB3-EIBU-RTTU QUESTION GLOBAL ID: 3. Laws and government regulations affect almost all business activities. a. True Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Business Activities and the Legal Environment QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 12:50 AM QUESTION ID: JFND-GTB3-EIBU-RTT1 QUESTION GLOBAL ID: 4. Many different laws may apply to a single business transaction. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Business Activities and the Legal Environment QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 12:53 AM QUESTION ID: JFND-GTB3-EIBU-RTTT QUESTION GLOBAL ID: 5. Businesspersons are expected to make decisions that are ethically sound. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Business Activities and the Legal Environment Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 12:55 AM QUESTION ID: JFND-GTB3-EIBU-RTTO QUESTION GLOBAL ID: 6. Being a small-business owner means that you will never have to take on the role of finance manager,

marketing manager or accountant. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Business Activities and the Legal Environment QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 12:58 AM QUESTION ID: JFND-GTB3-EIBU-RTTZ QUESTION GLOBAL ID: 7. State laws are the supreme law of the United States. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Sources of American Law QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LOCAL STANDARDS: KEYWORDS: OTHER: DATE CREATED: DATE MODIFIED: QUESTION ID: QUESTION GLOBAL ID:

United States - OH - Default City - AICPA Legal Bloom's: Knowledge = 11/11/2013 12:19 PM 12/19/2013 1:00 AM JFND-GTB3-EIBU-RTTS

8. The federal government and the states have the same constitution. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Sources of American Law QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 1:03 AM QUESTION ID: JFND-GTB3-EIBU-RTTI QUESTION GLOBAL ID: 9. A state law that conflicts with the U.S. Constitution will be deemed unconstitutional. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Sources of American Law QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 1:05 AM Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© QUESTION ID: JFND-GTB3-EIBU-RTTW QUESTION GLOBAL ID: 10. State constitutions are supreme within their respective borders. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Sources of American Law QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 1:12 AM QUESTION ID: JFND-GTB3-EIBU-RO4N QUESTION GLOBAL ID: 11. Statutory law includes state statutes and ordinances passed by cities and counties. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Sources of American Law QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: + DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 1:15 AM QUESTION ID: JFND-GTB3-EIBU-RO4B QUESTION GLOBAL ID: 12. Whether financial statements created by an accountant need to be verified for accuracy is not a legal

question.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Sources of American Law QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: N DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 1:18 AM QUESTION ID: JFND-GTB3-EIBU-RO33 QUESTION GLOBAL ID: 13. There are legal questions involved when considering ways to raise capital so a business can grow. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Sources of American Law QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: N DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 1:22 AM QUESTION ID: JFND-GTB3-EIBU-RO3A QUESTION GLOBAL ID: 14. There are legal questions involved when choosing an appropriate business organizational form. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: Sources of American Law QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge OTHER: N DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 1:25 AM QUESTION ID: JFND-GTB3-EIBU-RO4G QUESTION GLOBAL ID: 15. A small business owner is likely to face legal questions when determining ways to reduce his small

business’s taxes. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Sources of American Law QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: N DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 1:27 AM QUESTION ID: JFND-GTB3-EIBU-RO4F QUESTION GLOBAL ID: 16. Statutes are laws enacted by Congress and the state legislatures and comprise one of the sources of

American law. a. True b. False ANSWER: POINTS: DIFFICULTY: REFERENCES: QUESTION TYPE: HAS VARIABLES:

True 1 Easy Sources of American Law True / False False

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 1:40 AM QUESTION ID: JFND-GTB3-EIBU-RO4R QUESTION GLOBAL ID: 17. Administrative law is a source of American law that is comprised of statutes. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Sources of American Law QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 1:44 AM QUESTION ID: JFND-GTB3-EIBU-RO4D QUESTION GLOBAL ID: 18. Uniform laws apply in all states, including those in which the laws have not been adopted. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Sources of American Law QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: = Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 1:48 AM QUESTION ID: JFND-GTB3-EIBU-RO3U QUESTION GLOBAL ID: 19. The American Law Institute was the only organization involved in developing the Uniform Commercial

Code. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Sources of American Law QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: N DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 1:55 AM QUESTION ID: JFND-GTB3-EIBU-RO31 QUESTION GLOBAL ID: 20. No state has adopted the Uniform Commercial Code. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Sources of American Law QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 2:00 AM QUESTION ID: JFND-GTB3-EIBU-RO3T QUESTION GLOBAL ID: Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning©

21. Administrative law consists of the rules, orders, and decisions of administrative agencies. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Sources of American Law QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 2:20 AM QUESTION ID: JFND-GTB3-EIBU-RO3O QUESTION GLOBAL ID: 22. Administrative law includes only state regulations. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Sources of American Law QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: N DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 2:34 AM QUESTION ID: JFND-GTB3-EIBU-RO3Z QUESTION GLOBAL ID: 23. Common law is the same as statutory law. a. True b. False ANSWER: False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© POINTS: 1 DIFFICULTY: Easy REFERENCES: The Common Law Tradition QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 3:51 AM QUESTION ID: JFND-GTB3-EIBU-RO3S QUESTION GLOBAL ID: 24. Stare decisis is a doctrine obligating judges to help persons who have failed to protect their own rights. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: The Common Law Tradition QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 4:00 AM QUESTION ID: JFND-GTB3-EIBU-RO3I QUESTION GLOBAL ID: 25. Stare decisis is a doctrine obligating judges to follow the precedents established within their jurisdictions. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: The Common Law Tradition QUESTION TYPE: True / False HAS VARIABLES: False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 4:03 AM QUESTION ID: JFND-GTB3-EIBU-RO3W QUESTION GLOBAL ID: 26. Common law is a term for the laws that are familiar to most of us. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: The Common Law Tradition QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 4:05 AM QUESTION ID: JFND-GTB3-EIBU-RTNN QUESTION GLOBAL ID: 27. A court may depart from a precedent if the precedent is no longer valid. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: The Common Law Tradition QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: = Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 4:14 AM QUESTION ID: JFND-GTB3-EIBU-RTNG QUESTION GLOBAL ID: 28. In order to truly understand our legal system, it is important to understand the origins of the common law

tradition. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: The Common Law Tradition QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Risk Analysis LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 4:17 AM QUESTION ID: JFND-GTB3-EIBU-RTNB QUESTION GLOBAL ID: 29. Money or property, including land, are remedies at law. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: The Common Law Tradition QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: N DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 4:21 AM QUESTION ID: JFND-GTB3-EIBU-RTB3 QUESTION GLOBAL ID: Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning©

30. Equity is a branch of law, founded in justice and fair dealing that seeks to supply a remedy when no

adequate remedy at law is available. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: The Common Law Tradition QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 4:27 AM QUESTION ID: JFND-GTB3-EIBU-RTBA QUESTION GLOBAL ID: 31. The basis for the U.S. legal system is the natural law school. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: The Common Law Tradition QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 5/24/2014 8:15 PM QUESTION ID: JFND-GTB3-EIBU-RTNF QUESTION GLOBAL ID: 32. Criminal law focuses on duties that exist between persons. a. True b. False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Classifications of Law QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 4:37 AM QUESTION ID: JFND-GTB3-EIBU-RTNR QUESTION GLOBAL ID: 33. Criminal acts are prohibited only by federal government statutes. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Classifications of Law QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Research KEYWORDS: Bloom's: Knowledge OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 4:40 AM QUESTION ID: JFND-GTB3-EIBU-RTND QUESTION GLOBAL ID: 34. Government authorities cannot enforce national law a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Classifications of Law QUESTION TYPE: True / False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© HAS VARIABLES: False LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Research KEYWORDS: Bloom's: Knowledge OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 4:43 AM QUESTION ID: JFND-GTB3-EIBU-RTBU QUESTION GLOBAL ID: 35. International law is the law of a foreign nation and varies from country to country. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Classifications of Law QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: Diversity LOCAL STANDARDS: United States - OH - Default City - AICPA Research KEYWORDS: Bloom's: Knowledge OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 4:46 AM QUESTION ID: JFND-GTB3-EIBU-RTB1 QUESTION GLOBAL ID: Multiple Choice 36. Data Analytics, Inc., is a corporation engaged in the business of compiling, analyzing, and marketing data.

To accomplish its purposes, Data Analytics obtains financing, and hires and fires employees. Laws and government regulations affect such business activities as a. hiring and firing decisions. b. the manufacturing and marketing of products. c. business financing. d. all of the choices.

ANSWER: POINTS: DIFFICULTY: REFERENCES:

d 1 Moderate Business Activities and the Legal Environment

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: N DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 4:50 AM QUESTION ID: JFND-GTB3-EIBU-RTBT QUESTION GLOBAL ID: 37. Congress enacts a statute, the Federal Deposit Insurance Corporation (an administrative agency) issues rules,

the Southeast Financial Institutions Association (a private organizations) issues instructions, South Valley Bank posts a memo with orders for its employees, and Tina tells her co-worker about a recent news story. Sources of law include a. the instructions issued by private associations. b. the orders posted by employers. c. the rules issued by federal administrative agencies. d. the stories released by news agencies.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Sources of American Law QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: N DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 4:55 AM QUESTION ID: JFND-GTB3-EIBU-RTBO QUESTION GLOBAL ID: 38. Under Ohio’s state constitution, the Ohio Environmental Protection Agency issues a new rule, the Polk

County Commission approves a new property tax measure, and the professors and students at Ohio Law School publish the results of their most recent legal research. Sources of law do not include a. the measures approved by local governing bodies. b. the results of legal scholars’ research. c. the rules issued by state administrative agencies. d. the states’ constitutions.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Sources of American Law QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: N DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 5:00 AM QUESTION ID: JFND-GTB3-EIBU-RTBZ QUESTION GLOBAL ID: 39. A provision in the California state constitution conflicts with a provision in the U.S. Constitution. If

challenged a. neither provision will be enforced. b. the provisions will be balanced to reach a compromise. c. the state provision, not the U.S. Constitution, will be enforced. d. the U.S. Constitution, not the state provision, will be enforced.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Sources of American Law QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 5:13 AM QUESTION ID: JFND-GTB3-EIBU-RTBS QUESTION GLOBAL ID: 40. The Tenth Amendment to the U.S. Constitution a. reserves to the states all powers not granted to the federal government. b. reserves to the federal government all powers not granted to the states. c. requires each state in the union to have its own constitution.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© d. does not exist.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Sources of American Law QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 5:17 AM QUESTION ID: JFND-GTB3-EIBU-RTBI QUESTION GLOBAL ID: 41. The Pennsylvania legislature enacts a state law that violates the U.S. Constitution. This law can be enforced

by a. no one. b. the federal government only. c. the state of Pennsylvania only. d. the United States Supreme Court only.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Sources of American Law QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: N DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 5:22 AM QUESTION ID: JFND-GTB3-EIBU-RTBW QUESTION GLOBAL ID: 42. Smithy Saddlery is a saddle shop subject to the laws of New York. In New York, the highest-ranking

(superior) law is a. a case decided by the New York Court of Appeals. b. a rule created by a New York state administrative agency.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© c. a provision in the New York constitution. d. a statute enacted by the New York legislature.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Sources of American Law QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 5:26 AM QUESTION ID: JFND-GTB3-EIBU-RC1N QUESTION GLOBAL ID: 43. The Uniform Commercial Code has been adopted, at least in part, in a. all states. b. forty-five states. c. thirty-five states. d. no state.

ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: Sources of American Law QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 5:31 AM QUESTION ID: JFND-GTB3-EIBU-RC1B QUESTION GLOBAL ID: 44. The Bay City Planning Department, the Coastal County Zoning Commission, the Delaware Environmental

Quality Agency, and the U.S. Bureau of Land Management issue regulations. These rules constitute a. administrative law.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. case law. c. stare decisis. d. statutory law.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Sources of American Law QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 5:34 AM QUESTION ID: JFND-GTB3-EIBU-RCT3 QUESTION GLOBAL ID: 45. Much of American law is based on a. the English legal system. b. the Spanish legal system. c. the civil law of the Greeks. d. Ancient Chinese law.

ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: The Common Law Tradition QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension OTHER: N DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 5:41 AM QUESTION ID: JFND-GTB3-EIBU-RCTA QUESTION GLOBAL ID: 46. The best definition of a precedent is a. a law developed from custom.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. a judicial proceeding for the determination of a dispute between parties in which rights are enforced or protected. c. a proceeding by one person against another in court. d. a court decision that furnishes an example or authority for deciding subsequent cases involving identical or similar facts.

ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: The Common Law Tradition QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: N DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 5:50 AM QUESTION ID: JFND-GTB3-EIBU-RC1G QUESTION GLOBAL ID: 47. As a judge, Bonnie applies common law rules. These rules develop from a. administrative regulations. b. court decisions. c. federal and state statutes. d. proposed uniform laws.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Common Law Tradition QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: + DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/20/2013 9:08 AM QUESTION ID: JFND-GTB3-EIBU-RC1F QUESTION GLOBAL ID: 48. Owen is a federal judge whose judicial decisions are part of case law, which does not include interpretations Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© of a. other case law. b. constitutional provisions. c. statutes. d. sound bites in the media.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Common Law Tradition QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/20/2013 9:07 AM QUESTION ID: JFND-GTB3-EIBU-RC1R QUESTION GLOBAL ID: 49. Karen is a judge hearing the case of Local Dispatch Co. v. National Transport Corp. Applying the relevant

rule of law to the facts of the case requires Karen to find previously decided cases that, in relation to the case under consideration, are a. as different as possible. b. as similar as possible. c. at odds. d. exactly identical.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Common Law Tradition QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 6:38 AM QUESTION ID: JFND-GTB3-EIBU-RC1D Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© QUESTION GLOBAL ID: 50. In the case of Retail Sales Corp. v. Trucking Delivery Co., the court may rule contrary to a precedent if the

court decides that the precedent a. is incorrect or inapplicable. b. is not in line with the judge’s personal values. c. would lead to unintended consequences. d. would not bring about the result the judge prefers.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Common Law Tradition QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 6:42 AM QUESTION ID: JFND-GTB3-EIBU-RCTU QUESTION GLOBAL ID: 51. There are no precedents on which the court deciding the case Financial Investment Co. v. Goodhands

Insurance, Inc., can base its decision. The court may consider a. issuing an order according to the judge’s personal values. b. refusing to decide the case. c. postponing a decision until a precedent is available. d. basing a decision on public policy or social customs and values.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Common Law Tradition QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 6:52 AM Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© QUESTION ID: JFND-GTB3-EIBU-RCT1 QUESTION GLOBAL ID: 52. In Benny v. City Car Dealership, a state supreme court held that a minor could cancel a con-tract for the sale

of a car. Now a trial court in the same state is deciding Daphne v. Even Steven Auto Deals, Inc., a case with similar facts. Under the doctrine of stare decisis, the trial court is likely to a. allow the minor to cancel the contract. b. disregard the Benny case. c. order the minor to cancel the contract. d. require the minor to fulfill the contract.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Common Law Tradition QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 6:56 AM QUESTION ID: JFND-GTB3-EIBU-RCTO QUESTION GLOBAL ID: 53. Judge Julia decides that the precedent for the case she is hearing is no longer correct due to technological

changes. She overturns the precedent when she decides the case. It is most likely that her case will a. go unnoticed by the public. b. be thrown out of court. c. receive a great deal of publicity. d. be ignored by the media.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Common Law Tradition QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: + Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 7:00 AM QUESTION ID: JFND-GTB3-EIBU-RCTT QUESTION GLOBAL ID: 54. In an action against the sate of Idaho, Jaime obtains a remedy. This is a. the relief given to an innocent party to enforce a right or to prevent or compensate for the violation of a right. b. medication paid for by the government. c. a right guaranteed by the Bill of Rights. d. a situation or state of facts that gives a person a right to initiate a judicial proceeding.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Common Law Tradition QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: N DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 7:06 AM QUESTION ID: JFND-GTB3-EIBU-RCTZ QUESTION GLOBAL ID: 55. Starlight Café brings a suit, seeking a remedy at law. A remedy at law is a. the payment of money or property as compensation for damages. b. a decree of specific performance. c. a judicial proceeding for the resolution of a dispute. d. an injunction.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Common Law Tradition QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© OTHER: DATE CREATED: DATE MODIFIED: QUESTION ID: QUESTION GLOBAL ID:

= 11/11/2013 12:19 PM 12/19/2013 7:17 AM JFND-GTB3-EIBU-RCTS

56. In a suit against Knut, Leon obtains an injunction. This is a. an order to do or to refrain from doing a particular act. b. an order to perform what was promised. c. a payment of money or property as compensation. d. the cancellation of a contract.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Common Law Tradition QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application OTHER: N DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 7:29 AM QUESTION ID: JFND-GTB3-EIBU-RCTI QUESTION GLOBAL ID: 57. Eliza is a state court judge. Flora appears in a case in Eliza’s court, claim-ing that Glover breached a

contract. Which of the following actions may Eliza take? a. Award damages or issue a decree of specific performance b. Imprison Glover, but not Flora c. Imprison Flora, but not Glover d. Order the parties to pay Eliza to render a favorable ruling ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Common Law Tradition QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS: OTHER: DATE CREATED: DATE MODIFIED: QUESTION ID: QUESTION GLOBAL ID:

Bloom's: Application = 11/11/2013 12:19 PM 12/19/2013 7:34 AM JFND-GTB3-EIBU-RCTW

58. Leona enters into a contract with Munchie Bakery to cater a sales conference. When the conference is

postponed indefinitely, Leona asks a court to cancel the contract and return the parties to the positions that they held before its formation. This request involves a. specific performance. b. an injunction. c. rescission. d. an action that the court cannot order.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Common Law Tradition QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Decision Modeling KEYWORDS: Bloom's: Application OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/20/2013 9:10 AM QUESTION ID: JFND-GTB3-EIBU-RC4N QUESTION GLOBAL ID: 59. Maggie and Nate enter into a contract for the sale of a car, but Nate later refuses to deliver the car. Maggie

asks a court to order Nate to perform as promised. Ordering a party to perform what was promised is a. specific performance. b. damages. c. rescission. d. beyond the court’s authority.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Common Law Tradition QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO - 4 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: + DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 7:50 AM QUESTION ID: JFND-GTB3-EIBU-RC4B QUESTION GLOBAL ID: 60. Chelsea is a state court judge. Like judges in most state courts, in a particular case, she may grant a. a remedy at law only. b. a remedy in equity or a remedy at law, but not both. c. a remedy in equity and a remedy at law. d. a remedy in equity only.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Common Law Tradition QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: N DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 7:58 AM QUESTION ID: JFND-GTB3-EIBU-RC33 QUESTION GLOBAL ID: 61. Jane enters into a contract with Jill to provide 100 roses for a dinner party. Jane fails to deliver the roses. Jill

initiates a suit against Jane, asking the court to order Jane to deliver the roses. Jill is a. the plaintiff. b. the defendant. c. the binding authority. d. the king's conscience.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Common Law Tradition QUESTION TYPE: Multiple Choice HAS VARIABLES: False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 8:02 AM QUESTION ID: JFND-GTB3-EIBU-RC3A QUESTION GLOBAL ID: 62. To Cody, the written law of a particular society at a particular time is most significant. Cody is a a. legal positivist. b. legal rationalist. c. legal realist. d. person who adheres to the natural law school.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Common Law Tradition QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 8:06 AM QUESTION ID: JFND-GTB3-EIBU-RC4G QUESTION GLOBAL ID: 63. Beth is a victim of Carl’s violation of a criminal law. Criminal law is concerned with a. the prosecution of private individuals by other private individuals. b. the prosecution of public officials by private individuals. c. the relief available when a person’s rights are violated. d. wrongs committed against the public as a whole.

ANSWER: POINTS: DIFFICULTY: REFERENCES: QUESTION TYPE: HAS VARIABLES:

d 1 Moderate Classifications of Law Multiple Choice False

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 8:10 AM QUESTION ID: JFND-GTB3-EIBU-RC4F QUESTION GLOBAL ID: 64. Civil law a. defines, describes, regulates, and creates legal etiquette. b. spells out the rights and duties that exist between persons and between persons and their governments. c. establishes the methods of enforcing the rights established by criminal law. d. has to do with the wrongs committed against society for which society demands redress.

ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: Classifications of Law QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 11:18 PM QUESTION ID: JFND-GTB3-EIBU-RC4R QUESTION GLOBAL ID: 65. Japan violates an international law. Other countries may take coercive actions, which include a. violating the same law in the same way with impunity. b. confiscating Japanese businesses. c. boycotting Japanese goods. d. taxing Japanese citizens.

ANSWER: POINTS: DIFFICULTY: REFERENCES: QUESTION TYPE:

c 1 Moderate Classifications of Law Multiple Choice

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© HAS VARIABLES: False LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Research KEYWORDS: Bloom's: Application OTHER: + DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/19/2013 11:28 PM QUESTION ID: JFND-GTB3-EIBU-RC4D QUESTION GLOBAL ID:

Fact Pattern 1-1 The Texas Supreme Court decides the case of Livewire Co. v. Power Corp. Of nine justices, five believe the judgment should be in Livewire’s favor. Justice Bellamy, one of the five, writes a separate opinion. The four justices who believe the judgment should be in Power’s favor join in a third separate opinion.

66. Refer to Fact Pattern 1-1. These opinions are collected and published in volumes called a. citations. b. codes. c. regulations. d. reporters.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Finding Case Law QUESTION TYPE: Multiple Choice HAS VARIABLES: False PREFACE NAME: Fact Pattern 1-1 LEARNING OBJECTIVES: LO - NA NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Research KEYWORDS: Bloom's: Application OTHER: N DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/30/2013 11:45 PM QUESTION ID: JFND-GTB3-EIBU-RC3U QUESTION GLOBAL ID: PREFACE GLOBAL ID: GCID-5b328446604e-1c7b-ec14-a87c-90e0134d 67. Refer to Fact Pattern 1-1. Bellamy’s opinion is a. a concurring opinion. b. a dissenting opinion. c. a majority opinion.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© d. a per curiam opinion.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Finding Case Law QUESTION TYPE: Multiple Choice HAS VARIABLES: False PREFACE NAME: Fact Pattern 1-1 LEARNING OBJECTIVES: LO - NA NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Research KEYWORDS: Bloom's: Application OTHER: N DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/20/2013 12:08 AM QUESTION ID: JFND-GTB3-EIBU-RC31 QUESTION GLOBAL ID: PREFACE GLOBAL ID: GCID-5b328446604e-1c7b-ec14-a87c-90e0134d 68. Refer to Fact Pattern 1-1. The opinion joined by the four justices who favor Power is known as a. a concurring opinion. b. a dissenting opinion. c. a majority opinion. d. a per curiam opinion.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Finding Case Law QUESTION TYPE: Multiple Choice HAS VARIABLES: False PREFACE NAME: Fact Pattern 1-1 LEARNING OBJECTIVES: LO - NA NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Research KEYWORDS: Bloom's: Application OTHER: N DATE CREATED: 12/20/2013 12:34 AM DATE MODIFIED: 12/20/2013 9:12 AM QUESTION ID: JFND-GO4R-GFBD-NPTZ QUESTION GLOBAL ID: PREFACE GLOBAL ID: GCID-5b328446604e-1c7b-ec14-a87c-90e0134d

Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 69. Standard Business Company appeals a decision against it, in favor of Top Flight Corporation, from a lower

court to a higher court. Standard is a. the appellant. b. the appellee. c. the defendant. d. the plaintiff.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Reading and Understanding Case Law QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO - NA NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Research KEYWORDS: Bloom's: Application OTHER: N DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/20/2013 12:43 AM QUESTION ID: JFND-GTB3-EIBU-RC3O QUESTION GLOBAL ID: 70. Mikkayla is a well-known professional athlete. Mikkayla Co. owns trademarks, including “mikkayla,” that it uses to sell merchandise. Norm owns photos of Mikkayla that he markets through his Web site, mikkaylapics.com. Under the principles discussed in “A Sample Court Case,” Experience Hendrix, L.L.C. v. Hendrixlicensing.com Ltd., Norm’s domain name most likely a. constitutes nominative fair use of the “mikkayla” mark. b. infringes the “mikkayla” mark. c. is a legitimate description of Mikkayla Co.’s products. d. is a legitimate reference to Mikkayla Co.’s products.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging REFERENCES: Reading and Understanding Case Law QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO - NA NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: = DATE CREATED: 5/31/2014 2:42 AM DATE MODIFIED: 5/31/2014 2:42 AM Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© QUESTION ID: JFND-GO4F-GTDD-CO3I QUESTION GLOBAL ID: Essay 71. Americans with a Better Cause (ABC), a nonprofit organization, files a suit against the U.S. Department of Justice (DOJ), claiming that a certain federal statute the DOJ is empowered to enforce conflicts with the U.S. Constitution and with a state constitution. In each situation, which source of law has priority?

ANSWER: The U.S. Constitution is the supreme law of the land. A law in violation of the Constitution, no matter what its source, will be declared unconstitutional and will not be enforced. Thus, the federal statute does not have priority over the Constitution. The federal statute would have priority over the state constitution, however, because under the U.S. Constitution, when there is a conflict between a federal law and a state law, the state law is rendered invalid..

POINTS: 1 DIFFICULTY: Challenging REFERENCES: Sources of American Law QUESTION TYPE: Essay HAS VARIABLES: False LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Analysis OTHER: = DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/20/2013 1:11 AM QUESTION ID: JFND-GTB3-EIBU-RC3S QUESTION GLOBAL ID: 72. In a dispute between Cosmic Games Corporation and Mythic Engineering Associates, Inc., the court applies

the doctrine of stare decisis. What is this doctrine? What does this doctrine have to do with the American legal system?

ANSWER:

POINTS: DIFFICULTY: REFERENCES: QUESTION TYPE: HAS VARIABLES:

In a common law legal system, past judicial decisions are binding in current disputes with similar facts. This feature of the common law, which is the basis of the American legal system, is unique because, unlike the law in other legal systems, it is judge-made law.

Within the common law system, when possible, judges attempt to be consistent and to base their decisions on the principles suggested by earlier cases. The body of principles and doctrines that form the common law emerged over time as judges applied the principles announced in earlier cases to subsequent legal controversies. The practice of deciding cases with reference to former decisions, or precedents—the cornerstone of the American legal system—is called the doctrine of stare decisis. Under this doctrine, judges are obligated to follow the precedents established within their jurisdictions. This helps courts to be more efficient, and makes the law more stable and predictable.

1 Challenging The Common Law Tradition Essay False

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Analysis OTHER: N DATE CREATED: 11/11/2013 12:19 PM DATE MODIFIED: 12/20/2013 1:20 AM QUESTION ID: JFND-GTB3-EIBU-RC3I QUESTION GLOBAL ID:

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© True / False 1. Business ethics is not more complicated than personal ethics. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Business Ethics LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Ethics LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 2. Ethics is concerned with the fairness or justness of an action. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Business Ethics LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Ethics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 3. Adhering strictly to all business laws is all that is necessary to fulfill all business ethics obligations. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Business Ethics LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Ethics LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 4. Business ethics focuses on ethical behavior in the business world. a. True b. False ANSWER: True POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Easy REFERENCES: Business Ethics LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Ethics LOCAL STANDARDS: United States - OH - Default City - AICPA Risk Analysis KEYWORDS: Bloom's: Knowledge 5. Ethics is less certain than law. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Business Ethics LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Ethics LOCAL STANDARDS: United States - OH - Default City - AICPA Risk Analysis KEYWORDS: Bloom's: Knowledge 6. Compliance with the law does not necessarily fulfill all ethical obligations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Business Ethics LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Ethics LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 7. Focusing on a firm's short-term profits without considering the company’s long-term needs may be acting unethically. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Business Ethics LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Ethics LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 8. The legality of an action is always clear.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Business Ethics LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 9. To be a "good citizen," when making decisions a business should not evaluate the public relations impact. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Business Ethics LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Ethics LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 10. Ethics can be highly subjective and subject change over time. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Business Ethics LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Ethics LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 11. Acting in good faith gives a business firm a better chance of defending its actions in court. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Business Ethics LEARNING OBJECTIVES: LO - 1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 12. An ethical code of conduct typically outlines a company’s policies. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Business Ethics LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Ethics LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 13. There is no debate that employees have an absolute right to free expression to make negative posts in social media about other employees and managers. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Business Ethics and Social Media LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Ethics LOCAL STANDARDS: United States - OH - Default City - AICPA Risk Analysis KEYWORDS: Bloom's: Knowledge 14. Many companies have provided guidelines about what is appropriate when making posts on social media accounts. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Business Ethics and Social Media LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Ethics LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 15. No one believes that judging a job candidate based on what he or she does outside the work environment is ethical. a. True b. False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Business Ethics and Social Media LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Ethics LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 16. A company can broadly prohibit its employees from criticizing the company via social media. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Business Ethics and Social Media LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Ethics LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 17. Ethical reasoning is the process through which an individual links his or her moral convictions or ethical standards to the particular situation at hand. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Approaches to Ethical Reasoning LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Ethics LOCAL STANDARDS: United States - OH - Default City - AICPA Risk Analysis KEYWORDS: Bloom's: Knowledge 18. Duty-based ethical standards often come from religious precepts or through philosophical reasoning. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Approaches to Ethical Reasoning LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Ethics LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS:

Bloom's: Knowledge

19. According to German philosopher Immanuel Kant, individuals should evaluate their actions in light of the consequences that would follow if they were the only members of society that acted in that way. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Approaches to Ethical Reasoning LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Ethics LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 20. Absolute mandates such as the commandment “Thou shalt not steal” can be justifiably broken if there is a benevolent motive. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Approaches to Ethical Reasoning LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Ethics LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 21. The categorical imperative cannot be applied to many business actions. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Approaches to Ethical Reasoning LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Ethics LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 22. In ethical terms, a cost-benefit analysis is an assessment of the negative and positive effects of alternative actions on individuals. a. True b. False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Approaches to Ethical Reasoning LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Ethics LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 23. According to utilitarianism, it matters how many people suffer a negative effect from an act. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Approaches to Ethical Reasoning LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Critical Thinking United States - BUSPROG: Ethics KEYWORDS: Bloom's: Knowledge 24. According to utilitarianism, an action that affects the majority adversely is morally wrong. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Approaches to Ethical Reasoning LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Ethics LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Comprehension 25. Corporations can be good citizens by promoting goals that society deems worthwhile. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Approaches to Ethical Reasoning LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Risk Analysis KEYWORDS: Bloom's: Knowledge Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning©

26. Corporations can be perceived as owing ethical duties to groups other than their shareholders. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Approaches to Ethical Reasoning LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Risk Analysis KEYWORDS: Bloom's: Knowledge 27. If the interests of different stakeholders conflict, it can be difficult to determine which group’s interest should receive greater weight. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Approaches to Ethical Reasoning LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - AACSB Diversity LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 28. A business firm's profits may suffer if the firm is not a “good corporate citizen.” a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Approaches to Ethical Reasoning LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 29. Managers should apply the same ethical standards to themselves and to their employees. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: Making Ethical Business Decisions LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Ethics LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 30. An ethics program can clarify what a company considers to be unacceptable conduct. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Making Ethical Business Decisions LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Ethics LOCAL STANDARDS: United States - OH - Default City - AICPA Risk Analysis KEYWORDS: Bloom's: Knowledge 31. The effectiveness of a company’s code of ethics is determined by the commitment of the company leadership to enforcing the code. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Making Ethical Business Decisions LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Ethics LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 32. Some companies set up confidential systems for employees to “raise red flags” about suspected unethical practices. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Making Ethical Business Decisions LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Ethics LOCAL STANDARDS: United States - OH - Default City - AICPA Risk Analysis KEYWORDS: Bloom's: Knowledge 33. Setting realistic workplace goals can increase the probability that employees will act unethically.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Making Ethical Business Decisions LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 34. Management’s behavior sets the ethical tone of a firm. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Making Ethical Business Decisions LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Ethics LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 35. Bribery of foreign government officials is both an ethical and a legal issue. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Global Business Ethics LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge Multiple Choice 36. Any decision by the management of Fast-Food Franchise Corporation may significantly affect its a. operators only. b. operators, owners, suppliers, the community, or society as a whole. c. owners only. d. suppliers, the community, or society as a whole only.

ANSWER: b POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Moderate REFERENCES: Business Ethics LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Comprehension 37. Lia works for Media Marketing Company. Her job includes putting “spin” on the firm’s successes and failures. In this context, ethics consist of a. “bad” versus “good” publicity. b. questions of rightness and wrongness. c. the firm’s quarterly revenue. d. whatever is legal.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Business Ethics LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 38. John is sales manager for Kleen ‘N Brite Products, Inc. Compared to John’s personal activities, his business activities most likely involve a. more complex ethical issues. b. no ethical issues. c. simpler ethical issues. d. the same ethical issues.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Business Ethics LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 39. Mary works in the public relations department of New Trends Sales Company. Her job includes portraying New Trends’s activities in their best light. In this context, ethics consist of a. a different set of principles from those that apply to other activities. b. the same moral principles that apply to non-business activities. c. those principles that produce the most favorable financial outcome. d. whatever saves New Trends’s “face.”

ANSWER: b Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© POINTS: 1 DIFFICULTY: Moderate REFERENCES: Business Ethics LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 40. Flexo Trucking Company transports hazardous waste. Garn is a Flexo driver, whom the company knows drives longer hours than federal regulations permit. One night, Garn exceeds the limit and has an accident. Spilled chemicals contaminate Hill City’s water source, forcing the residents to move away. Flexo acted unethically because a. Flexo showed reckless disregard for Hill City’s residents and others. b. Garn exceeded the federal time limit. c. harm was caused by an unfortunate accident. d. Hill City should have better protected its water source.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Business Ethics LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Risk Analysis KEYWORDS: Bloom's: Application 41. In studying the legal environment of business, Professor Dooley’s students also review ethics in a business context.

Ethics includes the study of what constitutes a. fair or just behavior. b. financially rewarding behavior. c. legal behavior. d. religious behavior.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Business Ethics LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 42. Peak & Vale Accountants provides other firms with accounting services. Questions of what is ethical involve the extent to which Peak & Vale has a. a legal duty beyond those duties mandated by ethics. b. an ethical duty beyond those duties mandated by law. c. any duty beyond those mandated by both ethics and the law.

Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© d. any duty when it is uncertain whether a legal duty exists.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Business Ethics LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 43. According to the view that New Allied Manufacturing Corporation is a “citizen,” New Allied is expected to a. participate in bettering communities and society. b. primarily generate revenue for its owners. c. have no responsibility other than profit maximization. d. efficiently allocate scarce resources.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Business Ethics LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 44. Destiny and Eduardo, investors in Competitive Acquisitions Corporation, are dissatisfied with the profitmaximization theory of corporate objectives. These investors and others who look beyond profits and dividends may consider the triple bottom line, which does not include a corporation’s a. impact on people. b. profits. c. impact on the planet. d. congressional lobbying activities.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Business Ethics LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 45. David, the chief accounting officer of Tension Fencing Corporation, wants to be sure that all the company’s accounts are legal and ethical. Sometimes, however, he is unsure exactly what is legal and what is illegal. David should a. not worry about what is legal or illegal as long as the corporate executives benefit in the short run. b. try his best to not do anything illegal and keep documentation showing that he always acts in good faith.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© c. not worry about what is legal or illegal as long as it benefits the shareholders. d. not worry about what is legal or illegal as long as it benefits the chief executive of the corporation.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Business Ethics LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 46. Eden, the chief executive officer of Flo-Thru Piping Corporation, wants to en-sure that Flo-Thru’s activities are legal and ethical. The best course for Eden and Flo-Thru is to act in a. good faith. b. ignorance of the law. c. regard for the firm’s shareholders only. d. their own self interest.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Business Ethics LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 47. With respect to the potential for Great American Discount Stores, Inc., and any other major corporation to suffer damage to its reputation or loss of profits through negative publicity, the Internet has a. increased the potential. b. decreased the potential. c. had no impact. d. allowed a company to keep negative information or opinions hidden.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Business Ethics LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 48. PriceLess Retail Corporation specifies that its employees should not use social media to damage the company, harm another person’s reputation, or violate company policies. An employee who violates these rules may be subject to discipline and could be fired. According to the National Labor Relations Board, this social media policy Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© a. violates federal labor law. b. is too lenient toward employees. c. is too stringent toward management. d. is necessary to prevent inaccurate statements from being spread across the Internet.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Business Ethics and Social Media LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 49. Ridgeline Excavation & Construction, LLC, creates an internal code of ethics. Like the codes of other firms, Ridgeline’s company code is not a. law. b. a set of rules that the company can enforce. c. an outline of the company’s policies. d. a guide for decision makers facing ethical questions.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging REFERENCES: Business Ethics LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 50. In business deals, Fiona, the chief executive officer of Snacks n’ Bites, Inc., follows duty-based ethical standards.

These are most likely derived from a. a corporate ethics code. b. a cost-benefit analysis. c. philosophical reasoning. d. the law.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Approaches to Ethical Reasoning LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 51. Lyle, vice-president of sales for Mi-T Electric, Inc., adheres to Judeo-Christian re-lig-ious ethical standards. With Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© respect to their application, these standards are a. absolute. b. analytical. c. discretionary. d. utilitarian.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Approaches to Ethical Reasoning LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 52. Julia, the head executive of Fine Woolen Sweaters, Inc., is a committed Christian who strongly adheres to the Ten Commandments. One of Julia’s employees is found to be stealing sweaters and giving them to a local homeless shelter.

Julia is likely to a. punish the employee for stealing even though the employee’s motive was benevolent. b. view the employee’s actions as justified because the employee was clothing the poor. c. contribute more sweaters to the homeless shelter. d. gently reprimand the employee without suggesting that the employee’s actions were unethical.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging REFERENCES: Approaches to Ethical Reasoning LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 53. Carrie Ann works at Paper Products, Inc. She considers taking home a few sheets of stationery so she can write letters to her ailing grandmother. Since Paper Products produces thousands of sheets of stationery every day no one will miss the few sheets she takes and company profits will not be affected. Carrie Ann then considers what would happen if every employee took some stationery home and decides not to take any. Carrie Ann is being influenced by a. the categorical imperative. b. the principle of rights. c. a cost-benefit analysis. d. outcome-based ethics.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Approaches to Ethical Reasoning LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LOCAL STANDARDS: KEYWORDS:

United States - OH - Default City - AICPA Critical Thinking Bloom's: Application

54. In making business decisions, Glenda, personnel manager for HVAC Maintenance, Inc., applies her belief that all persons have fundamental rights. This is a. a religious rule. b. the categorical imperative. c. the principle of rights. d. utilitarianism.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Approaches to Ethical Reasoning LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Risk Analysis KEYWORDS: Bloom's: Application 55. Ryan, the owner of SuperMart Stores, Inc., adheres to the “principle of rights” theory. Under this theory, a key factor in determining whether a business decision is ethical is how that decision affects a. the right determination under a cost-benefit analysis. b. the rights of others. c. the “right”thing to do. d. the right to make a profit.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Approaches to Ethical Reasoning LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 56. In making decisions for Smartt Investments, Rita uses a cost-benefit analysis. This is a part of a. duty-based ethics. b. Kantian ethics. c. rights-based ethics. d. utilitarian ethics.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Approaches to Ethical Reasoning LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LOCAL STANDARDS: KEYWORDS:

United States - OH - Default City - AICPA Critical Thinking Bloom's: Application

57. Hailey, a lawyer on the staff of International Group, always considers the consequences of an action rather than the nature of the action itself when making ethical decisions in a business context. Hailey is applying a. the utilitarian theory of ethics in business contexts. b. religious beliefs in business contexts. c. Kantian ethics in business contexts. d. the principle of rights theory of ethics in business contexts.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Approaches to Ethical Reasoning LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 58. Bob, research manager for CornAgri Products, Inc., applies utilitarian ethics to determine that an action is morally correct when it produces the greatest good for a. Bob. b. CornAgri. c. the fewest people. d. the most people.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Approaches to Ethical Reasoning LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 59. In deciding questions of corporate social responsibility, Valley Disposal & Recycling, Inc., is concerned with a. how the corporation can best fulfill any ethical duty to society. b. the effect on corporate profits of ignoring any ethical duty to society. c. whether the corporation owes any ethical duty to society. d. all of the choices.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Approaches to Ethical Reasoning LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LOCAL STANDARDS: KEYWORDS:

United States - OH - Default City - AICPA Critical Thinking Bloom's: Application

60. MeatMen, Inc. spends a great deal of money and effort to ensure that all employees are safe on the job, that all products are safe for consumers, and that the environmental impact of the corporation is minimal. MeatMen appears to strongly believe in the concept of a. the moral minimum. b. corporate social responsibility. c. “grey areas” in the law. d. government oversight.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging REFERENCES: Approaches to Ethical Reasoning LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 61. Applied Business Corporation makes and markets its products nationwide. Under the stakeholder approach, to be considered socially responsible when making a business decision, Applied must take into account the needs of a. its consumers, the community, and society only. b. its employees and owners only. c. its employees, owners, consumers, the community, and society. d. no one.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging REFERENCES: Approaches to Ethical Reasoning LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Risk Analysis KEYWORDS: Bloom's: Application 62. A common ethical dilemma faced by the management of Spencer Hydraulics Corporation involves the effect that its decision will have on a. one group as opposed to another. b. the firm's competitors. c. the government. d. the U.S. Chamber of Commerce.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Approaches to Ethical Reasoning Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 63. At a meeting of employees, Fuel Injection Design & Manufacturing, Inc.’s managers announce the creation of a new company-wide code of ethical conduct and the initiation of an ad campaign to publicize the new code. They also say that any employees who do not adhere to the code will be discharged. The effectiveness of this code will be determined by a. the commitment of company leadership to enforcing the code. b. the extent to which the employees comply with the code. c. a marketing campaign posted online to tout the firm’s ethical tone. d. management directing employees to “do as we say, not as we do.”

ANSWER: a POINTS: 1 DIFFICULTY: Challenging REFERENCES: Making Ethical Business Decisions LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 64. Precision Engineering Inc., like other corporations, is subject to laws that are broad in their purpose and their scope.

Compliance with these laws is not always sufficient to determine “right” behavior because a. the law does not codify all ethical requirements. b. company codes are also sources of law. c. business decisions can have negative impacts. d. ethical problems occur in business.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Making Ethical Business Decisions LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 65. Ergonomic Corporation convenes its employees for its managers to announce (1) a new company-wide ethical code of conduct, (2) an ad campaign to publicize the new code, and (3) the discharge of employees who do not adhere to the code.

One of the most effective ways to set a tone of ethical behavior within a business organization is a. to create an ethical code of conduct. b. to discharge employees who create the appearance of impropriety. c. to post a marketing campaign online touting the firm’s ethical tone. d. for management to direct employees to “do as we say,not as we do.”

ANSWER: a Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© POINTS: 1 DIFFICULTY: Challenging REFERENCES: Making Ethical Business Decisions LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 66. Straitway Company encourages its managers to behave ethically, reasoning that the employees will take their cues from management. One of the most important ways to create and maintain an ethical behavior workplace is for management to a. demonstrate a commitment to ethical decision making. b. discreetly engage in unethical or illegal acts. c. look the other way when an employee engages in an unethical act. d. direct employees to “do as we say,not as we do.”

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Making Ethical Business Decisions LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 67. Richard suspects his supervisor of unethical accounting practices. However, he does not want to lose his job if he reports the supervisor and the supervisor finds out who reported him. An important feature of online reporting systems like NAVEX Global is a. the employee reporting the unethical behavior can do so anonymously. b. the employee reporting the unethical behavior is financially compensated if he loses his job as a result of the report. c. the employee reporting the unethical behavior must give his full name when making the report. d. the employee reporting the unethical behavior must have another employee supporting him.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Making Ethical Business Decisions LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 68. Margaret is the top manager of Pecans, Inc. She sets strict ethical standards for all employees. Margaret, however, often takes some of the company’s best nuts and sells them from her house. The ethical tone at Pecans, Inc. is a. likely to be good because Margaret has set such strict standards for her employees. b. not likely to be good because although Margaret sets strict ethical standards for the other employees, she does Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© not follow them. c. not related to either Margaret’s ethical standards or her own unethical behavior. d. not likely to be good because employees tend to resent strict ethical standards.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Making Ethical Business Decisions LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Decision Modeling KEYWORDS: Bloom's: Application 69. Ethical standards would most likely be considered violated if Team Logos Merchandising Corporation deals with a company in a developing nation that a. agrees to produce goods at Team Logos’s desired price. b. goes unnoticed by “corporate watch” groups. c. routinely violates labor and environmental standards. d. pays its workers less than the U.S. minimum wage.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Global Business Ethics LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 70. To assist in detecting illegal bribes, International Civil Engineers, Inc., and all other U.S. companies must a. conceal financial records that reveal past bribes. b. keep records that “accurately and fairly” reflect their financial activities c. make bribes through third parties rather than directly to officials. d. permit payments to foreign officials that are unlawful in that country.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging REFERENCES: Global Business Ethics LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application Essay 71. Olaf, an executive with Pharma Product Distribution, Inc., has to decide whether to market a product that might have Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© undesirable side effects for a small percentage of users. How should Olaf decide whether to sell the product? How does the standard of ethics that is applied affect this answer?

ANSWER: When a corporate executive has to decide whether to market a product that might have undesirable side effects for a small percentage of users but that would be beneficial for most users, the decision turns on the benefit to the many versus the harm to the few. Of course, all possible precautions should be taken to protect the few. A more specific answer depends on which system of ethics is applied.

From a religious duty-based perspective, the answer might be absolute: do not sell the product because some would be harmed, sell the product only to those who would not be harmed, or sell the product with clear warnings of the possible harm. Similar conclusions might be reached through a philosophical, “categorical imperative,” duty-based approach, which would consider the result if every corporation chose to sell the product. A principle-ofrights duty-based approach might likewise come to the same conclusions, reasoning that all persons have a right to life, for example, and that the corporation has an ethical duty to respect that right and act accordingly. From a utilitarian perspective, under a cost-benefit analysis, if the product were sold, it could benefit the greatest number of persons—future and current employees, as well as shareholders, and most consumers. If there was “bad” publicity, and it was adverse enough to reduce sales, however, more persons could benefit from the decision not to market the product. Under any of the different corporate social responsibility theories, the decision whether to market the product would acknowledge the firm’s duty to act ethically and be accountable to society. There might be a balancing of the interests of competing stakeholder groups or a shouldering of the responsibility to behave in a socially beneficial way as a good corporate citizen. Of course, the firm would likely have to accept any legal liability that would arise from its sale of the product.

To apply any of these approaches, the executive might evaluate the situation according to the six guidelines for making ethical business decision. Is the action legal? Is it in line with the company’s rules? If so, is it in accord with the “spirit” of the law, those policies, and one’s conscience? Could it withstand the glare of publicity and satisfy promises made to others? It seems probable that sales of the product would violate the company’s rules—at the least because in the long run the sales could negatively impact corporate profits when some are harmed by the product’s use—and that, thus, the sales could not withstand publicity, promises to others, or any individual’s conscience. Under the five-step procedure to review the ethical conflicts, the first step is to specify the facts, the problem, and the ethical principles at issue. The second step is to discuss potential actions and their effects. The third step is to come to a consensus as to what to do. This consensus should withstand moral scrutiny (the fourth step) and fulfill corporate, community, and individual values (the fifth step). It seems unlikely that a proposed sale of the product would survive the fourth step, under either a duty-based or an outcome-based ethical standard.

POINTS: 1 DIFFICULTY: Challenging REFERENCES: Approaches to Ethical Reasoning Business Ethics Making Ethical Business Decisions LEARNING OBJECTIVES: LO - 1 LO - 2 LO - 3 LO - 4 NATIONAL STANDARDS: United States - AICPA: BB-Critical Thinking United States - BUSPROG: Ethics KEYWORDS: Bloom's: Application Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 72. Recreation & Sports Equipment Corporation sells a product that is capable of seriously injuring consumers who misuse it in a foreseeable way. Does the firm owe an ethical duty to take this product off the market? What conflicts might arise if the firm stops selling this product?

ANSWER: Ethical behavior can sometimes generate sufficient good will to warrant practicing it out of a desire for increased profits. By the same token, unethical behavior can sometimes generate enough bad publicity to warrant avoiding it out of the same desire. A business firm’s activities that are perceived as ethical and receive wide publicity can benefit the firm’s owners in the short run-and even in the long run if the firm’s enhanced public image continues to attract more consumers to its products. There is nothing unethical about making a profit. It is the behavior that generates the profit that can be questionable. Business ethics thus has a practical element. A business firm should act in its best interest. A firm interested in profits should also be interested in the public’s opinion. Of course, it is not a company’s fault when consumers misuse its product. If continuing to sell a product is not a strict violation of the law, stopping its sale would likely reduce profits. This could impact the firm’s owners, employees, and others. But suspending sales could reduce injuries, and it could lead to increased profits from the sales of other products, if the suspension stops negative publicity. When a business entity decides to respond to what it sees as a moral or ethical obligation by removing a product from the market, an ethical conflict is raised between the firm and its employees and between the firm and its shareholders. This conflict arises directly out of the impact that the decision has on the firm’s profits. If meeting this perceived obligation increases the firm’s profitability, then all parties “win” and the dilemma would be easily resolved in favor of “doing the right thing.”

POINTS: 1 DIFFICULTY: Challenging REFERENCES: Approaches to Ethical Reasoning Business Ethics Making Ethical Business Decisions LEARNING OBJECTIVES: LO - 1 LO - 2 LO - 3 LO - 4 NATIONAL STANDARDS: United States - AICPA: BB-Critical Thinking United States - BUSPROG: Ethics KEYWORDS: Bloom's: Application

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© True / False 1. Judicial review is the process by which a court decides on the constitutionality of legislative enactments and

actions of the executive branch. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: The Judiciary's Role LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 2. Generally, a state court’s power is limited to the territorial boundaries of the state in which it is located and

the immediately adjacent states. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Basic Judicial Requirements LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 3. Cases involving diversity of citizenship arise only between citizens of different states.. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Basic Judicial Requirements LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 4. The amount in controversy in a diversity of citizenship case must be more than $1 million before a federal

court can take jurisdiction. a. True b. False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Basic Judicial Requirements LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 5. Concurrent jurisdiction exists when both federal and state courts have the power to hear a particular case. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Basic Judicial Requirements LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 6. State courts cannot have exclusive jurisdiction. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Basic Judicial Requirements LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 7. A state court can exercise jurisdiction over an out-of-state defendant who does business in the state over the

Internet. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Basic Judicial Requirements LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LOCAL STANDARDS: KEYWORDS:

United States - OH - Default City - AICPA Critical Thinking Bloom's: Knowledge

8. A business firm may have to comply with the laws of any jurisdiction in which it actively targets customers. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Basic Judicial Requirements LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 9. Federal courts are superior to state courts. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: The State and Federal Court Systems LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 10. Lawyers are not allowed to represent people in small claims courts in any of the states. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: The State and Federal Court Systems LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 11. Small claims courts hear both civil and criminal cases a. True b. False ANSWER: False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© POINTS: 1 DIFFICULTY: Easy REFERENCES: The State and Federal Court Systems LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 12. All states have intermediate appellate courts. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: The State and Federal Court Systems LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 13. There is at least one federal district court in every state. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: The State and Federal Court Systems LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 14. U.S. district courts have original jurisdiction in federal matters. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: The State and Federal Court Systems LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 15. There are twelve justices on the United States Supreme Court. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: The State and Federal Court Systems LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 16. The United States Supreme Court has original jurisdiction in some situations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: The State and Federal Court Systems LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 17. There is one set of procedural rules for federal courts and one set for state courts. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: The State and Federal Court Systems LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 18. A default judgment is a judgment entered against the party who brought the claim before the court. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Following a State Court Case Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 19. An answer never admits to the allegations made in a complaint. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Following a State Court Case LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 20. On a motion for judgment on the pleadings, a court may consider evidence outside the pleadings. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Following a State Court Case LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 21. A summary judgment is granted only if there is no genuine question of law. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Following a State Court Case LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 22. A deposition is a sworn testimony by a party to a lawsuit or any witness. a. True Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Following a State Court Case LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 23. Interrogatories are written questions for which written answers are prepared and signed under oath. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Following a State Court Case LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 24. Any relevant material, except information stored electronically, can be the object of a discovery request. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Following a State Court Case LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 25. A closing argument is a statement by a party that results in a summary judgment in that party’s favor. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Following a State Court Case LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LOCAL STANDARDS: KEYWORDS:

United States - OH - Default City - AICPA Legal Bloom's: Knowledge

26. A motion for a new trial will be granted only if a constitutional issue is involved. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Following a State Court Case LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 27. A motion for a directed verdict is also known as a motion for judgment as a matter of law. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Following a State Court Case LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 28. Any judgment is enforceable. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Following a State Court Case LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 29. Arbitration is always legally binding. a. True b. False ANSWER: False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© POINTS: 1 DIFFICULTY: Easy REFERENCES: Alternative Dispute Resolution LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 30. In mediation, the mediator proposes a solution that includes what compromises are necessary to reach an

agreement. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Alternative Dispute Resolution LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 31. Negotiation is the most complex form of alternative dispute resolution. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Alternative Dispute Resolution LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 32. ADR proceedings are always strictly regulated by federal statutes. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Alternative Dispute Resolution LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS:

Bloom's: Knowledge

33. A court’s review of an arbitrator’s award may be restricted. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Alternative Dispute Resolution LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 34. The verdict in a summary jury trial is binding. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Alternative Dispute Resolution LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking LOCAL STANDARDS: United States - OH - Default City - AICPA Leveraging Technology KEYWORDS: Bloom's: Knowledge 35. Most online dispute resolution services apply general, universal legal principles to resolve disputes. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Alternative Dispute Resolution LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge Multiple Choice 36. Justin wants to file a suit against Mikayla. For a court to hear the case a. Mikayla must agree. b. the court must have jurisdiction. c. the court must issue a deposition.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© d. the parties must own property.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Basic Judicial Requirements LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 37. Hua, a resident of Illinois, owns a warehouse in Indiana. A dispute arises over the ownership of the

warehouse with Jac, a resident of Kentucky. Jac files a suit against Hua in Indiana. Regarding this suit, Indiana has a. federal jurisdiction. b. in personam jurisdiction. c. in rem jurisdiction. d. no jurisdiction.

ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: Basic Judicial Requirements LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 38. Megan, a resident of Ohio, runs a red light in Texas and hits Sarah, a Texas resident. Sarah files suit against

Megan. The statute that allows the Texas court to exercise jurisdiction over Megan is called a(n) a. long arm statute. b. in personam statute. c. in rem statute. d. out-of-state jurisdiction statute.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Basic Judicial Requirements LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 39. A Montana state court can exercise jurisdiction over Endurance Insurance Corporation, an out-of-state

defendant, but the defendant must have Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© a. minimum contacts with the state. b. maximum contacts with the state. c. legitimate contacts with the state. d. legal contacts with the state.

ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: Basic Judicial Requirements LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 40. Fresh Harvest Company, which is based on Georgia, packages and sells vegetables. Jack, who is a resident

of North Carolina, buys a Fresh Harvest product, eats it, and suffers severe food poisoning. Jack wants to file a suit against Fresh Harvest. The diversity of citizenship between these parties means that a. federal and state courts have concurrent jurisdiction. b. federal courts have exclusive jurisdiction. c. no court has jurisdiction. d. state courts have exclusive jurisdiction.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Basic Judicial Requirements LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 41. The case of Max v. National Credit Co. is heard in a trial court. The case of O! Boy! Ice Cream Co. v.

Refrigerated Transport, Inc. is heard in an appellate court. The difference between a trial and an appellate court is whether a. the proceedings focus on the presentation of evidence and the examination of witnesses. b. the court is appealing. c. the parties question how the law applies to their dispute. d. the subject matter of the case involves complex facts.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Basic Judicial Requirements LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Reflective Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LOCAL STANDARDS: KEYWORDS:

United States - OH - Default City - AICPA Legal Bloom's: Application

42. Laney is a resident of Maine. Delacorte is a Canadian. They dispute the ownership of Petite Isle, an island in

North Rapids River on the border between Canada and the United States. The diversity of the parties’ citizenship could serve as a basis for a. federal jurisdiction. b. general jurisdiction. c. limited jurisdiction. d. universal jurisdiction.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Basic Judicial Requirements LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 43. Sandy, a resident of Illinois, wants to file suit against Carl, a resident of Kansas, over Carl’s failure to pay Sandy for work on his house. The amount in dispute is $15,000. Under diversity of citizenship requirementse a. no court can exercise jurisdiction. b. a state court cannot take jurisdiction because the amount in controversy is less than $25,000. c. a federal court cannot take jurisdiction because the amount in controversy is more than $10,000. d. a federal court cannot take jurisdiction because the amount in controversy is less than $75,000.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Basic Judicial Requirements LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Decision Modeling KEYWORDS: Bloom's: Application 44. Tyler, a citizen of West Virginia, files a suit in a West Virginia state court against Louisville Sales

Corporation, a Kentucky state company that does business in West Virginia. The court has original jurisdiction, which means that a. the case is being heard for the first time. b. the court has a unique method of deciding whether to hear a case. c. the court has unusual procedural rules. d. the subject matter of the suit is interesting and new.

ANSWER: POINTS:

a 1

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Moderate REFERENCES: Basic Judicial Requirements LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 45. Jack and Jill, citizens of Vermont, are involved in a case related to the adoption of their child. The Vermont

state courts a. have concurrent jurisdiction with federal courts over this case. b. have original jurisdiction over this case. c. have exclusive jurisdiction over this case. d. do not have jurisdiction for over case.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Basic Judicial Requirements LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 46. David, an Alabama resident, files a suit in an Alabama court against QuickAds, an Internet company based

in Georgia that provides advertising services. QuickAds only contact with persons in Alabama has been through QuickAds’s passive advertising. The Alabama court is a. likely to have jurisdiction over the case. b. not likely to have jurisdiction over the case. c. likely to refer the case to a higher district court. d. likely to refer the case to an appellate court.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Basic Judicial Requirements LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 47. Milo files a suit against Nick in an Ohio state court, noting that Nick operates a Web site through which

Ohio residents have done substantial business with him. The court is most likely to have jurisdiction over Nick if Milo’s claim arises from a. anything an Ohio resident has done. b. Nick’s Web site activities.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© c. nothing an Ohio resident has done. d. something other than Nick’s Web site.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Basic Judicial Requirements LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 48. Jo files a suit against Lara in a Missouri state court. Lara’s only connection to Missouri is an ad on the Web

originating in Nebraska. For Missouri to exercise jurisdiction, the issue is whether Lara, through her ad, has a. a commercial cyber presence in Missouri. b. conducted substantial business with Missouri residents. c. general maximum contact with Missouri. d. solicited virtual business in Missouri.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Basic Judicial Requirements LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 49. Lora files a suit in Michigan against Ned over the ownership of a boat docked in a Michigan harbor. Lora and Ned are residents of Ohio. Ned could ask for a change of venue on the ground that Ohios a. has a sufficient stake in the matter. b. has jurisdiction. c. has sufficient minimum contacts with the parties. d. is a more convenient location to hold the trial.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Basic Judicial Requirements LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 50. Elinor sells Cathy a horse for $2,000. When Elinor goes to the bank to deposit Cathy’s check, the check

bounces. Elinor is furious and files suit against Cathy. Elinor probably filed her suit in Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© a. a small claims court. b. a domestic relations court. c. a municipal court. d. a probate court.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Basic Judicial Requirements LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 51. Carol files a suit against Andy in a state trial court and loses. Carol a. cannot take her case any higher in the court system. b. can insist that the United States Supreme Court hear her case. c. can plead her case before an appellate court. d. can plead her case before a small claims court.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: The State and Federal Court System LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 52. Kit loses her suit against Lou in a Minnesota state trial court. Kit appeals to the state court of appeals and

loses again. Kit would appeal next to a. a U.S. district court. b. the Minnesota Supreme Court. c. the United States Supreme Court. d. the U.S. Court of Appeals for the Eighth Circuit.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: The State and Federal Court System LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 53. Martha brings a suit against SafeCars, Inc. claiming that she was injured during a car crash due to defects in

the car she had purchased from SafeCars. There is no evidence that Martha was injured in the accident, but the trial court awards her $1 million in damages. SafeCars appeals the decision. The appellate court will most likelys a. not modify the trial court’s finding of fact because appellate courts are forbidden to look at questions of fact. b. modify the trial court’s finding of fact because the finding was clearly erroneous. c. modify the trial court’s finding of fact because the award amount was more than $25,000. d. modify the trial court’s finding of fact because the award amount was less than $5 million.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: The State and Federal Court System LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 54. Drummond wants to make a federal case out of his dispute with Elena. Federal cases originate in a. federal courts of appeals. b. federal district courts. c. state trial courts. d. the United States Supreme Court.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: The State and Federal Court System LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 55. The Arizona Supreme Court rules against Jennifer in a case against Kut Rate Stores, Inc. Jennifer wants to

appeal her case to the United States Supreme Court. She must ask the Court to issue a writ of a. appeal. b. certiorari. c. jurisdiction. d. summons.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: The State and Federal Court System LEARNING OBJECTIVES: LO - 3 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 56. Ben files a suit in a federal district court against Cathy. Cathy loses the suit, appeals to the U.S. Court of

Appeals for the Second Circuit, and loses again. Cathy asks the United States Supreme Court to hear the case.

The Court agrees to hear the case. This means that a. at least four justices approve of hearing the case. b. Cathy’s petition does not raise a possibility of an important constitutional question. c. the amount in controversy in Cathy’s suit is greater than $100,000. d. the Court feels that the lower courts’ judgments were erroneous.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: The State and Federal Court System LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 57. Uma wants to initiate a suit against Valley Vacation Tours by filing a complaint. The complaint should

include a. an explanation to refute any defense the defendant might assert. b. a motion for summary judgment. c. a motion to dismiss. d. a statement of the facts necessary to show Uma is entitled to relief.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Following a State Court Case LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 58. To initiate a lawsuit, Darla files a complaint against E-Sales Company, which responds with an answer.

Together, the complaint and answer are a. a motion to dismiss. b. a summons. c. a writ of certiorari. d. the pleadings.

ANSWER: POINTS:

d 1

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Moderate REFERENCES: Following a State Court Case LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 59. Jason files a suit against Maybelline. If Maybelline fails to respond, Jason a. must appeal the case to a different court. b. must refile the suit in the same court. c. will be awarded the remedy sought. d. will have a default judgment entered against him.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Following a State Court Case LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 60. Lyn files a suit against Karl. Karl denies Lyn’s charges and sets forth his own claim that Lyn breached their

contract and owes Karl money for the breach. Karl’s claim is a. a contrary charge. b. a counterclaim. c. a counterpoint. d. a cross complaint.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Following a State Court Case LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 61. In Kettle Cafe’s suit against Food Services, Inc., the court issues a judgment in Kettle’s favor. The judgment

can be appealed to an appropriate court of appeals by a. either party. b. Kettle only. c. Food Service only. d. neither party.

ANSWER:

a

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© POINTS: 1 DIFFICULTY: Moderate REFERENCES: Following a State Court Case LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 62. During the trial phase of Fuel Corporation’s suit against Gas Stations, Inc., their attorneys engage in voir

dire. This is a. an assessment of the validity of the arguments for both parties. b. a determination of the issues to be argued before the court. c. the trial. d. the selection of jurors.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Following a State Court Case LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 63. Kelly files a suit against Lewis in a state court. The case proceeds to trial, after which the court renders a

verdict. The case is appealed to an appellate court. After its review of Kelly v. Lewis, the appellate court upholds the lower court’s verdict. The appellate court has a. affirmed the case. b. reversed the case. c. remanded the case. d. reversed and remanded the case.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Following a State Court Case LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 64. iTablets, Inc., files a suit against Andromeda Pads Corporation. Suri is a witness for iTablets. Kevin is a

witness for Andromeda. iTablets may direct interrogatories to a. Andromeda. b. Suri.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© c. Kevin. d. the judge.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Following a State Court Case LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 65. Solar Power, Inc., files a suit against Thunder Bay Utility Company and seeks to examine electronic

documents in Thunder’s possession. A legitimate reason for this examination is that the documents contain a. evidence about the case. b. private information about Thunder’s operations. c. public information about energy generation. d. irrelevant data that can be eliminated from consideration.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Following a State Court Case LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application Fact Pattern 3-1 Bean Vendors, Inc., and Java Bistros Corporation dispute a term in their contract.

66. Refer to Fact Pattern 3-1. The least expensive method of resolving the dispute between Bean and Java may

be a. arbitration because the case will be heard by a mini-jury b. litigation because each party will pay its own legal fees. c. mediation because the dispute will be resolved by a non-expert. d. negotiation because no third parties are needed.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Alternative Dispute Resolution LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Risk Analysis KEYWORDS: Bloom's: Application Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 67. Refer to Fact Pattern 3-1. If Bean and Java have a long-standing business relationship that they would like to

continue, they may prefer to settle their dispute through mediation because a. the case will be heard by a mini-jury. b. the dispute will eventually go to trial. c. the process is not adversarial. d. the resolution of the dispute will be decided an expert.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Alternative Dispute Resolution LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Risk Analysis KEYWORDS: Bloom's: Application 68. Refer to Fact Pattern 3-1. If Bean and Java resolve their dispute by having a neutral third party render a

binding decision, they will have used the method of a. arbitration. b. conciliation. c. intervention. d. mediation.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Alternative Dispute Resolution LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Risk Analysis KEYWORDS: Bloom's: Application 69. Transnational Corporation and United Shipping, Inc., agree to a contract that includes an arbitration clause.

If a dispute arises, a court having jurisdiction mays a. monitor any arbitration until it concludes. b. order an arbitrator to rule in a particular way. c. order a party to bring the dispute to court. d. order a party to submit to arbitration.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Alternative Dispute Resolution LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: Reflective Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LOCAL STANDARDS: KEYWORDS:

United States - OH - Default City - AICPA Legal Bloom's: Application

70. To resolve a dispute, Amy in Boston and Chris in Denver utilize E-Solution, an online dispute resolution

(ODR) service. This limits these parties' recourse to the courts a. not at all. b. until the ODR service has issued a decision. c. with respect to any dispute arising between them. d. with respect to this dispute only.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Alternative Dispute Resolution LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application Essay 71. Norwest Trucking Corporation files a suit in a state court against Bob’s Service Company (BSC), and wins.

BSC appeals the court’s decision, asserting that the evidence presented at trial to support Norwest’s claim was so scanty that no reasonable jury could have found for the plaintiff. Therefore, argues BSC, the appellate court should reverse the trial court’s decision. Is the appellate court likely to reverse the trial court’s findings with respect to the facts? If not, why not? What are an appellate court’s options after reviewing a case?

ANSWER: An appellate court will reverse a lower court’s decision on the basis of the facts if the evidence does not support the findings or if it contradicts them. Appellate courts normally defer to a trial court’s decision with regard to the facts of a case, however, for several reasons. First, trial judges and juries have the opportunity to observe witnesses and tangible evidence first hand. The appellate court sees only a cold record of the trial court proceedings and therefore cannot make the kind of judgments about the credibility of witnesses and the persuasiveness of evidence that can be gleaned only from first hand experience. Second, as occurs when there is no jury and the case is heard by a judge, trial judges routinely sit as fact finders. As a result, they develop a particular expertise in determining what kind of evidence and testimony is reliable and what kind is not. (There are also constitutional reasons for an appellate court to defer to a jury verdict. If, based on the evidence presented to a jury, a reasonable person could have come to the same decision that the jury came to, an appellate court cannot reverse the jury’s decision with regard to the facts because this would, in essence, take away a person’s right to a jury trial.) An appellate court’s options after reviewing a case are to affirm the trial court’s judgment, to reverse it in whole, to reverse it in part, to modify the decision, or to remand the case for further proceedings.

POINTS: DIFFICULTY:

1 Challenging

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: State and Federal Court Systems and Following a State Court Case LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Decision Modeling KEYWORDS: Bloom's: Analysis 72. Discount Mart, Inc., files a suit in a state court against Elements Computer Corporation, alleging that

Elements breached a contract to sell 500 notebook computers to Discount. During the course of the suit, Discount files a motion for judgment on the pleadings, Elements files a motion for a directed verdict, and both parties file motions for summary judgment. When and for what purpose are each of these motions made?

ANSWER: After the pleadings have been filed, either party can file a motion for judgment on the pleadings. This motion may be used when no facts are disputed and, thus, only questions of law are at issue. The difference between this motion and a motion for summary judgment is that the party requesting the motion may support a motion for summary judgment with sworn statements and other materials; on a motion for a judgment on the pleadings, a court may consider only those facts pleaded. At the conclusion of the plaintiff’s case, the defendant can file a motion for a directed verdict (federal courts use the term motion for a judgment as a matter of law), asking the court to direct a verdict for the defendant on the ground that the plaintiff has presented no evidence to justify the granting of the plaintiff’s remedy. In considering the motion, the judge looks at the evidence in the light most favorable to the plaintiff and grants the motion only if there is insufficient evidence to raise an issue of fact. At the end of the defendant’s case, either party can move for a directed verdict. If the only question is which laws apply to the facts in a case, either party can move for summary judgment before or during a trial. When a court considers a motion for summary judgment, it can take into account evidence outside the pleadings. The evidence may consist of sworn statements by parties or witnesses, as well as documents. A motion for summary judgment will be granted only when there are no genuine questions of fact, and the only question is a question of law.

POINTS: 1 DIFFICULTY: Challenging REFERENCES: Following A State Court Case LEARNING OBJECTIVES: LO - 3 LO - 4 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Decision Modeling KEYWORDS: Bloom's: Analysis

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© True / False 1. A confederal form of government is a confederation of independent states with a central government of very limited powers. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: The Constitutional Powers of Government LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 2. In a country with a federal form of government, the national government and the states share sovereign power. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: The Constitutional Powers of Government LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 3. All powers not specifically delegated to the federal government are reserved to the states. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: The Constitutional Powers of Government LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 4. The checks and balances in the U.S. Constitution prevent any one branch of government from exercising too much power. a. True b. False ANSWER: True Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© POINTS: 1 DIFFICULTY: Easy REFERENCES: The Constitutional Powers of Government LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 5. Under the Constitution, the judicial branch interprets the laws. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: The Constitutional Powers of Government LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 6. Under the Constitution, the judicial branch is responsible for foreign affairs. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: The Constitutional Powers of Government LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 7. The President determines the jurisdiction of the federal courts. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: The Constitutional Powers of Government LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 8. The President appoints federal judges with the advice and consent of the Senate. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: The Constitutional Powers of Government LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 9. The judicial branch has the power to hold actions of the other branches of government unconstitutional. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: The Constitutional Powers of Government LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 10. Article I, Section 8, of the U.S. Constitution permits Congress to regulate interstate commerce. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: The Constitutional Powers of Government LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 11. At least in theory, Congress can regulate every commercial enterprise in the United States. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: The Constitutional Powers of Government LEARNING OBJECTIVES: LO - 2 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 12. Under their police powers, states can regulate only public activities, such as political demonstrations. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: The Constitutional Powers of Government LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 13. When there is a direct conflict between a federal and a state law, the state law is rendered invalid. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: The Constitutional Powers of Government LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 14. Preemption occurs when Congress chooses to act exclusively in a concurrent area and a valid federal statue or regulation takes precedence over a conflicting state or local law. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: The Constitutional Powers of Government LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 15. The Second Amendment to the U.S. Constitution reserves all powers not delegated to the national government to the states. a. True Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Business and the Bill of Rights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 16. The Bill of Rights protects individuals against types of interference by the federal government. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Business and the Bill of Rights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 17. The Fifth Amendment prohibits unreasonable searches and seizures of persons or property. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Business and the Bill of Rights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 18. The Eighth Amendment prohibits excessive bail and fines, as well as cruel and unusual punishment. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Business and the Bill of Rights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LOCAL STANDARDS: KEYWORDS:

United States - OH - Default City - AICPA Critical Thinking Bloom's: Knowledge

19. Symbolic speech is defined as nonverbal expressions of belief and is protected by the First Amendment. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Business and the Bill of Rights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 20. A restriction on commercial speech is valid as long as it forbids only the expression of views on controversial issues. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Business and the Bill of Rights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 21. The First Amendment protects corporate political speech. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Business and the Bill of Rights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 22. The First Amendment protects defamatory speech. a. True b. False ANSWER: False POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Easy REFERENCES: Business and the Bill of Rights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 23. The Children’s Internet Protection Act requires public schools and libraries to use filtering software to block children’s access to adult contact on Web sites. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Business and the Bill of Rights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 24. The First Amendment requires a complete separation of church and state. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Business and the Bill of Rights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 25. The establishment clause of the U.S. Constitution prohibits the federal government from establishing a state-sponsored religion. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Business and the Bill of Rights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning©

26. A law that has any impact on religion is unconstitutional. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Business and the Bill of Rights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 27. The Fourteenth Amendment guarantees a right to due process of law. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Due Process and Equal Protection LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 28. Procedural due process requires that any government decision to take a person’s property must be made fairly. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Due Process and Equal Protection LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 29. Substantive due process focuses on the substance of legislation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: Due Process and Equal Protection LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 30. The terms “due process” and “equal protection” mean the same thing. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Due Process and Equal Protection LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 31. A law that limits only some persons’ exercise of a fundamental right is valid under any circumstances. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Due Process and Equal Protection LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 32. A law that limits the liberty of all persons may violate substantive due process. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Due Process and Equal Protection LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 33. A law that restricts people of a certain national origin from doing something will be carefully examined to make sure it promotes a compelling government interest before it is allowed to stand.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: Due Process and Equal Protection LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 34. Because the Constitution does not specifically a right to privacy, this right is denied to people. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Privacy Rights LEARNING OBJECTIVES: LO - NA NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 35. Individuals have a right to obtain access to information about them collected in government files. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Privacy Rights LEARNING OBJECTIVES: LO - NA NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge Multiple Choice 36. The Financial Institutions Association would like a certain law enacted, administered, interpreted, and enforced in the best interest of its members, which include banks. Under the Constitution, Congress a. administers the laws. b. enforces the laws. c. interprets the laws. d. makes the laws.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Constitutional Powers of Government LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 37. The Constitution sets out the authority and the limits of the branches of the government. The term checks and balances means that a. Congress writes checks and the other branches balance the budget. b. each branch has some power to limit the actions of the others. c. the courts balance their authority to the other branches’ checklists. d. the president “checks” the courts, which “balance” the laws.

ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: The Constitutional Powers of Government LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 38. Antonin, a federal judge, retires. The vacant position will be filled by a judge a. appointed by the United States Supreme Court. b. elected by voters. c. appointed by the President. d. appointed by Congress.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Constitutional Powers of Government LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 39. The commerce clause of the U.S. Constitution is found in a. Article I, Section 8. b. Article I, Section 2. c. Article VIII, Section 1. d. Article II, Section 8.

ANSWER: a Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© POINTS: 1 DIFFICULTY: Easy REFERENCES: The Constitutional Powers of Government LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 40. South Dakota, like other states, may regulate private activities to protect or promote the public order, health, safety, and general welfare under a. the state’s police powers. b. the dormant commerce clause. c. the due process clause. d. the free exercise clause.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Constitutional Powers of Government LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 41. Tami’s Tasty Tacos, a fast food outfit, files a suit against the state of Texas, claiming that a Texas state law violates the commerce clause. The court will agree if the statute imposes a substantial burden on a. a local government. b. interstate commerce. c. noneconomic activity. d. the state.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging REFERENCES: The Constitutional Powers of Government LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 42. The commerce clause’s express grant of exclusive authority to regulate commerce that substantially affects trade and commerce among states is referred to as the a. dormant aspect of the commerce clause. b. positive aspect of the commerce clause. c. negative aspect of the commerce clause. d. exclusive aspect of the commerce clause.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: The Constitutional Powers of Government LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Decision Modeling KEYWORDS: Bloom's: Knowledge 43. Congress enacts a law that sets out a rigorous medical-device premarket approval process for the U.S. Food and Drug Administration to follow. The law includes a preemption provision. Moe is injured by a device that underwent the process and files a claim under New Hampshire state law to recover for the injury. The court will most likely rule that a. Moe’s state law claim preempts the federal law. b. the federal law and state law claim are concurrent. c. the federal and state law claim cancel each other out. d. the federal law preempts Moe’s state law claim.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Constitutional Powers of Government LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Comprehension 44. Savers Mart, Inc., distributes its merchandise to retail outlets on an inter-state basis. Under the commerce clause, Congress has the power to regulate a. any commercial activity in the United States. b. only activities that are in intrastate commerce. c. only activities that are in local commerce. d. only activities that are not in commerce.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Constitutional Powers of Government LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 45. Congress enacts a law prohibiting toys made in China from being sold in the United States. The Hawaii state legislature enacts a law allowing the sale of Chinese-made toys. Hawaii’s law will most likely be struck down under a. the commerce clause. b. the equal protection clause.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© c. the due process power. d. the supremacy clause.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging REFERENCES: The Constitutional Powers of Government LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 46. A federal law regarding the labeling of pesticides directly conflicts with a state law. The state law will be rendered invalid due to the a. the supremacy clause. b. the commerce clause. c. the federal spending power. d. the First Amendment.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Constitutional Powers of Government LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 47. Don, a U.S. citizen, is the owner of Egrets Unlimited, Inc. Egret’s competitors include Feathered Friends Company (FFC), which is owned by Greg and Huey. The Bill of Rights embodies a series of protections for Don against types of interference by a. FFC and its other competitors only. b. FFC, Greg, Huey, others, and the government. c. Greg, Huey, and other private individuals only. d. the government only.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Business and the Bill of Rights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 48. Martin, a U.S. citizen, feels that a recently enacted federal law is unfair. He assembles a group of friends and they write a petition to the government. Martin and friends then stand quietly in front of the White House with signs declaring Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© their belief that the law is unfair. Under the First Amendment, Martin has a right to a. petition the government, but not to assemble a group peaceably. b. assemble peaceably, but not to petition the government. c. both petition the government and assemble peaceably. d. neither petition the government nor assemble peaceably.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging REFERENCES: Business and the Bill of Rights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 49. The police obtain a search warrant and search Dave’s apartment. After yelling obscenities at the officers, Dave confesses to a crime and implicates his friends. The Constitution protects against a. obscene speech only. b. others’ implication only. c. unreasonable searches only. d. obscene speech, others’ implication, and unreasonable searches.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Business and the Bill of Rights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 50. Bailey, the president of Carmichael Commodities Company, claims that certain actions by the federal government and by the state of Delaware infringe on rights guaranteed by the Bill of Rights. All of these rights limit a. neither Delaware nor the federal government. b. the federal government only. c. Delaware and the federal government. d. Delaware only.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging REFERENCES: Business and the Bill of Rights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 51. Mary creates a t-shirt design that expresses her support for a presidential candidate and distributes t-shirts to all her friends. The t-shirts are an example of a. unprotected speech. b. controlled speech. c. symbolic speech. d. illegal speech.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Business and the Bill of Rights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Comprehension 52. Serenity City enacts an ordinance that bans the use of “sound amplifying systems” on public streets. Tyler wants to campaign for a seat on the city council by broadcasting his message through speakers mounted on a truck. In Tyler’s suit against the city, a court would likely hold the ordinance to be a. an unconstitutional restriction of speech. b. constitutional under the First Amendment. c. justified by the need to protect individual rights. d. necessary to protect national interests.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging REFERENCES: Business and the Bill of Rights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Decision Modeling KEYWORDS: Bloom's: Application 53. George burns an American flag in his backyard. He films his actions and posts the video on YouTube.com. George’s actions are a. expressly prohibited by the U.S. Constitution. b. protected by the First Amendment of the U.S. Constitution. c. considered to be a form of treason. d. illegal in some states.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Business and the Bill of Rights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS:

Bloom's: Application

54. Beachside City enacts an ordinance that bans the distribution of all printed materials on city streets. Carl opposes the city’s latest “revenue-enhancing” measure and wants to protest by distributing handbills. In his suit against the city, a court would likely hold the printed-materials ban to be a. an unconstitutional restriction of speech. b. constitutional under the First Amendment. c. justified by the need to protect individual rights. d. necessary to protect national interests.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging REFERENCES: Business and the Bill of Rights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 55. Reusable Energy Corporation regularly expresses opinions on political issues. Under the First Amendment, corporate political speech is a. discouraged. b. forbidden. c. protected. d. required.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Business and the Bill of Rights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Decision Modeling KEYWORDS: Bloom's: Application 56. California enacts a statute to ban advertising in “bad taste.” This statute would likely be held by a court to be a. an unconstitutional restriction of speech. b. constitutional under the First Amendment. c. justified by the need to protect individual rights. d. necessary to protect national interests.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Business and the Bill of Rights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LOCAL STANDARDS: KEYWORDS:

United States - OH - Default City - AICPA Decision Modeling Bloom's: Application

57. Machismo Motor Sales Corporation regularly advertises its off-the-road vehicles, all-terrain vehicles, and other products.

Under the First Amendment, these ads and other commercial speech are given a. less extensive protection than noncommercial speech. b. more extensive protection than symbolic speech. c. no protection. d. the same protection as defamatory speech.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging REFERENCES: Business and the Bill of Rights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 58. ViolentVideoGames, Inc. markets a variety of shooting, fighting and hunting video games. A state statue is enacted that requires all video game manufacturers to label any games with an option to kill something as “excessively violent.” A court would likely hold this regulation to be a. an unconstitutional restriction of speech. b. constitutional under the First Amendment. c. justified by the need to protect individual rights. d. necessary to protect national interests.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging REFERENCES: Business and the Bill of Rights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 59. In 2013, Congress enacts the Act to Restrict Commercial Speech (ARCS). The ARCS will be considered valid if it directly advances a substantial government interest a. but goes no further than necessary to achieve its purpose. b. without regard to how “far” it goes. c. and the parties affected by it can elect how “far” to go in applying it. d. and goes further than necessary to ensure full coverage.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Business and the Bill of Rights Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 60. Julia is a U.S. citizen. She establishes a website that posts threatening messages about celebrities. Her website is a. protected by the First Amendment. b. not protected by the First Amendment. c. protected by the Fifth Amendment. d. protected by the Tenth Amendment.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Business and the Bill of Rights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 61. Brad stands in front of Rooster’s Round-Up Café, shouting “fighting words” that are likely to incite Rooster’s patrons to respond violently. The First Amendment protects such speech a. all of the time. b. none of the time. c. only if it is noncommercial. d. only if it is symbolic.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Business and the Bill of Rights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 62. Adult Shoppe in Bay City sells a variety of publications, including child pornography. Bay City enacts an ordinance prohibiting the sale of such materials. This ordinance is most likely a. an invalid restriction of individuals’ privacy. b. an unconstitutional restriction of speech. c. a violation of adults’ rights to enjoy certain privileges. d. constitutional under the First Amendment.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Business and the Bill of Rights Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 63. Which of the following does not necessarily make material obscene? a. The average person finds that it violates contemporary community standards. b. The work taken as a whole appeals to a prurient interest in sex. c. The work shows patently offensive sexual conduct. d. The work shows animals mating.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Business and the Bill of Rights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Decision Modeling KEYWORDS: Bloom's: Comprehension 64. Oklahoma enacts a law requiring all businesses in the state to donate 10 per-cent of their profits to Protestant churches that provide certain services to persons whose income is below the poverty level. PriceLess Stores files a suit to block the law’s enforcement. The court would likely hold that this law violates a. no clause in the U.S. Constitution. b. the establishment clause. c. the free exercise clause. d. the supremacy clause.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging REFERENCES: Business and the Bill of Rights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 65. Marie claims that a Nebraska state statute infringes on her “procedural due process” rights. This claim focuses on a. procedures used in making decisions to take life, liberty, or property. b. the content of the statute. c. the similarity of the treatment of similarly situated individuals. d. the steps to be taken to protect Marie’s privacy.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Due Process and Equal Protection Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 66. A Massachusetts state statute imposes a prison term, without a trial, on all street performers who operate in certain areas. A court would likely review this statute under the principles of a. the commerce clause. b. the equal protection clause. c. the due process clause. d. the First Amendment.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging REFERENCES: Due Process and Equal Protection LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 67. Orin claims that a Pennsylvania state statute infringes on his “substantive due process” rights. This claim focuses on a. procedures used to make decisions to take life, liberty, or property. b. the content of the statute. c. the similarity of the treatment of similarly situated individuals. d. the steps to be taken to protect Orin’s privacy.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Due Process and Equal Protection LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 68. Justice For All, a political organization, files a claim to challenge a Colorado statute that limits the liberty of all persons to broadcast “annoying” radio commercials. This claim is most likely based on the right to a. equal protection of the law. b. indictment. c. procedural due process. d. substantive due process.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging REFERENCES: Due Process and Equal Protection Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 69. To reduce traffic, Harbor Town enacts an ordinance that allows only a few street vendors to operate in certain areas. A court would likely review this ordinance under the principles of a. the commerce clause. b. the equal protection clause. c. the due process clause. d. the First Amendment.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Due Process and Equal Protection LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 70. Jon, a law enforcement official, monitors Kelsey’s Internet activities—e-mail and Web site visits—to gain access to her personal financial data and student information. This may violate Kelsey’s right to a. equal protection of the law. b. privacy. c. procedural due process. d. substantive due process.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging REFERENCES: Privacy Rights LEARNING OBJECTIVES: LO - NA NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Risk Analysis KEYWORDS: Bloom's: Application Essay 71. Jim operates Jim’s Fruits & Vegetables, a small market stocked entirely with produce grown on his adjacent farm.

Under what clause of the Constitution can the federal government regulate Jim’s activities? What is Jim’s best argument against federal regulation of his farm and business?

ANSWER:

Under the commerce clause, at least in theory, Congress has the power to regulate any activity—interstate or intrastate—that affects interstate commerce. Thus, under that clause, it could be argued that the farmer’s growing and selling of produce is subject to federal regulation because these activities affect interstate commerce. The farmer-vendor’s best

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© argument against federal regulation of his farm and business in this problem might be that in his case these activities and their effects are purely local. But because of the economic character of these activities, and hence their effect on interstate commerce, however minimal and de-spite their local character, it is unlikely that a court would accept this argument.

POINTS: 1 DIFFICULTY: Challenging REFERENCES: The Constitutional Powers of Government LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Decision Modeling KEYWORDS: Bloom's: Application 72. The Arkansas state legislature enacts a statute that prohibits the advertising of video games “because the games might be harmful to minors.” Despite this new statute, the president of Games Marketing, Inc. (GMI), orders GMI marketers to place ads in various media. When a GMI ad appears on HDTV, a local television station, GMI and HDTV are charged with violating the statute. What is the defendants’ best defense against a conviction?

ANSWER: GMI and HDTV cannot be convicted because a state legislature cannot enact a statute that restricts commercial speech (in this problem, marketing video games) to this extent. The First Amendment protects commercial speech. Commercial speech does not receive as much protection as noncommercial speech, however, so states can place some restraints on the former. For example, to protect consumers, a state may ban certain kinds of marketing practices, such as deceptive or misleading advertising. Generally, a restriction on commercial speech will be considered valid as long as it (1) seeks to implement a substantial government interest, (2) directly advances that interest, and (3) goes no further than necessary to accomplish the objective. Here, the complete ban on ads for video games “because the games might be harmful to minors” is too restrictive: it goes too far in attempting to protect minors for an apparently unsubstantiated purpose.

POINTS: 1 DIFFICULTY: Challenging REFERENCES: Business and the Bill of Rights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BB_17.3 - BB-Decision Modeling United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective KEYWORDS: Bloom's: Application

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© True / False 1. Through tort law, society compensates those who suffer injuries as a result of others’ wrongful conduct. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Introduction LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: N 2. Very few states have limited the amount of damages that can be awarded in tort cases. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: The Basis of Tort Law LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: N 3. Class-action lawsuits are suits in which a number of persons join together to bring an action. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: The Basis of Tort Law LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: N 4. To commit an intentional tort, one person must intend to harm a certain person. a. True b. False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Intentional Torts Against Persons LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: N 5. For a tort to be considered intentional, the tortfeasor must have an evil or harmful motive. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Intentional Torts Against Persons LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: N 6. Self-defense is a defense to an allegation of both assault and battery. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Intentional Torts Against Persons LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: N 7. Defense of others is a defense to an allegation of battery, but not assault. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Intentional Torts Against Persons Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension OTHER: N 8. False imprisonment occurs when a person restrains another intentionally and without justification. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Intentional Torts Against Persons LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: = 9. A party cannot recover damages for severe emotional distress absent a showing of physical injury. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Intentional Torts Against Persons LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: N 10. Defamation is one person’s use of another’s name without permission. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Intentional Torts Against Persons LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© OTHER:

N

11. Statements made by in judicial proceedings are NOT privileged communications and may be the basis for defamation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Intentional Torts Against Persons LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: N 12. The public disclosure of private facts about a person is an invasion of privacy. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Intentional Torts Against Persons LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: N 13. The use of a person’s likeness for commercial purposes without permission is appropriation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Intentional Torts Against Persons LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: N 14. Fraud occurs only when there is reliance on a statement of opinion. a. True b. False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Intentional Torts Against Persons LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: N 15. Any lawful contract can potentially form the basis for an action based on wrongful interference with a contractual relationship. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Intentional Torts Against Persons LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: N 16. The courts consider legitimate competitive behavior permissible only if it does not result in the breaking of a contract. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Intentional Torts Against Persons LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: N 17. If it can be shown that a trespass to land was warranted, a complete defense exists. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Intentional Torts Against Property Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: N 18. Wrongfully taking personal property without the owner’s permission is conversion. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Intentional Torts Against Property LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: N 19. A failure to return personal property is disparagement of property even if the rightful owner consented to the initial taking. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Intentional Torts Against Property LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: N 20. Disparagement of property is another term for slander of quality. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Intentional Torts Against Property LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© OTHER:

N

21. Failure to live up to a standard of care may be an act or an omission. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Negligence LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: N 22. To determine whether a duty of care has been breached, a judge asks how a reasonable person would have acted in the same circumstances. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Negligence LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: N 23. Under the theory of negligence, the duty of care requires a careless act. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Negligence LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: N 24. To avoid liability for negligence, a business owner must protect its pa-trons against all risks. a. True Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Negligence LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: N 25. Some risks are obvious but that does not necessarily excuse a business owner from the duty to protect customers from foreseeable harm. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Negligence LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: N 26. Proximate cause exists when the connection between an act and an in-jury is strong enough to justify imposing liability. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Negligence LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: N 27. Harm must be foreseeable to be considered the proximate cause of an injury in negligence. a. True b. False ANSWER: True POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Easy REFERENCES: Negligence LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: N 28. If no harm results from an allegedly negligent act, there is no liability. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Negligence LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: N 29. Self-defense is a defense to negligence. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Negligence LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: N 30. An assumption of risk defense does not require that a risk be voluntarily assumed. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Negligence LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LOCAL STANDARDS: KEYWORDS: OTHER:

United States - OH - Default City - AICPA Legal Bloom's: Knowledge +

31. Under the doctrine of comparative negligence, only the plaintiff’s negligence is taken into consideration. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Negligence LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: N 32. Under the “danger invites rescue” doctrine, a person who tries to rescue another individual from harm is liable for any injuries to that individual. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Negligence LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: N 33. Under a dram shop act, liability can be imposed without proof of negligence. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Negligence LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge OTHER: N Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 34. The extreme risk of an activity is a defense against imposing strict liability. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Strict Liability LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge OTHER: + 35. An Internet service provider cannot be held liable for disseminating others’ defamatory remarks. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Strict Liability LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: N Multiple Choice 36. The Class Action Fairness Act of 2005 a. shifted jurisdiction over certain class-action lawsuits from the state courts to the federal courts. b. shifted jurisdiction over certain class-action lawsuits from the federal courts to the state courts. c. made forum shopping punishable by large fines. d. limited the amount of damages that could be awarded in a medical malpractice suit.

ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: The Basis of Tort Law LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge OTHER: N 37. Ike pushes Joan, who falls and breaks her arm. Ike is liable for the injury a. if Ike intended to push Joan.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. only if Ike did not intend to break Joan’s arm. c. only if Ike had a bad motive for pushing Joan. d. only if Ike intended to break Joan’s arm.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Intentional Torts Against Persons LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: N 38. Mary is angry with Julia so she waits outside Julia’s house and hits Julia with a baseball bat as Julia leaves the house.

When Julia sues Mary for battery, Mary will be considered a a. victim. b. tortfeasor. c. plaintiff. d. unreasonable person.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Intentional Torts Against Persons LEARNING OBJECTIVES: LO - 2 KEYWORDS: Bloom's: Application OTHER: + 39. Louis—larger and stronger than Mica—threatens to hit Mica before hitting and injuring him. Mica files a suit against Louis for assault and battery. Mica will most likely recover for a. assault and battery. b. assault but not battery. c. battery but not assault. d. neither assault nor battery.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Intentional Torts Against Persons LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: N 40. Liz trespasses on Mega Corporation’s property. Through the use of rea-sonable force, Mega’s security guard Ned Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© detains Liz until the police ar-rive. Mega is liable for a. assault. b. battery. c. false imprisonment. d. none of the choices.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Intentional Torts Against Persons LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: N 41. Roger wants Andy to work late on a project. He tells Andy that the morally correct thing to do is to stay late at the office and work on the project. Andy feels obligated to stay and work late due to the moral pressure from Roger. Andy stays late at the office, even though he does not want to. Andy can sue Roger for a. false imprisonment. b. battery. c. defamation. d. no tort.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Intentional Torts Against Persons LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: N 42. Jackie distributes a handbill throughout her neighborhood accusing her neighbor Ked of being a convicted sex offender. The statement is defamatory if a. a neighbor repeats it. b. Ked suffers emotional distress. c. the statement is true. d. the statement is false.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Intentional Torts Against Persons LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LOCAL STANDARDS: KEYWORDS: OTHER:

United States - OH - Default City - AICPA Legal Bloom's: Application N

43. Glen falsely accuses Hu of stealing from Island Tours, Inc., their employer. Glen’s statement is NOT defamatory if a. only Hu hears it. b. a third party hears it. c. the statement is published. d. the statement is a lie.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Intentional Torts Against Persons LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: N 44. Jane develops a new color of lipstick. To market her lipstick, Jane uses a computer design program to show a famous model using Jane’s lipstick. Jane does not ask the model’s permission. The model can sue Jane for a. battery. b. fraudulent misrepresentation. c. defamation. d. appropriation.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Intentional Torts Against Persons LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: N 45. Barbara is selling her car. She knows that the brakes do not work. When a potential buyer asks Barbara if there are any problems with the car, Barbara assures the buyer that there are no problems. The buyer purchases the car based on the assurance that there is nothing wrong with it. The buyer may be able to sue Barbara for a. assault. b. defamation. c. fraudulent misrepresentation. d. appropriation.

ANSWER: c POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Moderate REFERENCES: Intentional Torts Against Persons LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: N 46. Obie accuses Portia, a broker with QT Financial Services, of fraudulently inducing him to invest in Risky Development Company, whose stock price declines in value. The reliance that gives rise to liability for fraud requires a. a subjective statement. b. misrepresentation of a fact knowing that it is false. c. puffery. d. seller’s talk.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Intentional Torts Against Persons LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: N 47. Jim is an appliance salesperson. To make a sale, he asserts that a certain model of a Kitchen Helper refrigerator is the “best one ever made.” This is a. fraud if the statement is the truth. b. fraud if Jim believes that this statement is not true. c. fraud if Jim is stating his opinion, not the facts. d. not fraud.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Intentional Torts Against Persons LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: N 48. Dom, an EZ Baked Goods salesperson, follows Flora, a salesperson for Goody Pastries, Inc., as she attempts to make sales to food stores. Dom solicits each of Flora’s customers. Dom is most likely liable for wrongful inter-ference with a a. bargaining relationship. b. business relationship.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© c. contractual relationship. d. customer relationship.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Intentional Torts Against Persons LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: N 49. Kai files a suit against Lana based on one of Lana’s statements that Kai alleges is fraudulent. To give rise to fraud, the statement must be one of a. emotion. b. fact. c. illusion. d. opinion.

ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: Intentional Torts Against Persons LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: N 50. OK Dry-Cleaning advertises so effectively that the regular customers of its competitor Purity Cleaners patronize OK instead of Purity. This is a. appropriation. b. conversion. c. wrongful interference with a contractual relationship. d. no tort.

ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: Intentional Torts Against Persons LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: N Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 51. Bella owns a farm in Colorado. Doyle drives his sport utility vehicle off a highway and onto Bella’s land. Doyle commits trespass if he a. does not have Bella’s permission to drive on the property. b. drives onto the property for recreational purposes. c. harms the property in a material way. d. harms the property in any way.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Intentional Torts Against Property LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: N 52. Manuel is walking past Thomas’s house when he hears a smoke alarm going off. He also hears a child calling for help and sees smoke coming from a window. Manuel rushes into Thomas’s house, finds the child and brings it outside. If Thomas sues Manuel for trespass to land, Manuel’s defense will probably be a. assisting someone in danger. b. consent. c. self-defense. d. the reasonable person defense.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Intentional Torts Against Property LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: N 53. Susan takes her car to Ken’s repair shop and asks him to fix the car’s brakes. Ken completes the work and sends Susan a bill for $100. Susan refuses to pay so Ken refuses to return Susan’s car. Susan can probably successfully sue Ken for a. battery. b. conversion. c. trespass to property. d. none of the choices.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Intentional Torts Against Property LEARNING OBJECTIVES: LO - 3 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: N 54. As a joke, Jem takes Kyla’s business law textbook and hides it so that Kyla cannot find it during the week before the exam. Jem may have committed a. appropriation. b. conversion. c. disparagement of property. d. trespass to personal property.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Intentional Torts Against Property LEARNING OBJECTIVES: LO - 3 KEYWORDS: Bloom's: Application OTHER: N 55. Lizzie, a clerk at a Movies Unlimited store, takes a DVD player from the store without permission. Lizzie is liable for a. appropriation. b. benefiting an employee. c. conversion. d. wrongful interference with a business relationship.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Intentional Torts Against Property LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: N 56. In newspaper ads, Lo-Price Autos falsely accuses Hi-Value Vehicles, a competitor, of selling stolen cars. Hi-Value’s sales decrease. Lo-Price has most likely committed a. slander of quality. b. slander of title. c. wrongful interference with a business relationship. d. none of the choices.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Intentional Torts Against Property Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: N 57. Bette backs out of City Parking Garage, colliding with Dill’s car. Dill may recover $7,500 to cover the cost of the repairs if Bette failed to act as a. a blameless person. b. a faultless person. c. a holistic person. d. a reasonable person.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Negligence LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: N 58. Kelly is injured when she slips and falls on Layla’s sidewalk. To determine whether Layla owed a duty of care to Kelly, Layla is subject to the standard of a. a realistic person. b. a reasonable person. c. a recognizable person. d. a reliable person.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Negligence LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: N 59. Cook’s Pantry Appliances, a retail store, must use reasonable care on its premises to warn its patrons of a. all risks. b. hidden risks. c. obvious risks. d. no risks.

ANSWER: b Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© POINTS: 1 DIFFICULTY: Moderate REFERENCES: Negligence LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: N 60. Nico is a passenger in a car driven by Owen, whose reckless driving causes an accident, injuring himself. Nico, uninjured, accompanies Owen to Parkside Hospital in an ambulance. The ambulance is hit by a car driven by Quin, and Nico is injured. Nico files a suit against Owen, alleging negligence. The element most likely to be a question for the court to decide is a. causation in fact. b. proximate cause. c. the duty of care. d. the injury requirement.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Negligence LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: N 61. Ralph, a van driver for Speedy Delivery Company, causes a multi-vehicle accident on a city street. Ralph and Speedy are liable to a. all those who were injured. b. only those who were uninsured. c. only those whose injuries could have been reasonably foreseen. d. only those whose vehicles were closest to Ralph’s van.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Negligence LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: N 62. Duffy is a passenger in a car that Caleb is driving when an accident occurs. Both Caleb and Duffy are emotionally Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© rattled, but neither is physically hurt. Caleb is not liable to Duffy on a negligence theory because a. both parties were emotionally rattled. b. Caleb apparently did not intend to cause an accident. c. Duffy must have been comparatively negligent. d. Duffy was not injured.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Negligence LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: N 63. Richard is an avid baseball fan and attends baseball games whenever he can. Richard considers himself an expert on all things, including risks, related to baseball. One day a ball flies into the stands, hits Richard in the head and seriously injures him. Richard can probably successfully win a case against the sports stadium based on a. negligence. b. breach of duty of care. c. defamation. d. none of the choices.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Negligence LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: N 64. Liu enters Mountain Triathlon, an athletic competition in which Liu has never competed. Regarding the risk of injury, Liu assumes the risks a. attributable to the triathlon in any way. b. different from the risks normally associated with the triathlon. c. greater than the risks normally associated with the triathlon. d. normally associated with the triathlon.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Negligence LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LOCAL STANDARDS: KEYWORDS: OTHER:

United States - OH - Default City - AICPA Legal Bloom's: Application N

65. Frank slips and falls on Guy’s Harbor Tour Boat and is injured. Frank files a suit against Guy’s for $500,000. If Frank is 20 percent at fault and Guy’s is 80 percent, under the “50 percent rule” comparative neg-ligence principles, Frank would recover a. $0. b. $250,000. c. $400,000. d. $500,000.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Negligence LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: N 66. A Rhode Island state statute requires machinery in industrial plants to include automatic shut-off switches accessible to each employee working on the machine. Steel Company’s equipment does not have the switches. Trudy, a Steel employee, suffers an injury that an accessible shut-off switch would have prevented. Trudy’s best theory for recovery is a. assault. b. assumption of risk. c. invasion of privacy. d. negligence.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Negligence LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application OTHER: N 67. George has a badly infected right foot. Herb, George’s physician, prescribes amputation. George agrees. During the operation, Herb amputates the left foot. In George’s suit against Herb, George’s best theory for recovery is a. assumption of risk. b. negligence per se. c. res ipsa loquitur. d. strict liability.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Negligence LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: N 68. An Iowa state statute requires amusement parks to maintain equipment in specific condition for the protection of patrons. Jack’s Fun Park fails to maintain its equipment. Keely, a patron, is injured. Jack’s has committed a. abuse of process. b. battery. c. false imprisonment. d. negligence.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Negligence LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: N 69. Jean is playing a video game on a defective disk that melts in her game player, starting a fire that injures her hands.

Jean files a suit against K-Tech, Inc., the game’s manufacturer. K-Tech is held liable under the doctrine of strict liability.

A significant appli-cation of this doctrine is in the area of a. cyber torts. b. intentional torts. c. product liability. d. unintentional torts.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Strict Liability LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application OTHER: N 70. Oakley posts a defamatory remark about Pierre in “Roominate,” an online social network maintained by SocNet, Inc., Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© an Internet service provider. Most likely to be held liable for the remark will be a. Oakley. b. Pierre. c. Roominate. d. SocNet. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Strict Liability LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - AACSB Technology LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application OTHER: N Essay 71. Precise Engineering Corporation has a contract with Quik Mart Stores to provide customized software for Quik’s inventory control system. Retail Outlets, Inc., Quik’s competitor, induces Sam, a Precise subcontractor who is writing code for the Quik software, to delay delivery of the code for one week. As a result, Precise’s delivery of the software is delayed, and Quik sustains $500,000 in lost profits. On what ground could Quik recover damages from Retail Outlets?

ANSWER: Quik could file an action against Retail Outlets based on wrongful interference with a contractual relationship. The elements that Quik must prove are that (1) a valid, enforceable contract existed between two parties; (2) a third party knew that this contract existed; and (3) the third party intentionally caused the breach of the contract for the purpose of advancing that party’s own interest. For a successful tort action, Quik must also show that the third party’s act caused damages. Facts that satisfy all of these elements are set out in the problem.

There was a valid, enforceable contract between Precise and Quik. Retail Outlets knew of this contract. Retail Outlets intentionally interfered with this contract, causing its breach, for the purpose of advancing its own interest (undercutting the profit of its competitor). Quik suffered lost profits as a result of Retail Outlets’ act.

POINTS: 1 DIFFICULTY: Moderate REFERENCES: Intentional Torts Against Property LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Decision Modeling KEYWORDS: Bloom's: Application OTHER: N 72. After two years of research and the investment of considerable funds, Coast-to-Coast Company (CC) develops a new product that it hopes will produce substantial profits. CC learns that a competitor, National Sales, Inc., has made and begun to sell a nearly identical product. CC learns from a reliable source that National paid a CC employee to obtain the plans for CC’s product while it was in development. What legal recourse does CC have against National?

ANSWER: In terms of legal recourse against National, CC might base a civil suit on charges of conversion and trespass to personal property. Conversion is any act depriving an owner of personal property without that owner’s permission and without just cause. Conversion is the Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© civil side of crimes related to theft. When conversion occurs, trespass to personal property usually occurs as well. If the initial taking of the property was unlawful, there is trespass.

Retention of that property is conversion. CC might also have a claim for wrongful interference with a contractual relationship for inducing the CC employee to break his or her employment contract with CC by selling company secrets.

POINTS: 1 DIFFICULTY: Challenging REFERENCES: Intentional Torts Against Persons Intentional Torts Against Property LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Decision Modeling KEYWORDS: Bloom's: Application OTHER: N

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© True / False 1. A crime can be committed only against persons. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Civil Law and Criminal Law LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 2. Criminal law spells out the duties that exist between persons or between citizens and their governments. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Civil Law and Criminal Law LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 3. Public officials prosecute criminal defendants a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Civil Law and Criminal Law LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 4. A criminal case must be proved beyond a reasonable doubt. a. True b. False ANSWER: POINTS:

True 1

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Easy REFERENCES: Civil Law and Criminal Law LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 5. One purpose of criminal sanctions is to deter others from committing similar crimes in the future. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Civil Law and Criminal Law LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 6. The crime of theft requires the taking of property, without regard to whether the perpetrator knew it belonged to another. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Criminal Liability LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 7. Corporations, like persons, can be liable for crimes. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Criminal Liability LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 8. Larceny relies on fear and force. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Types of Crimes LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 9. Picking pockets is larceny. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Types of Crimes LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 10. Counterfeiting is robbery a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Types of Crimes LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 11. Falsifying public records is forgery a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Types of Crimes LEARNING OBJECTIVES: LO - 2 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 12. A bank employee stealing funds from a client is an example of embezzlement. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Types of Crimes LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 13. Crimes occurring in a business context are popularly referred to as white-collar crime. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Types of Crimes LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 14. Embezzlement can be committed only by physically taking property from the possession of another. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Types of Crimes LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 15. It is not a crime to defraud the public through the use of ads on television. a. True b. False ANSWER: False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© POINTS: 1 DIFFICULTY: Easy REFERENCES: Types of Crimes LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 16. The crime of bribery occurs when the bribe is offered. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Types of Crimes LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 17. Bribing foreign officials to obtain favorable business contracts is not a crime. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Types of Crimes LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 18. Divestiture of a business interest is a possible penalty under RICO. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Types of Crimes LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 19. In some states, misdemeanors are punishable by imprisonment for up to 10 years. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Types of Crimes LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 20. Felonies are punishable by imprisonment for more than a year or death. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Types of Crimes LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 21. Someone suffering from a mental illness may be incapable of the state of mind to commit a crime. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Defenses to Criminal Liability LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 22. Ordinarily, “ignorance of the law” is a valid defense to criminal liability. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Defenses to Criminal Liability LEARNING OBJECTIVES: LO - 3 Cengage Learning Testing, Powered by Cognero

Page 6

Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 23. Most crimes must be prosecuted within a certain number of years after the crimes occur. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Defenses to Criminal Liability LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 24. There is at least one circumstance in which a person cannot refuse to testify on Fifth Amendment grounds. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Defenses to Criminal Liability LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 25. Constitutional safeguards protect the rights of individuals against federal government actions. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Defenses to Criminal Liability LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 26. Under the Fourth Amendment, a general search warrant and a general search through a person’s belongings are permitted. a. True b. False Cengage Learning Testing, Powered by Cognero

Page 7

Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Criminal Procedures LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 27. A suspect cannot be tried twice in the same court for the same crime. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Criminal Procedures LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 28. Under the exclusionary rule, illegally obtained evidence may not be included in any criminal prosecution. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Criminal Procedures LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 29. The purpose of the exclusionary rule is to deter police from misconduct. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Criminal Procedures LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal Cengage Learning Testing, Powered by Cognero

Page 8

Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS:

Bloom's: Knowledge

30. Under the exclusionary rule, all evidence must be included in a criminal prosecution. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Criminal Procedures LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 31. Individuals who are arrested must be informed of certain constitutional rights. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Criminal Procedures LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 32. All persons who are arrested have the constitutional right to remain silent. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Criminal Procedures LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 33. Any criminal activity occurring via a computer in the virtual community of the Internet is a cyber crime. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: Cyber Crime LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 34. Identity theft occurs when a wrongdoer steals another’s form of identification and uses it to access the victim’s financial resources. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Cyber Crime LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 35. A hacker is someone who uses one computer to break into another. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Cyber Crime LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge Multiple Choice 36. Mike is arrested at a warehouse in North Industrial Park and is charged with the crime of theft. Mike will be prosecuted by a. the owner of the warehouse. b. the owner of the property that Mike is charged with stealing. c. a public official. d. any third party unrelated to Mike, the property, or the crime.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Civil Law and Criminal Law LEARNING OBJECTIVES: LO - 1 Cengage Learning Testing, Powered by Cognero

Page 10

Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 37. Ludwig receives from Milo a marimba stolen from Nadine. To be criminally liable, Ludwig must know a. Milo. b. Nadine. c. that the marimba is stolen and Ludwig must intend to keep it. d. what a marimba is.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging REFERENCES: Criminal Liability LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 38. Mary enters a gas station and points a gun at the clerk. She then forces the clerk to open the cash register and give her all the money. Mary can be charged with a. robbery. b. forgery. c. larceny. d. embezzlement.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Types of Crimes LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 39. William goes to Saddle Up Stables in the middle of the night when no one is around and takes five saddles.

William’s crime is a. forgery. b. larceny. c. robbery. d. embezzlement.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Types of Crimes LEARNING OBJECTIVES: LO - 2 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 40. Mariah takes off her ring and places it on her desk while she works. Without her knowledge or consent, her coworker Nita picks up the ring, puts it on, and walks away. Nita has likely committed a. burglary. b. forgery. c. larceny. d. no crime.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging REFERENCES: Types of Crimes LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 41. Scott, a State Bank employee, deposits into his account checks that are given to him by bank customers to deposit into their accounts. This is a. embezzlement. b. larceny. c. money laundering. d. no crime.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Types of Crimes LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 42. Plato works for Quirky Squirters, Inc. During work hours, Plato “steals” time, space, and data on his employer’s computer system to start up his own business, Rowdy Drenchers. This is a. burglary. b. robbery. c. larceny. d. no crime.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Types of Crimes Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 43. Susan is unhappy with the way her mother has made out her will. Susan has a lawyer draft a new will and then signs her mother’s name to it without her mother’s consent. Susan has committed a. larceny. b. no crime. c. robbery. d. forgery.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging REFERENCES: Types of Crimes LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 44. Leah gains access to government records and alters certain dates and amounts in her favor. This is a. embezzlement. b. forgery. c. larceny. d. no crime.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Types of Crimes LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 45. Ivan signs Jeb’s name, without his authorization, to the back of a check.This is a. no crime. b. forgery. c. larceny. d. robbery.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Types of Crimes LEARNING OBJECTIVES: LO - 2 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 46. Jake is charged with embezzlement. Embezzlement may be committed without a. a criminal act. b. a criminal intent. c. taking property from its owner. d. the use of force or fear.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Types of Crimes LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 47. Briana, an employee of Cotillion Bank, is charged with embezzlement, which requires a. fraudulently appropriating another’s property. b. obtaining lawful possession of property. c. physically taking property from its owner. d. the use of force or fear.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Types of Crimes LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 48. After Edie solicits clients to invest in a nonexistent business, she is charged with “mail fraud.” This requires, among other things a. claiming that an item is “in the mail” when it is not. b. deceiving postal authorities as to the content of an item of mail. c. depositing items in the postal system without proper postage. d. mailing or causing someone else to mail a writing.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Types of Crimes LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LOCAL STANDARDS: KEYWORDS:

United States - OH - Default City - AICPA Legal Bloom's: Application

49. Robert uses the Internet to defraud Prairie Valley Credit Union. He is found guilty of wire fraud. He can be punished by a. imprisonment for not more than one year. b. imprisonment for up to thirty years and fines of up to $1 million. c. fines for not more than $50,000. d. death.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging REFERENCES: Types of Crimes LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 50. Mona offers Ned, a building inspector, $5,000 to overlook the violations in her new warehouse. Ned accepts the cash and overlooks the violations. Mona is charged with the crime of bribery. The crime occurred when a. Mona decided to offer the bribe. b. Mona offered the bribe. c. Ned accepted the bribe. d. Ned overlooked the violations.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging REFERENCES: Types of Crimes LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 51. Dirk, an employee of Ergonomic Elevators, Inc., pays Ferbie, an employee of Ergonomics’ competitor G-Force Risers Company, for a secret G-Force pricing schedule. This is a. an effective marketing strategy. b. commercial bribery. c. creative legal bookkeeping. d. money laundering.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging REFERENCES: Types of Crimes LEARNING OBJECTIVES: LO - 2 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 52. Bruno is a businessperson with investments in legal and illegal operations. Bruno may be subject to penalties under RICO a. for making an unprofitable, but legal, investment. b. for the commission of any business fraud. c. only in a case involving a “racket.” d. only in a case involving organized crime.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging REFERENCES: Types of Crimes LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 53. Jared is arrested and found guilty of a misdemeanor. His punishment will not include a. imprisonment for six months. b. a fine of $100. c. death. d. imprisonment for six months and a fine of $500.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Types of Crimes LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 54. Megan is charged with jaywalking, which is classified as a. a misdemeanor. b. a felony. c. a petty offense. d. no crime.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Types of Crimes LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LOCAL STANDARDS: KEYWORDS:

United States - OH - Default City - AICPA Legal Bloom's: Application

55. Smitty, driving while intoxicated, causes a car accident that results in the death of Tiffany. Smitty is arrested and charged with a felony. A felony is a crime punishable by death or imprisonment for a. any period of time. b. more than one year. c. more than six months. d. more than ten days.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging REFERENCES: Types of Crimes LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 56. Vance points a gun at Workman and threatens to shoot him. Workman hits Vance, causing his death. Charged with homicide, Workman can successfully claim as a defense a. nothing. b. duress. c. entrapment. d. self-defense.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging REFERENCES: Defenses to Criminal Liability LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 57. Evan is charged with a crime. Almost all federal courts and some state courts would not hold Evan liable if, at the time of the offense, as a result of a mental disease or defect, Evan lacked substantial capacity to a. appreciate the wrongfulness of his conduct only. b. appreciate the wrongfulness of his conduct and obey the law. c. appreciate the wrongfulness of his conduct or obey the law. d. obey the law only.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging REFERENCES: Defenses to Criminal Liability LEARNING OBJECTIVES: LO - 3 Cengage Learning Testing, Powered by Cognero

Page 17

Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 58. Davis points a gun at Eton, threatening to shoot him if he does not steal from his employer, Freddy’s Convenience Store, and give the stolen funds to Davis. Charged with theft, Eton can successfully claim, as a defense a. nothing. b. duress. c. entrapment. d. self-defense.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging REFERENCES: Defenses to Criminal Liability LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 59. Mae is granted immunity after she agrees to testify about a crime. Mae has an absolute privilege against selfincrimination and a. can be prosecuted only for a crime about which she agreed to testify. b. cannot be prosecuted for any crime. c. cannot refuse to testify on Fifth Amendment grounds. d. can refuse to testify on Fifth Amendment grounds.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging REFERENCES: Defenses to Criminal Liability LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 60. Maya, a police officer, wants to search the offices of Niles Corporation. Maya asks Judge Orion to issue a warrant.

Under the Fourth Amendment, no warrants for a search or an arrest can be issued without a. double jeopardy. b. probable cause. c. reasonable doubt. d. immunity.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging REFERENCES: Criminal Procedures Cengage Learning Testing, Powered by Cognero

Page 18

Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 61. Justin is charged with a crime. He insists that he should have an opportunity to object to the charges before a “fair, neutral decision maker.” No one can be deprived of “life, liberty, or property without due process of law” under the a. Second Amendment. b. Fourth Amendment. c. Fifth Amendment. d. Eighth Amendment.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging REFERENCES: Criminal Procedures LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 62. Alan, the president of Bayside Investments, Inc., and Colin, Bayside’s accountant, are charged with a crime, after the police search Bayside’s offices. Under the exclusionary rule a. certain Bayside records are excluded from subpoena. b. certain parties to a criminal action may be excluded from a trial. c. illegally obtained evidence must be excluded from a trial. d. persons who have biases that would prevent them from fairly deciding the case may be excluded from the jury.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging REFERENCES: Criminal Procedures LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 63. Jackson is accused of a crime. Jackson can refuse to provide information about his allegedly criminal activities a. if he suspects the information will be used to prosecute him. b. if the police do not promise to keep the information confidential. c. if the information is “fruit of the poisonous tree.”. d. under no circumstances.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging REFERENCES: Criminal Procedures Cengage Learning Testing, Powered by Cognero

Page 19

Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 64. Herb, a computer programmer for Inventory Control Corporation, is arrested in his employer’s parking lot on suspicion of larceny. Herb must be informed of his right to a. a trial by jury. b. punishment. c. question witnesses. d. remain silent.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Criminal Procedures LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 65. Gina sells “Bulk Up” steroids over the Internet. She is arrested and charged with the sale of a controlled substance.

This is cyber crime, which is a. a new category of crime that is not related to older types of crime. b. a crime that occurs the virtual community of the Internet. c. a crime that is less real than the same crime in the physical world. d. no crime.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Cyber Crime LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 66. Travis sends Suri what purports to be a link to an e-birthday card, but when she clicks on the link, software is downloaded to her computer to record her keystrokes and send the data to Travis. He uses the data to obtain her personal information and access her financial resources. This is a. identity theft. b. cyberterrorism. c. entrapment. d. no crime.

ANSWER: a Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© POINTS: 1 DIFFICULTY: Challenging REFERENCES: Cyber Crime LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 67. Posing as Platinum Bank, Oswald e-mails Nadia, asking her to update her personal banking information through a link in the e-mail. She clicks on the link and types in the data, which Oswald promptly sells to Moe. This is a. hacking. b. identity theft. c. cyberterrorism. d. bribery.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging REFERENCES: Cyber Crime LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 68. Farouk uses his computer to break into Global Financial Center’s computer. Farouk is a a. hacker. b. phisher. c. worm. d. virus.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Cyber Crime LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 69. Via the Internet, Rocky sabotages the computer system of Quik Chik’n Company, a food manufacturer, to alter the levels of ingredients in the company’s products so that consumers of the food become ill. Rocky is a a. cyberterrorist. b. botnet. c. virus. d. an inquisition.

ANSWER: a Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© POINTS: 1 DIFFICULTY: Challenging REFERENCES: Cyber Crime LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 70. Patricia commits an act via e-mail against Othman Finance Company, a business in California, where the act is a cyber crime. Patricia resides in New York where the act is not a crime. Prosecution of Patricia in California involves questions of a. jurisdiction. b. “maximum contacts.” c. the immunity of Internet service providers. d. encryption.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging REFERENCES: Cyber Crime LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application Essay 71. Sophie is the president of Tasty Foods Corporation, a wholesale grocery company. An inspection by Uri, a government agent, uncovers unsanitary conditions in the company’s ware-house caused by Vic, a Tasty Foods employee.

Will, a Tasty Foods vice president, assures Uri that the situation will be corrected, but a later inspection finds that the warehouse is still unsanitary. Sophie knows nothing about any of this. Can Tasty Foods be convicted of a crime in these circumstances? Can Sophie be held personally liable?

ANSWER: The answer to both questions is yes. A corporation may be held liable for the crime of its employee if (1) the criminal act is within the scope of the employment and the purpose of the statute defining the act as a crime is to impose liability on the corporation, (2) the crime consists of a failure to perform a specific duty imposed on corporations by law, and (3) the crime was authorized by one of the corporation’s “high managerial agents.” Here, all of these elements exist. The unsanitary conditions in the warehouse are within the employee’s scope of employment, the crime consists of a failure to keep the warehouse clean, and the crime was authorized by a company vice president. As for the president’s personal liability, if she has the authority and the responsibility to deal with the situation, she can be held personally liable. A corporate officer must have the authority and the responsibility to deal with such situations. Personal liability is imposed in these circumstances, not because the corporate officer knew about the crime or intended it, but because the officer is in a “responsible relationship” to the corporation and has the power to prevent the crime. Under this “responsible corporate officer” doctrine, a corporate officer can be held liable for an employee’s violations of the law. This liability may be imposed regardless of whether the officer participated in, directed, or knew about the violation.

POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Challenging REFERENCES: Criminal Liability LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Decision Modeling KEYWORDS: Bloom's: Analysis 72. An unknown individual launches a series of attacks against the Web sites of Prime Sales Corporation. The attacks significantly slow the sites, leading to $100 million in damage in terms of lost work time, lost revenue, site repair costs, and other expenses. The attacker does not intend to profit from the onslaught and in fact does not realize any financial benefit from the effects. How is this attack most likely orchestrated? Who is most likely to engage in this act—that is, whose habits and limitations are clearly suited to such conduct—and why?

ANSWER: The perpetrator in this question likely committed the attack through hacking—using one computer to break into another. The hacker may have appropriated a large number of computers without their owners’ knowledge. Each computer might have become a bot, together constituting a botnet, through which the hacker could secretly install programs to forward transmissions to even more computers. The hacker might then have installed other malware, or other programs harmful to computers. This might have consisted of a worm, which could reproduce and transfer itself to other computers, or a virus, which could reproduce itself but could not transfer without being attached to an infected file. These programs might have been uploaded to Web sites based anywhere in the world.

POINTS: 1 DIFFICULTY: Challenging REFERENCES: Cyber Crime LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BB_17.3 - BB-Decision Modeling United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application

Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© True / False 1. International law is a body of law that governs relations between and among citizens, not countries. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Introduction LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 2. Under the principle of comity, one nation may defer and give effect to the laws and judicial decrees of another country. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: International Law LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 3. Under the principle of comity, all foreign governments are subject to all U.S. laws. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: International Law LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 4. The act of state doctrine provides that the executive branch of one country will not examine the validity of public acts committed by a recognized foreign government within its own territory. a. True b. False ANSWER: False POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Easy REFERENCES: International Law LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 5. Confiscation occurs when a government seizes a private property for a proper public purpose and awards just compensation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: International Law LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 6. The act of state doctrine does not have important consequences for firms doing business in other countries. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: International Law LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 7. Expropriation occurs when a government seizes private property for a proper purpose and awards just compensation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: International Law LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 8. The Foreign Sovereign Immunities Act spells out what a “foreign state” includes. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: International Law LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 9. Under the Foreign Sovereign Immunities Act, a foreign state can be a political subdivision of a foreign state. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: International Law LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 10. The doctrine of sovereign immunity cannot immunize a foreign nation from the jurisdiction of U.S. courts. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: International Law LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 11. According to the Foreign Sovereign Immunities Act, a foreign state that has committed a tort in the United States is protected from the jurisdiction of the U.S. courts. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: International Law Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 12. According to the Foreign Sovereign Immunities Act, a foreign state that waived its immunity by implication is subject to the jurisdiction of the U.S. courts. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: International Law LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 13. The simplest way for a U.S. firm to do business in a foreign market is to export its products directly to that market. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Doing Business Internationally LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 14. In direct exporting, a U.S. company signs a sales contract with a foreign purchaser that provides for the conditions of shipment and payment of goods. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Doing Business Internationally LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 15. When a U.S. firm wishes to increase its involvement in an international market, it normally establishes an agency Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© relationship with a foreign firm. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Doing Business Internationally LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 16. A party to a licensing agreement generally agrees to pay royalties on some basis. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Doing Business Internationally LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 17. International franchisees usually do not pay fees for the license to use a trademark or trade name. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Doing Business Internationally LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 18. In a joint venture, the parent company in the United States retains complete ownership and authority over all phases of the operation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Regulation of Specific Business Activities Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 19. Restrictions on imports may include prohibitions. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Regulation of Specific Business Activities LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 20. A tariff is always a flat rate per unit. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Regulation of Specific Business Activities LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 21. Restrictions on imports may include quotas. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Regulation of Specific Business Activities LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 22. Tariffs are imposed only on exports. a. True b. False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Regulation of Specific Business Activities LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 23. Quotas are limits on the amounts of goods that can be exported. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Regulation of Specific Business Activities LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 24. Dumping is the exporting of environmentally polluting goods to a foreign market. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Regulation of Specific Business Activities LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 25. Dumping is the sale of imported goods at “less than fair value.” a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Regulation of Specific Business Activities LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS:

Bloom's: Knowledge

26. The chief aim of the World Trade Organization and other trade agreements is to maximize trade barriers among their members. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Regulation of Specific Business Activities LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 27. The chief aim of the European Union and other trade organizations is to minimize trade barriers among their members. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Regulation of Specific Business Activities LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 28. The primary goal of the North American Free Trade Agreement is to eliminate tariffs among the United States, Canada, and Mexico. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Regulation of Specific Business Activities LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 29. All international sales contracts should have a choice-of-language clause to designate the official language by which the contract will be interpreted. a. True b. False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: International Contracts LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 30. Force majeure clauses in international business contracts commonly set forth the major clauses of the contracts. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: International Contracts LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 31. Foreign exchange markets comprise a worldwide system for buying and selling currency. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Payment Methods LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 32. Generally, a foreign government cannot sue under U.S. antitrust laws in U.S. courts. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: U.S. Laws in a Global Context LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS:

Bloom's: Knowledge

33. Any conspiracy that has a substantial effect on U.S. commerce is within the reach of the U.S. antitrust laws. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: U.S. Laws in a Global Context LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 34. A U.S. citizen can bring a civil suit in a U.S. court against a U.S. entity for a tort allegedly committed overseas. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: U.S. Laws in a Global Context LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 35. U.S. laws that prohibit discrimination in employment apply to U.S. employees working for U.S. firms located abroad. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: U.S. Laws in a Global Context LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge Multiple Choice 36. Yokio, Ltd., and Zeno, S.A., transact an international sale of goods. At the request of these parties, a court in Portugal resolves a dispute between them. A U.S. court will most likely honor the judgment a. if it is consistent with U.S. laws and public policy. b. if it is consistent with Portuguese laws and public policy.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© c. if it does not benefit the U.S. to deny it. d. under no circumstances.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: International Law LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 37. Michael, a citizen of Ireland, and Nina, a citizen of the United States, enter into a contract. When Nina breaches the contract, Michael obtains an award of damages in an Irish court. He asks a U.S. court to enforce the award. The U.S. court defers to and enforces the Irish court’s decree. This is a. a travesty of justice. b. the act of state doctrine. c. the doctrine of sovereign immunity. d. the principle of comity.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: International Law LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 38. The basis for India to give effect to the laws and court decisions of the United States is primarily a. courtesy and respect. b. fear and intimidation. c. admiration and envy. d. payments of cash and exchanges of property.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: International Law LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 39. Premier Clothing, Inc., a U.S. firm, obtains a judgment in a U.S. court against Quang Tri, Ltd., a Vietnamese business.

Whether the court’s judgment will be enforced by a court in Vietnam depends on the Vietnamese court’s application of a. the act of state doctrine.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. the doctrine of sovereign immunity. c. the principle of comity. d. the World Trade Organization.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: International Law LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 40. Mountain Mining Company, a U.S. firm, owns property in Bolivia. The government of Bolivia seizes the property for an illegal purpose without paying just compensation. This is a. confiscation. b. defalcation. c. dumping. d. expropriation.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: International Law LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 41. Sudan seizes the assets of Triage Medical, Inc., a U.S. firm. Triage’s recovery from Sudan in a U.S. court may be prevented by a. the act of state doctrine. b. the doctrine of sovereign immunity. c. the Foreign Corrupt Practices Act. d. the principle of comity.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: International Law LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 42. Call Center Corporation, a U.S. firm, owns property in India. The government of India seizes the property for a proper public purpose and pays Call Center just compensation. This is Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© a. confiscation. b. defalcation. c. dumping. d. expropriation.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: International Law LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 43. UniOil, a U.S. firm, owns property in Venezuela. When the government of Venezuela seizes the property, UniOil asks a U.S. court to order the property’s return. The court rules that Venezuela is exempt from the court’s jurisdiction. This is a. a travesty of justice. b. the act of state doctrine. c. the doctrine of sovereign immunity. d. the principle of comity.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: International Law LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 44. U.S. Cars, a U.S. firm, owns property in Argentina. The government of Argentina seizes the property. U.S. Cars claims that this is confiscation. The government of Argentina claims that it is expropriation. The burden of proof lies with a. the U.S. government. b. the government of Argentina. c. U.S. Cars. d. the U.S. Supreme Court.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: International Law LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 45. Soleful Shoes, Inc. owns property in Somalia. The Somalian government seizes the property. In order for the seizure Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© to be considered an expropriation and not a confiscation, the Somalian government must a. pay just compensation to Soleful Shoes. b. give Soleful Shoes at least thirty days notice of the seizure. c. give Soleful Shoes at least ninety days notice of the seizure. d. notify the U.S. government before the seizure.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: International Law LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 46. Metallic Metals, Inc., a U.S. firm, files a suit against a Venezuela government agency. The agency has committed a tort in the United States. Under the Foreign Sovereign Immunities Act a. the Venezuelan government agency is not immune from the jurisdiction of the U.S. courts. b. the Venezuelan government agency is immune from the jurisdiction of the U.S. courts. c. Metallic Metals cannot bring a suit against the Venezuelan agency. d. Metallic Metals must file suit in Venezuela.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: International Law LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 47. In some cases, foreign states are not immune from the jurisdiction of U.S. courts. These circumstances are governed by the a. Uniform Commercial Code. b. Foreign Sovereign Immunities Act. c. European Union. d. North American Free Trade Agreement.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: International Law LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 48. Canada and the United States form an agreement to govern their commercial ex-changes with one another. This is a. a bilateral agreement. b. a lateral agreement. c. a multilateral agreement. d. a unilateral agreement.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: International Law LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 49. Wrugged Woolens, Inc., a U.S. corporation, sets up a specialized marketing organization in Scotland by appointing a foreign agent. This is called a. direct exporting. b. indirect exporting. c. a joint venture. d. piracy.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Doing Business Internationally LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 50. WiFi Corporation, a U.S. firm, signs a contract with Bueno Computadores, Ltd., an Argentinean firm, for a shipment and payment for WiFi’s goods. This is a. a distribution agreement. b. a joint venture. c. direct exporting. d. licensing.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Doing Business Internationally LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 51. Optima Medico Corporation, a U.S. firm, signs a contract with Pharma Beneficial, Ltd., a Canadian firm, to give Pharma the right to sell Optima’s products in Canada. This is a. a distribution agreement. b. a joint venture. c. direct exporting. d. licensing.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Doing Business Internationally LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 52. KO Marketing Company, a U.S. firm, signs a contract with Librador Corporacion, a Chilean firm, to give Librador the right to use Innovative’s animation techniques and characters in product promotions. This is a. a distribution agreement. b. a joint venture. c. direct exporting. d. licensing.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Doing Business Internationally LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 53. The U.S. corporation Fun Toys, Inc. sets up a firm in China. The parent company remains in the United States and retains complete ownership of the China branch as well as complete authority and control over all phases of the operation.

This is a. a franchise. b. a wholly owned subsidiary. c. a joint venture. d. direct exporting.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Doing Business Internationally LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS:

Bloom's: Application

54. Secure Investments, Inc., a U.S. firm, expands into international markets through a joint venture. In this situation, Secure owns a. all of the operation, and its profits and liabilities. b. all of the operation, and none of its profits and liabilities. c. none of the operation, and none of its profits and liabilities. d. part of the operation, and shares its profits and liabilities.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging REFERENCES: Regulation of Specific Business Activities LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 55. Senator Brown and other politicians want to restrict the flow of technologically advanced products and data from the United States to other countries. To restrict or encourage exports, Congress can a. do nothing. b. assess antidumping duties. c. impose export taxes. d. set export quotas.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Regulation of Specific Business Activities LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 56. Vieux Carré S.A., a French firm, imports its goods into the United States and offers those goods for sale at “less than fair value.” “Fair value” is the price of a. comparable goods in a select “basket” of other countries. b. Vieux Carré’s goods in France. c. Vieux Carré’s goods in the United States. d. Vieux Carré’s goods on the world market.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Regulation of Specific Business Activities LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LOCAL STANDARDS: KEYWORDS:

United States - OH - Default City - AICPA Legal Bloom's: Application

57. The United States and other members of a certain organization agree to grant normal trade relations status to each other with regard to imports and exports. This organization is a. the Convention on Contracts for the International Sale of Goods. b. the International Export-Import Bank. c. the United Nations. d. the World Trade Organization.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging REFERENCES: Regulation of Specific Business Activities LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 58. The United States taxes each barrel of imported oil at a flat rate. This is a. an antidumping duty. b. a dumping duty. c. a quota. d. a tariff.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Regulation of Specific Business Activities LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 59. The government of Japan sets a limit on the amount of rice that can be imported from the United States. This is a. a dumping duty. b. an antidumping duty. c. a quota. d. a tariff.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Regulation of Specific Business Activities LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS:

Bloom's: Application

60. Wytex, Inc., a U.S. firm, and Findora Commercial, a Nigerian firm, are parties to a contract that specifies that the official language of the contract is English. This is a. a choice-of-forum clause. b. a choice-of-language clause. c. a choice-of-law clause. d. an arbitration clause.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: International Contracts LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 61. Telfonix Corporation, a U.S. firm, and Adex, Inc., a British firm, are parties to a contract with a forum-selection clause. The forum specified in the clause a. must be within the geographic boundaries of the United States. b. must be within the geographic boundaries of Britain. c. need not be within the geographic boundaries of either party. d. must be within the geographic boundaries of either the United States or Britain.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: International Contracts LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 62. Quality Energy Company, a U.S. firm, and Royal Petro, a Dutch firm, enter into a contract that includes an arbitration clause. This clause must provide that the arbitrator will be a. any specified third party. b. the American Arbitration Association. c. the Dutch Arbitration Organization. d. the International Chamber of Commerce.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: International Contracts LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LOCAL STANDARDS: KEYWORDS:

United States - OH - Default City - AICPA Legal Bloom's: Application

63. Suisse Internationale, a Swiss maker of athletic equipment, enters into a price fixing agreement with Total World Sports, a U.S. wholesaler of Suisse’s products. U.S. courts will apply U.S. antitrust laws if a. the agreement was made in Switzerland. b. the agreement was made in the United States. c. the price fixing has a substantial effect on U.S. commerce. d. the Swiss government agrees to be sued in the United States.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging REFERENCES: U.S. Laws in a Global Context LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 64. Bulbous Cordials, Inc., a U.S. firm, enters into an agreement with Columbiana Cacao, S.A., a South American firm, to fix the price of dark chocolate in the U.S. market. If the agreement is a per se violation of U.S. antitrust laws, a U.S. court could exercise jurisdiction over a. Bulbous Cordials and Columbiana Cacao. b. Bulbous Cordials only. c. Columbiana Cacao only. d. neither Bulbous Cordials nor Columbiana Cacao.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging REFERENCES: U.S. Laws in a Global Context LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 65. Two Japanese firms—Mikato, Ltd., and Shuzushi, Ltd.—enter into a joint venture in an attempt to increase their market share of the U.S. auto market. If the joint venture is not a per se violation of U.S. antitrust laws, a U.S. court could exercise jurisdiction over the firms a. if the joint venture has a substantial effect on U.S. commerce. b. if the joint venture has any effect on U.S. commerce. c. if the joint venture was entered into in the United States. d. under no circumstances.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: U.S. Laws in a Global Context LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 66. Bango! Business, Inc., a U.S. firm, may have committed, in Chile, acts that would constitute, in the United States, violations of U.S. anti-trust laws. These laws apply a. extraterritorially. b. only to signatories of the North American Free Trade Agreement. c. only to members of the World Trade Organization. d. only within U.S. borders.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: U.S. Laws in a Global Context LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 67. Qang and other foreign citizens allege human rights violations committed overseas by the government of Burma on behalf of Railway Construction Company, a U.S. firm. To seek redress for their injuries in a U.S. court, these citizens can a. allege antitrust injuries under the Sherman Act. b. bring civil suits under the Alien Tort Claims Act. c. file criminal complaints under Title VII of the Civil Rights Act. d. do nothing.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging REFERENCES: U.S. Laws in a Global Context LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 68. Sam, or any U.S. citizen, can bring a civil suit in a U.S. court against a foreign entity for a. a tort allegedly committed in the United States only. b. a tort allegedly committed in the United States or overseas. c. a tort allegedly committed overseas only. d. no purpose.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: U.S. Laws in a Global Context LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Comprehension 69. Real World Sports Corporation (RWSC) is a U.S. firm with a workplace in Switzerland. Generally, RWSC must abide

by U.S. anti-discrimination laws in Switzerland a. under any circumstances. b. under no circumstances. c. unless to do so would contravene the cultural norms of Switzerland. d. unless to do so would violate the law of Switzerland.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging REFERENCES: U.S. Laws in a Global Context LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 70. Miranda is a U.S. citizen working in Europe for Tourist Vacations, Inc., a U.S. travel agency. Tourist fires Miranda for reasons that she believes violate U.S. antidiscrimination laws. Those laws apply a. extraterritorially. b. only to signatories of the North American Free Trade Agreement. c. only to members of the World Trade Organization. d. only within U.S. borders.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: U.S. Laws in a Global Context LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application Essay 71. The management of Sport Shoes Corporation, a U.S. firm, wants to expand into foreign investment and employment markets. They are considering either opening their own production facility in a foreign country or entering into a licensing agreement with a foreign firm. What are the advantages and disadvantages of each of these courses of action?

ANSWER: One of the advantages of opening a wholly owned production facility, in the United States or in a foreign nation, is that all of the profits accrue to the owner. The disadvantages include the risk involved in opening a production facility in a foreign country. There is a possibility of the foreign government’s expropriation of the facility. Expropriation is the taking of private property for a public purpose and the paying of just compensation. Foreign Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© governments have also sometimes confiscated the property of foreign companies.

Confiscation is the taking of private property for a public purpose without just compensation.

Under the act of state doctrine, U.S. courts would be reluctant to intervene, either by ordering the property returned or ordering the payment of a fair price. Thus, there could be a considerable sum of money at risk in a foreign production facility. A licensing agreement, by contrast, involves relatively little capital investment and represents less risk of loss from a confiscation or an expropriation. By entering into a licensing agreement with a foreign firm for the rights to manufacture Sport products, or to sell products under the Sport trade-mark, Sport eliminates the chance that its assets would be lost if they were confiscated. Of course, there will also be fewer profits and those will likely be in the form of royalties.

POINTS: 1 DIFFICULTY: Challenging REFERENCES: International Law LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Decision Modeling KEYWORDS: Bloom's: Application 72. Savory Cooking Sauces, Inc., a U.S. business firm, makes and sells distinctively flavored cooking sauces. Although the recipes are secret, the ingredients could be revealed and the sauces could be reconstructed with diligent efforts. What can Savory do to prevent its products from being “decoded” and pirated abroad?

ANSWER: One possibility is that Savory Cooking Sauces, or any U.S. firm, or any domestic firm in any nation, can license its recipe, formula, product, or process to a foreign company to avoid the theft of the trade secret. The foreign firm would obtain the right to make and sell the product according to the recipe (or formula, or right to use the process, or other trade secret) and agree to keep the information confidential and to pay royalties to the licensing firm. The royalties might be based on so many cents per unit made or a percentage of profits from units sold in a particular geographic territory. Licensing can benefit both parties to the deal. A firm that receives the license can take advantage of an established reputation. The firm that grants the license can receive income from the sale of the license or the sales of its products and may enhance its reputation through this marketing. Once a firm’s products are more widely known globally, the firm may experience an increased demand for other products that it makes or sells.

POINTS: 1 DIFFICULTY: Challenging REFERENCES: Doing Business Internationally LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Decision Modeling KEYWORDS: Bloom's: Application

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© True / False 1. The need to protect intellectual property is recognized in the Declaration of Independence. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Introduction LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Analytic:Ref - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 12/23/2013 12:28 AM 2. A patent and a copyright are examples of intellectual property, but a trademark is not an example of

intellectual property. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Introduction LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 11/15/2013 4:40 AM 3. A beverage company that competes with Coca-Cola Company cannot call its products “Koke.” a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Trademarks LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge DATE CREATED: 11/11/2013 12:21 PM Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DATE MODIFIED:

5/29/2014 11:46 PM

4. The 1995 Federal Trademark Dilution Act allowed trademark owners to bring suit in federal court for

trademark dilution. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Trademarks LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 5/29/2014 11:47 PM 5. A trademark can be diluted by the use of a similar mark. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Trademarks LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 5/29/2014 11:49 PM 6. A trademark does not need to be registered to support a trademark infringement action. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Trademarks LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge DATE CREATED: 11/11/2013 12:21 PM Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DATE MODIFIED:

5/29/2014 11:49 PM

7. The states and the federal government provide for the registration of trademarks. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Trademarks LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 5/29/2014 11:53 PM 8. A fanciful use of ordinary words may be trademarked. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Trademarks LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 5/29/2014 11:54 PM 9. A suggestive use of ordinary words may be trademarked. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Trademarks LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 5/30/2014 3:19 PM Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 10. A generic term is not protected under trademark law unless it acquires a secondary meaning. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Trademarks LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 5/30/2014 3:50 PM 11. A service mark distinguishes products used, or “put into service,” by the government. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Trademarks LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 5/30/2014 3:51 PM 12. A certification mark distinguishes products approved, or “certified,” by the government. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Trademarks LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 5/30/2014 3:53 PM 13. It is estimated that over 70 percent of the goods imported to the United States are counterfeit.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Trademarks LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 5/30/2014 3:53 PM 14. Trade names have the same legal protection as trademarks. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Trademarks LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 5/30/2014 3:54 PM 15. A trade name can be protected if it is unusual or fanciful. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Trademarks LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 5/30/2014 3:55 PM 16. A license permits the use of another’s intellectual property for certain limited purposes. a. True Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Trademarks LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 5/30/2014 3:58 PM 17. The owner of intellectual property may put restrictions on the use of the intellectual property in a license

agreement. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Trademarks LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 5/30/2014 3:58 PM 18. By using another’s trademark, a business could lead consumers to believe that its goods were made by the other business. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Trademarks LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge DATE CREATED: 12/12/2013 5:48 PM DATE MODIFIED: 8/13/2015 9:33 AM 19. To be patentable, an invention, discovery, or design must be novel, useful and not obvious in light of current

technology.

Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Patents LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 12/23/2013 1:22 AM 20. Patent infringement is a tort. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Patents LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 12/23/2013 1:27 AM 21. Foreign firms cannot obtain U.S. patent protection on items that they sell in the United States. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Patents LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 12/23/2013 1:29 AM 22. Copyright protection is automatic—registration is not required. a. True Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Copyrights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 12/23/2013 1:33 AM 23. It is possible to copyright an idea. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Copyrights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 12/23/2013 1:34 AM 24. A copyright owner must place a © or an ® on the work to have the work protected from copyright

infringement. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Copyrights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 12/23/2013 1:38 AM 25. A copy does not need to be exactly the same as the original to infringe a copyright. a. True Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Copyrights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 12/23/2013 1:41 AM 26. A person who buys a copyrighted work cannot sell it to someone else. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Copyrights LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge DATE CREATED: 12/12/2013 5:48 PM DATE MODIFIED: 8/13/2015 9:36 AM 27. A marketing technique can be a trade secret. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Trade Secrets LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 12/23/2013 1:47 AM 28. A customer list is not a trade secret. a. True b. False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Trade Secrets LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 12/23/2013 1:50 AM 29. Pricing information is not a trade secret. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Trade Secrets LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 12/23/2013 1:53 AM 30. Information that is not or cannot be protected under trademark, patent, or copyright law may be protected

under the law of trade secrets. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Trade Secrets LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 12/23/2013 1:55 AM 31. Anyone who writes a book has automatic international copyright protection. a. True b. False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: International Protections LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 5/30/2014 4:03 PM 32. Each member country of the TRIPS agreement must include in its domestic laws intellectual property rights. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: International Protections LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge DATE CREATED: 12/23/2013 7:13 AM DATE MODIFIED: 5/30/2014 4:01 PM 33. The TRIPS agreement covers computer programs. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: International Protections LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge DATE CREATED: 12/23/2013 7:14 AM DATE MODIFIED: 5/30/2014 4:00 PM 34. The TRIPS agreement established standards for the international protection of intellectual property rights for computer programs. a. True b. False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: International Protections LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge DATE CREATED: 12/12/2013 5:48 PM DATE MODIFIED: 8/13/2015 9:37 AM 35. The Anti-Counterfeiting Trade Agreement applies to counterfeit physical goods and to pirated copyrighted works being distributed via the Internet. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: International Protections LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge DATE CREATED: 12/12/2013 5:48 PM DATE MODIFIED: 8/13/2015 9:37 AM Multiple Choice 36. Paula develops a new espresso machine that she names “Sure Shot.” She also writes an operating manual for the machine. Paula can obtain trademark protection for a. the espresso machine. b. the "newness" of the espresso machine. c. the name “Sure Shot.” d. the operating manual.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Trademarks LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application DATE CREATED: 11/11/2013 12:21 PM Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DATE MODIFIED:

5/30/2014 4:02 PM

37. Trademarks are protected from use on noncompeting goods by a. the Federal Trademark Dilution Act. b. the America Invents Act. c. the Anticybersquatting Consumer Protection Act. d. the Copyright Act. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: Trademarks LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 5/30/2014 4:03 PM 38. Beans Coffee & Cocoa Company makes and sells a chocolate-flavored coffee drink under the name

“CoCoCafe.” Darkroast Java, Inc., later markets a similar drink under the name “KoKoKafe.” This is most likely a. copyright infringement. b. patent infringement. c. trademark infringement. d. a theft of trade secrets.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Trademarks LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 5/30/2014 4:04 PM 39. Bubbly Cola features Sparkly Cola’s trademark without its owner’s permission. Bubbly’s use of the mark is

actionable provided a. consumers are confused. b. Bubbly’s use is intentional. c. Bubbly’s use reduces the value of Sparkly’s mark. d. Sparkly’s mark is registered.

ANSWER:

a

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© POINTS: 1 DIFFICULTY: Moderate REFERENCES: Trademarks LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 5/30/2014 4:05 PM 40. Li’l Canine Company (LCC) uses a trademark that neither LCC nor anyone else has registered with the

government. Under federal trademark law, LCC a. can register the mark for protection. b. cannot register a mark that has been used in commerce. c. has committed trademark infringement. d. must put off registration until the mark is out of use for six months.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Trademarks LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 5/30/2014 4:05 PM 41. In 2012, Online Marketing Corporation registers its trademark as provided by federal law. After the first renewal, this registration a. is renewable every ten years. b. is renewable every twenty years. c. runs for the life of the corporation plus seventy years. d. runs forever.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Trademarks LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 5/30/2014 4:07 PM Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning©

42. Billy opens a bicycle shop that sells an innovative new kind of bicycle. He decides to call the bicycles

“Bicycles.” Billy extensively markets his product, has a high sales volume and becomes well known for selling Bicycles. The term Bicycle a. is automatically protected against trademark infringement . b. receives no protection against trademark infringement. c. can be registered as a trademark to obtain protection against trademark infringement. d. can be registered as a certification mark.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Trademarks LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 5/30/2014 4:08 PM 43. Wendy works as a weather announcer for a TV station under the character name Weather Wendy. Wendy

can register her name as a a. a certification mark. b. a collective mark. c. a service mark. d. a trade name.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Trademarks LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 5/30/2014 4:09 PM 44. Trek Transport Company uses a mark associated with its name to distinguish its services from those of other

trucking firms. This mark is a. a certification mark. b. a collective mark. c. a service mark. d. a trade name.

ANSWER:

c

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© POINTS: 1 DIFFICULTY: Moderate REFERENCES: Trademarks LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 5/30/2014 4:10 PM 45. Which of the following cannot be registered as a trade name? a. Peach Blossom, Certified Public Accountant b. Apples & Oranges, Investment Partnership c. Banana Republic Clothing, Inc. d. Strawberries ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Trademarks LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 5/30/2014 4:10 PM 46. Trevor’s operates The Spicy Chocolatier Café chain of restaurants. “The Spicy Chocolatier Café” is a a. certification mark. b. collective mark. c. service mark. d. trade name.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Trademarks LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 5/30/2014 4:11 PM 47. Mary Kate Corporation allows Ashley Company to use Mary Kate’s trademark as part of Ashley’s domain Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© name. This is a. a license. b. a likelihood of consumer confusion. c. counterfeiting. d. trademark dilution.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Trademarks LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 5/30/2014 4:12 PM 48. From Southeast Asia, Tai Ltd. exports genuine trademarked goods to the United States. Tai also makes labels and packaging bearing another firm’s trademark, ships the labels to another location, and then affixes them to an inferior product to deceive buyers. Tai sells these goods to retailers who are unaware that the marks are counterfeit. Under the Stop Counterfeiting in Manufactured Goods Act, it is a crime to a. import genuine trademarked goods. b. traffic in counterfeit labels, stickers, and packaging. c. sell counterfeit versions of brand-name products in foreign countries. d. unknowingly use a counterfeit mark on goods.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Trademarks LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application DATE CREATED: 12/12/2013 5:48 PM DATE MODIFIED: 8/13/2015 9:45 AM 49. In its ads for athletic shoes, Sleek Feet LLC uses a trademark that is similar, but not identical, to the famous, registered mark of Trend Flash, Ltd. Sleek Feet’s unauthorized use of the mark constitutes trademark dilution, provided that a. consumers are confused. b. Sleek Feet and Trend Flash are competitors. c. Sleek Feet’s use is intentional. d. Sleek Feet’s use is likely to impair the distinctiveness of Trend Flash's mark.

ANSWER: a POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Moderate REFERENCES: Trademarks LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application DATE CREATED: 12/12/2013 5:48 PM DATE MODIFIED: 5/29/2014 11:38 PM 50. Moving Advanced Technology Corporation can not claim a trademark in the phrase “Moving to the Market” if the phrase a. has a secondary meaning. b. is descriptive. c. is generic. d. is memorable.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Trademarks LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application DATE CREATED: 12/12/2013 5:48 PM DATE MODIFIED: 5/29/2014 11:40 PM 51. Ric designs a new tablet computer that he names “Sci Phi.” He also writes the operating manual to be

included with each final product. Ric can obtain patent protection for a. the tablet computer. b. the “newness” of the tablet computer. c. the name. d. the operating manual.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Patents LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 12/23/2013 3:43 AM 52. Ryan invents a pen that digitally “remembers” what is written or drawn with it. To obtain a patent for the Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© pen, Ryan does not have to show that it is a. novel. b. marketable. c. useful. d. not obvious in light of current technology.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Patents LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 12/23/2013 3:47 AM 53. Sights Unseen, Inc., (SUI) sells telescopes with distinctively designed lenses and mirrors. Later, without

SUI’s permission, Telescopes Etc. Corporation begins to sell scopes with identical structures of lenses and mirrors. This is most likely a. copyright infringement. b. patent infringement. c. trademark infringement. d. not infringement .

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Patents LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 12/23/2013 3:52 AM 54. Zoe invents “All for One,” new business inventory control software, and applies for a patent. If Zoe is

granted a patent, it will protect her product a. for ten years. b. for twenty years. c. for the life of the inventor plus seventy years. d. forever.

ANSWER: POINTS:

b 1

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Moderate REFERENCES: Patents LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 12/23/2013 3:56 AM 55. RiteMade Machinery, Inc., designs, makes, and sells a drill press. Steel Equipment Company copies the

design without RiteMade’s permission. Steel’s conduct is actionable provided that a. consumers are confused. b. Steel’s conduct is intentional. c. Steel’s conduct reduces the value of RiteMade’s design. d. RiteMade’s design is patented.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Patents LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 12/23/2013 4:02 AM 56. Stormclouds Inc. makes and markets its U.S. patented Tempest Tablet in the United States. Squalls Ltd., a

Chinese firm, begins making and marketing the same product in China as Outburst Pad without Stormclouds’s permission. Squalls is a. not guilty of patent infringement. b. guilty of patent infringement. c. guilty of trademark infringement . d. in violation of the America Invents Act. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Patents LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 12/23/2013 4:06 AM Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning©

57. Gas Up, Inc., designs, makes, and sells a fuel injection system that copies Hybrid Corporation’s design

without Hybrid’s permission. This is most likely a. copyright infringement. b. patent infringement. c. trademark infringement. d. a theft of trade secrets.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Patents LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 12/23/2013 4:20 AM 58. Riley invents a new valve to cap undersea oil spills. He names the valve “Great Catch.” He also writes the

installation manual to be included with each valve. Riley can obtain copyright protection for a. the valve. b. the “newness” of the valve. c. the name. d. the installation manual.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Copyrights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 12/23/2013 4:25 AM 59. Sayers is very clever and spends lots of time creating new things. Which of the following is not

copyrightable? a. A sculpture of Sayers’s dog b. A book about Sayers’s business successes c. A movie about Sayers’s life d. Sayers’s idea for a new way to play the guitar ANSWER: POINTS:

d 1

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Moderate REFERENCES: Copyrights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 12/23/2013 4:31 AM 60. Go! is a handheld video game featuring races between imaginary creatures and vehicles. The graphics used

in the game are protected by a. copyright law. b. patent law. c. trademark law. d. trade secrets law.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Copyrights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 12/23/2013 4:38 AM 61. Elvin publishes a book titled First Place, which includes a chapter from Frank’s copyrighted book Olympic

Winners & Losers. Elvin’s use of the chapter is actionable provided a. consumers are confused. b. Elvin’s use is intentional. c. Elvin’s use reproduces Frank’s chapter exactly. d. Elvin does not have Frank’s permission.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Copyrights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 12/23/2013 5:16 AM Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 62. Mace copies Nick’s book, Mumbai Monsoon, in its entirety and sells it to Parkland Books, Inc., without

Nick’s permission. Parkland publishes it under Mace’s name. This is a. copyright infringement. b. fair use. c. licensing. d. protected expression.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Copyrights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 12/23/2013 5:23 AM 63. Joey reproduces Mina’s copyrighted work Storm on the Mountain without paying royalties. Joey is most likely excepted from liability for copyright infringement under the “fair use” doctrine if a. Joey copies the entire work. b. Joey distributes the copies without charge to the public. c. Joey’s use has no effect on the market for Mina’s work. d. Joey’s use is for a commercial purpose.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Copyrights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 12/23/2013 5:30 AM 64. James buys a copy of the book Downpour. Later, after reading the book, James sells it to his sister. Under

the first sale doctrine, James’s sale of the book is a. legal. b. legal only if the copyright has expired. c. legal only if he sells it for less than he paid for it. d. illegal.

ANSWER: POINTS: DIFFICULTY:

a 1 Moderate

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: Copyrights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 12/23/2013 5:35 AM 65. Creation Worx, Inc., develops, makes, and markets new computer programs for businesses and consumers. Generally, copyright protection extends to a. all aspects of the software. b. the “look and feel” of the software. c. those parts of the software that can be read by humans. d. all of the choices.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Copyrights LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application DATE CREATED: 12/12/2013 5:48 PM DATE MODIFIED: 5/29/2014 11:43 PM 66. The idea for “On Your Mark,” a computer game featuring world-class athletic competition in extreme and

unique contests, is protected by a. copyright law. b. patent law. c. trademark law. d. trade secrets law.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Trade Secrets LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 12/23/2013 5:43 AM 67. Ewa is Diamond Financial Planners’ most productive employee. She is dissatisfied with the commission structure, however, so she quits to work for Feldstar Investments, Inc. When she leaves Diamond’s employ, she takes her list of Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© Diamond’s clients so that she can induce them to switch to Feldstar. Trade secrets law covers a. Diamond’s list of clients. b. Ewa’s performance. c. Feldstar’s commission structure. d. none of the choices.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Trade Secrets LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 12/23/2013 5:54 AM 68. Caramello Chip & Cookie Corporation (4C) obtains, and gives its employees, a list of the customers of

Sugar & Spice Sales, Inc. (3S). Under the law that applies to trade secrets, 4C’s conduct is actionable provided a. consumers are confused. b. 4C's conduct is intentional. c. 4C uses the list. d. 4C does not have 3S's permission to use the list.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Trade Secrets LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 12/23/2013 5:59 AM 69. Ross, an employee at Super Snowboard Company, is laid off. Before he exits Super’s building, he e-mails

the company’s marketing campaign to Winter Sports Corporation, Super’s competitor, without permission. This is a. copyright infringement. b. patent infringement. c. trademark infringement. d. a theft of trade secrets.

ANSWER: POINTS: DIFFICULTY:

d 1 Moderate

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: Trade Secrets LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 12/23/2013 6:04 AM 70. New Apps Company develops “Browser Lite” software, which speeds the display of graphics on Web sites.

Browser “Lite” has the most copyright protection under a. the Berne Convention. b. the Paris Convention. c. the TRIPS Agreement. d. the Madrid Protocol.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: International Protections LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 5/30/2014 4:13 PM Essay 71. In 2003, Hawk Corporation begins making and selling electric motorcycles under the mark “Hawk.” Ten

years later, Hawk.com, Inc., a different company selling medical equipment and supplies, begins to use “hawk” as part of its URL and registers it as a domain name. Can Hawk Corporation stop Hawk.com’s use of “hawk”?

If so, what must the motorcycle-maker show?

ANSWER: Hawk may be successful in obtaining a court order to stop the use of its name as part of another company’s URL and registered domain name. This use may constitute trademark dilution. Dilution occurs when a trademark is used, without permission, in a way that diminishes the distinctive quality of the mark. This cause of action does not require proof that consumers are likely to be confused by a connection between the unauthorized use and the mark. As in this problem, the products involved do not have to be similar. To succeed on a charge of dilution, however, the owner must show that its mark was famous when the dilution took place.

POINTS: 1 DIFFICULTY: Challenging REFERENCES: Trademarks LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LOCAL STANDARDS: KEYWORDS: DATE CREATED: DATE MODIFIED:

United States - OH - Default City - AICPA Decision Modeling Bloom's: Analysis 11/11/2013 12:21 PM 5/30/2014 4:14 PM

72. College Copy Shop (CCS) compiles, copies, and sells reading materials to students. The compilations are prepared on the instructions of professors, who indicate which parts of which publications should be included for their students. The copied materials include texts published by Deep Topics, Inc. CCS does not obtain the permission of Deep Topics, or any of the other original publishers of the copied materials, and does not pay royalties on the sales of the compilations. Deep Topics and others file a suit against CCS, alleging infringement of their intellectual property rights. Which type of intellectual property is involved in this situation? What is CCS’s likely defense? How is a court most likely to rule?

Explain.

ANSWER: The intellectual property at issue in this situation is copyright—specifically, of course, the copyrights of the publishers of the materials that CCS copies and sells without permission.

CCS is likely to assert the “fair use” doctrine in its defense. This doctrine allow exceptions to the general requirement that an owner’s permission be obtained before copyrighted material can be copied. CCS is likely to argue that its compilations are excepted because they are dedicated to “educational” uses. A court is most likely to conclude, however, that CCS’s copying and selling of the materials is not a fair use, because CCS profits from the sales, which undercut the potential market for the copyrighted publications from which the copies are made. In determining fair use, a court considers four factors: the purpose and character of the use, the nature of the copyrighted work, the amount and substantiality of the portion used in relation to the copyrighted work as a whole, and the effect of the use on the potential market for or value of the copyrighted work. In this situation, the fourth factor is most significant and supports the conclusion that CCS’s use of the materials is not a fair use POINTS: 1 DIFFICULTY: Challenging REFERENCES: Copyrights LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Decision Modeling KEYWORDS: Bloom's: Analysis DATE CREATED: 11/11/2013 12:21 PM DATE MODIFIED: 12/23/2013 6:18 AM

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© True / False 1. In some states, an unsolicited e-mail must include a toll-free phone number that the recipient can use to ask the sender to send no more unsolicited e-mail. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Internet Law LEARNING OBJECTIVES: Introduction NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 2. Federal law permits the sending of unsolicited commercial e-mail and does not prohibit spamming activities. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Internet Law LEARNING OBJECTIVES: Introduction NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 3. In an attempt to combat spam, thirty-six states have enacted laws that prohibit or regulate its use a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Internet Law LEARNING OBJECTIVES: Introduction NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 4. Cybersquatting is illegal only if a domain name is identical to the trademark of another, not if the name is merely confusingly similar. a. True b. False ANSWER: False POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Easy REFERENCES: Internet Law LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 5. Cybersquatting occurs when key words are inserted into the hyper text markup language code to tell Internet browsers specific information about a Web page. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Internet Law LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 6. When you download an application on your smartphone, you are typically entering into a license agreement. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Internet Law LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Knowledge 7. Using a domain name that is an identical or similar to the trademark of another is legal. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Internet Law LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 8. The Anticybersquatting Consumer Protection Act applies to most, but not all, domain name registrations of Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© trademarks. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Internet Law LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 9. Federal law prohibits the Federal Trade Commission from cooperating and sharing information with foreign agencies in investigating and prosecuting those involved in spamming. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Internet Law LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 10. Using another’s trademark in a meta tag does not normally constitute trademark infringement, even if it is done without the owner’s permission. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Internet Law LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 11. A claim of trademark dilution requires proof that consumers are likely to be confused by a connection between the unauthorized use and the mark. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: Internet Law LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 12. A licensor might grant a license allowing a trademark to be used as part of a domain name. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Internet Law LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 13. Much of the material on the Internet, including software and database information, is not copyrighted. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Copyrights in Digital Information LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 14. The law does not restrict the “fair use” of methods for the circumvention of encryption software or other technological antipiracy protection for educational and other noncommercial purposes. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Copyrights in Digital Information LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 15. No federal court has held that digitally sampling a copyrighted sound recording of any length constitutes copyright infringement.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Copyrights in Digital Information LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 16. Downloading music into a computer’s random access memory, or RAM, is not copyright infringement, even if it is done without authorization. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Copyrights in DIgital Information LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 17. Penalties exist for anyone who circumvents encryption software or other technological antipiracy protection. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Copyrights in DIgital Information LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 18. The manufacture, import, sale, and distribution of devices or services for the circumvention of encryption software is prohibited. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Copyrights in Digital Information Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 19. An Internet service provider is liable for any act of copyright infringement by its customer. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Copyrights in Digital Information LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 20. A company can distribute file-sharing software with the object of promoting its use to infringe copyrights without liability for the resulting acts of infringement by its users. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Copyrights in DIgital Information LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 21. Federal wiretapping law covers electronic forms of communication. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Social Media LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 22. Federal law permits the intentional interception of any wire, oral, or electronic communication. a. True Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Social Media LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 23. Federal law permits the intentional accessing of stored electronic communication even if the accessing is unauthorized. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Social Media LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 24. Law enforcement uses social media to detect and prosecute criminals. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Social Media LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 25. Social media posts are routinely included in discovery in litigation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Social Media Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Critical Thinking United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 26. Social media users can post trademarked images or copyrights materials without infringing the owners’ rights, even if it is done without permission. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Social Media LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 27. Social media posts have no uses in litigation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Social Media LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Critical Thinking United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 28. An employer may have a right to terminate a person based on his or her violation of the employer’s social media policy. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Social Media LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS:

Bloom's: Knowledge

29. Employees’ posts on social media may be protected under labor laws. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Social Media LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 30. Employers cannot monitor employees’ electronic communications made in the ordinary course of business. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Social Media LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 31. Federal law prevents a provider of communication services—such as a cell phone company—from divulging private communications to certain entities and individuals. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Social Media LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 32. Cyber torts are torts that arise from online conduct. a. True b. False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Online Defamation LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 33. Online defamation is wrongfully hurting a person’s reputation by communicating false statements about that person to others online. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Online Defamation LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 34. It is frequently the companies rather than courts or legislatures that are defining the privacy rights of their online users. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Privacy LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 35. To maintain a suit for the invasion of privacy, a person must have a reasonable expectation of privacy in the particular situation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Privacy LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS:

Bloom's: Knowledge

Multiple Choice 36. ConnectWeb, Inc., an Internet service provider (ISP), supplies information to the Federal Trade Commission concerning possible unfair or deceptive conduct in foreign jurisdictions. For this disclosure, federal law gives ConnectWeb and other ISPs immunity from liability. This is a. goodwill. b. fair use. c. a safe harbor. d. a license.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Internet Law LEARNING OBJECTIVES: Introduction NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application Fact Pattern 15-2 Sound Financials Corporation sends daily e-mail ads to its previous customers and those who have opted to receive the notices. Instable Investments, Inc., sends e-mail ads to any e-mail address that Instable can find on the Web or otherwise generate.

37. Refer to Fact Pattern 15-2. In those states with antispam laws, federal law a. prohibits or regulates the use of spam. b. requires the use of spam by business entities. c. bans the use of spam altogether. d. preempts the application of state law to commercial e-mail with certain exceptions.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Internet Law LEARNING OBJECTIVES: Introduction NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 38. Refer to Fact Pattern 15–2. One of the advertisers—either Sound Financials or Instable Investments—is acting within the bounds of federal law. Federal law permits the sending of a. unsolicited commercial e-mail. b. solicited commercial e-mail only. c. commercial e-mail to randomly generated addresses. d. commercial e-mail to addresses “harvested” from Web sites through the use of specialized software.

ANSWER: a Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© POINTS: 1 DIFFICULTY: Moderate REFERENCES: Internet Law LEARNING OBJECTIVES: Introduction NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 39. Refer to Fact Pattern 15-2. Sound Financials and Instable Investments are subject to the laws of the states in which they are located and do business. Thirty-six states a. prohibit or regulates the use of spam. b. require the use of spam by business entities. c. ban the use of spam altogether. d. preempt the application of state law to commercial e-mail.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Internet Law LEARNING OBJECTIVES: Introduction NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application Fact Pattern 15-1 CallTalk Corporation, a smartphone and phone-time seller, chooses to use and register “calltalk” as its second-level domain. Later, CallTalk’s less successful competitor, CellTalk Company, chooses to use and register “caltalk” (an intentional misspelling of “calltalk”) as its second-level domain. Still later, Call&Talk, Inc., uses the domain name “callltalk” (also a deliberate misspelling of “calltalk”) without CallTalk’s authorization, to sell pornographic phone conversations.

40. Refer to Fact Pattern 15-1. By using a similar domain name to CallTalk’s, CellTalk is most likely attempting to profit from its competitor’s a. goodwill. b. fair use. c. license. d. safe harbor.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Internet Law LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 41. Refer to Fact Pattern 15-1. CallTalk wants to sue Call&Talk for its unauthorized use of the domain name “callltalk.”

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© Before bringing the suit, CallTalk has to ask the court for a subpoena to discover a. the true identity of the owner of the unauthorized site. b. the amount of the profits of the unauthorized site. c. the estimated costs of the court proceedings and discovery. d. all of the registered variations of the name “calltalk.”

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Internet Law LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 42. Refer to Fact Pattern 15-1. Call&Talk’s use of the domain name “callltalk,” without CallTalk’s authorization, to sell pornographic phone conversations, is a. goodwill. b. fair use. c. a license. d. trademark dilution.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Internet Law LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 43. BeFriends Corporation uses the trademark of Community Life Inc., a social media site, as a meta tag without Community Life’s permission. This may be permissible a. if the appropriating site has nothing to do with the meta tag. b. if the two sites appear in the same search engine results. c. if the use is reasonably necessary. d. under no circumstances.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Internet Law LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 44. BurgerBoy Restaurant Corporation allows its trademark to be used as part of a domain name for BurgerBoyNY, Inc., Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© an unaffiliated company. BurgerBoyNY does not obtain ownership rights in the mark. This is a. goodwill. b. fair use. c. a license. d. a safe harbor.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging REFERENCES: Internet Law LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 45. Tech Outsourcing, Inc., registers a domain name that is the same as, or confusingly similar to, the trademark of Tech Resourcing Corporation and then offers to sell the domain name back to Tech Resourcing. This is a. cybersquatting. b. typosquatting. c. trademark infringement. d. trademark dilution.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Internet Law LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 46. Rowan registers a domain name—sweetfriedpotatos.com—that is a misspelling of a popular brand— sweetfriedpotatoes.com. This is a. cybersquatting. b. typosquatting. c. trademark infringement. d. trademark dilution.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Internet Law LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's; Application 47. To protect domain name rights from would-be cybersquatters and typosquatters, AgriBusiness Inc. and other large Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© corporations may have to a. register thousands of domain names across the globe. b. pay the owners of Web sites with identical or confusingly similar domain names for the number of unique visits, or hits, to the sites. c. change their domain names to avoid identical or confusingly similar domain names. d. change their trademarks to avoid identical or confusingly similar domain names.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Internet Law LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 48. Without authorization, Brady uses the trademark of Ciera Coffee Company to promote cheap, flavorless candy, which is not similar to Ciera’s products but diminishes the quality of the coffee company’s mark. This is a. cybersquatting. b. typosquatting. c. trademark infringement. d. trademark dilution.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Internet Law LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 49. Far & Wide Corporation uses the trademark of Google Inc. in a meta tag without Google’s permission. This is a. cybersquatting. b. typosquatting. c. trademark infringement. d. trademark dilution.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Internet Law LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 50. Riley obtains permission from Saga Company to use the firm’s game app on Riley’s smartphone, tablet, and other Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© mobile device. But Riley does not obtain ownership rights in the app. This is a. a license. b. a cookie. c. cloud computing. d. a violation of the law.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Internet Law LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 51. InfoFree Inc., makes and sells devices and services for the circumvention of encryption software and other technological antipiracy protection. Under the Digital Millennium Copyright Act, this is a. a violation of copyright law. b. prohibited but not a violation of copyright law. c. a “fair use” exception to the provisions of the act. d. permitted for reconsideration every three years.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging REFERENCES: Copyrights in DIgital Information LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 52. Stefano transfers copyrighted music recordings, without the copyright owners’ authorization, to his friends. This is a. copyright infringement. b. a license. c. a safe harbor. d. none of the choices.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Copyrights in DIgital Information LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 53. Sly includes in his song “Sneaky” a few seconds of Wily’s copyrighted sound recording “Wits” without permission.

Some federal courts have found that such digital sampling is Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© a. a violation of copyright law. b. a “fair use” exception to the provisions of the act. c. not a “fair use” exception to the provisions of the act. d. all of the choices.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Copyrights in DIgital Information LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Comprehension 54. OntheWeb Company is an Internet service provider. OntheWeb’s customer Phoebe commits copyright infringement.

OntheWeb is not liable for Phoebe’s activity a. unless OntheWeb is aware of Phoebe’s violation. b. unless OntheWeb is not aware of Phoebe’s violation. c. unless OntheWeb shuts down Phoebe after learning of the violation. d. under any circumstances.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Copyrights in DIgital Information LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 55. To test computer security and conduct encryption research, Tech Solutions Inc. circumvents the encryption software and other technological antipiracy protection of United Business Corporation’s software. Under the Digital Millennium Copyright Act, this is a. a violation of copyright law. b. prohibited but not a violation of copyright law. c. a “fair use” exception to the provisions of the act. d. permitted for reconsideration every three years.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Copyrights in Digital Information LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: NBloom's: Application 56. Dona downloads music into her computer’s random access memory, or RAM, without authorization. This is Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© a. copyright infringement. b. within Dona’s rights as a computer user. c. a basis of liability for the computer maker if it does not act against Dona. d. none of the choices.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Copyrights in Digital Information LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 57. Because of the loss of significant amounts of revenue as a result of unauthorized digital downloads, file-sharing has created problems for a. the motion picture industry. b. recording artists and their labels. c. the companies that distribute file-sharing software. d. all of the choices.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Copyrights in Digital Information LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 58. Sales & Revenue, Inc., discovers that defamatory statements about its policies and products are being posted in an online forum. TransWeb Inc., the Internet service provider whose users are posting the messages, refuses to disclose the identity of the person or persons responsible. Sales & Revenue files a suit against the anonymous users. The plaintiff can obtain from TransWeb the identity of the persons responsible for the defamatory messages by a. using the authority of the court. b. gaining unauthorized access to TransWeb’s servers. c. deceiving TransWeb into revealing the posters’ identities. d. no legal or illegal means.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging REFERENCES: Social Media LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning©

59. Omni Corporation provides cell phones, laptops, and tablets for its employees to use “in the ordinary course of its business.” Omni intercepts the employees’ business communications made on these devices. This is a. a violation of the rights of Omni’s employees. b. a matter for which Omni must obtain its employees’ consent. c. a subject for dispute resolution by the communications providers that Omni uses. d. excluded from the coverage of the Electronic Communications Privacy Act. ANSWER: d POINTS: 1 DIFFICULTY: Challenging REFERENCES: Social Media LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 60. April and other employees of Bodegas & Bistros Inc. (2B) maintain a password-protected social media page to “vent about work.” When 2B learns of the page, the company intimidates April into revealing the password, and after reviewing the posts, fires her and the other participants. Most likely, this is a. a violation of the Stored Communications Act. b. within 2B’s rights as an employer. c. a subject for dispute resolution by the communications providers that the employees’ page uses. d. a “business-extension exception” under the Electronic Communications Privacy Act. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Social Media LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 61. Paige applies to work for Quibbling & Company. Reece applies for admittance to State University. As part of their applications, Paige and Reece are asked to divulge their social media passwords. Legislation that protects individuals from having to disclose their social media passwords has been enacted in a. no states. b. most states but not by the federal government. c. all states and by the federal government. d. four states.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Social Media Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 62. Justin’s posts on Facebook provide information that establishes his intent and what he knew at a particular time, indicating potential liability. For this and other reasons, social media posts are often a. included in discovery in litigation. b. used by law enforcement to detect and prosecute criminals. c. used by federal regulators in investigations into illegal activities. d. all of the choices.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Social Media LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 63. Zoe and other users of Facebook and other social networking sites post trademarked images and copyrighted materials on these sites without permission. This a. is a violation of the intellectual property rights of the owners of the images and materials. b. is within the rights of the users of social networks. c. is a subject for dispute resolution by the providers of the social networks. d. falls under the “business-extension exception” to the Electronic Communications Privacy Act. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Social Media LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 64. Oversight Corporation monitors employees’ electronic communications made in the ordinary course of business. This a. is a violation of the rights of Oversight’s employee. b. is within Oversight’s rights as an employer. c. is a subject for dispute resolution by the communications providers that Oversight uses. d. falls under the “business-extension exception” to the Electronic Communications Privacy Act. ANSWER: d POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Moderate REFERENCES: Social Media LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 65. Keisha is an employee of Leeway Corporation. She uses social media in a way that violates her employer’s stated social media policies. Leeway first disciplines its employee and then, after a second transgression, fires her. This a. is a violation of Keisha’s rights as an employee. b. is within Leeway’s rights as an employer. c. is a subject for dispute resolution by the social media that Keisha used. d. falls under the “business-extension exception” to the Electronic Communications Privacy Act. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Social Media LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 66. Auto Maker Components LLC is an employer based in Michigan. Michigan state law prohibits employers from taking adverse action against an employee or job applicant based on what the person has posted online. This applies to a. social media sites. b. e-mail accounts. c. cloud storage accounts. d. all of the choices.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Social Media LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 67. Mobile Device Company (MDC) discovers that defamatory statements about its policies and products are being posted in an online forum. NuView Inc., the Internet service provider whose users are posting the messages, refuses to disclose the identity of the person or persons responsible. MDC should a. bring a suit against “John Doe” and use the authority of the court to obtain the identity from NuView. b. bring a suit against NuView for publishing the statements.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© c. counter the statements with its own posts in an effort to enhance the company’s goodwill. d. post defamatory statements about NuView and its users.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Online Defamation LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 68. Copious Bounty, LLC, and other companies operate social media Web sites, issue apps for mobile devices, obtain ad revenue from search engines, and sell directly to consumers from other sites. The privacy rights of the users of these products are frequently defined, not by the courts or legislatures, but by a. the companies that own the sites and the apps. b. retailers who have had to change their procedures to compete. c. spammers, cybersquatters, and typosquatters. d. Internet service providers.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Privacy LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's; Application 69. Interactive Entertainment Corporation markets its products online. Through the use of cookies, Interactive Entertainment and other online marketers can a. track individuals’ Web browsing activities. b. gain access to competitors’ servers. c. “sweet talk” consumers into buying certain products. d. attack competitors’ Web sites.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Privacy LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 70. Global Reach Corporation uses invisible files created on the computers, smartphones, and other mobile devices of visitors to its Web sites to track the users’ browsing activities. These files are a. licenses.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. cookies. c. cloud computing. d. a violation of the law.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Privacy LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application Essay 71. “Dawn” is a song included in the sound track of “eDay,” a movie produced and distributed by FasTrac Corporation.

The song features a digital sampling of a few seconds of the guitar solo of one of George Harrison’s copyrighted sound recordings without permission. Does this digital sampling constitute copyright infringement on the part of FasTrac?

Explain.

ANSWER: Yes, the digital sampling described in this question most likely would be held to constitute copyright infringement. To transfer materially digitally, online or otherwise, it must be “copied.” So, generally, whenever a party downloads music or other software into a computer’s random access memory, or RAM, without authorization, a copyright is infringed. In other words, technology has vastly increased the potential for copyright infringement. Thus, digitally sampling a copyrighted sound recording of any length constitutes copyright infringement.

In this question, a few seconds of the guitar solo of one of George Harrison’s copyrighted sound recordings has been digitally sampled without permission in “Dawn.” This song is then included in the film “eDay,” which is produced and distributed by FasTrac. The sampling involved “copying” the solo digitally into a computer. This constitutes copyright infringement.

POINTS: 1 DIFFICULTY: Challenging REFERENCES: Copyrights in Digital Information LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - BB_17.3 - BB-Decision Modeling United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 72. Sonya and other employees of TransGlobal Inc. maintain a password-protected social media page on which they post comments on work-related issues. The posts range from positive to negative, supporting the page’s purpose to “vent about work.” When TransGlobal learns of the page, the company intimidates Sonya into revealing the password, and after reviewing the posts, fires her and the other participants. Which federal law discussed in this chapter most likely applies to this situation? Has this law been violated? Discuss.

ANSWER: The federal law discussed in this chapter that most likely applies to the situation described in this question is the Stored Communications Act (SCA), which is part of the Electronic Communications Privacy Act (ECPA). And the SCA appears to have been violated here.

The SCA prohibits intentional and unauthorized access to stored electronic Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© communications and sets forth criminal and civil sanctions for violators. A person can violate the SCA by intentionally accessing a stored electronic communication. The SCA also prevents “providers” of communication services, such as cell phone companies and social media networks, from divulging private communications to certain entities and individuals.

In this question, the employees of TransGlobal maintain a password-protected social media page on which they post comments on work-related issues. The company gains access by intimidating one of the employees, and after reviewing the posts, fires all of the participating employees. This appears to be a violation of the SCA because the company’s access was intentional and unauthorized—intimidation does not constitute authorization.

As a result, the employees should be allowed to retain their social media page, be reinstated to their jobs, be given back pay, and possibly obtain compensatory and other damages.

POINTS: 1 DIFFICULTY: Challenging REFERENCES: Social Media LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - BB_17.3 - BB-Decision Modeling United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© True / False 1. Some promises are not legally binding. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Introduction LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Critical Thinking United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 2. In contract law, intent is determined by the personal or subjective intent, or belief, of a party. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: An Overview of Contract Law LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 3. If a contractual promise is not fulfilled, the person who made it is not subject to the sanctions of a court. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: An Overview of Contract Law LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Critical Thinking United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 4. The only requirement for a valid contract is that the parties voluntarily entered into it. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: An Overview of Contract Law LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic 5. A bilateral contract comes into existence at the moment promises are exchanged. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Types of Contracts LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 6. If a voidable contract is avoided, the promisee, but not the promisor, is released from it. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Types of Contracts LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 7. A unilateral contract is formed when the party receiving the offer com-pletes the re-quested act or performance. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Types of Contracts LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 8. An implied contract is not an actual contract. a. True b. False ANSWER: False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© POINTS: 1 DIFFICULTY: Moderate REFERENCES: Types of Contracts LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 9. An executed contract is one that has been fully performed. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Types of Contracts LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic 10. If a voidable contract is ratified, the parties must fully perform their respective legal obligations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Types of Contracts LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 11. A request or invitation to negotiate is an offer. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Agreement LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 12. An acceptance can impose new conditions or change the terms of the original offer without rejecting it.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Agreement LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Comprehension 13. A statement of future intent—“I plan to sell my car”—is an offer. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Agreement LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 14. An advertisement—“we buy gold”—is an offer. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Agreement LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 15. No offer may be revoked before it is accepted. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Agreement Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 16. A counteroffer is a rejection of the original offer and the simultaneous making of a new offer. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Agreement LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 17. An acceptance that changes the terms of the original offer may be considered a counteroffer. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Agreement LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's; Knowledge 18. Under the mailbox rule, an acceptance takes effect at the time it is sent. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Agreement LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 19. An acceptance sent by means not expressly or impliedly authorized is not effective until it is received. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: Agreement LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 20. An e-contract must meet basic requirements that are different from those required of a paper contract. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: E-Contracts LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 21. An important rule to keep in mind is that the offeree (the buyer) controls the acceptance and thus the resulting contract. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: E-Contracts LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 22. Under federal law, an electronic signature is as valid as a signature on pa-per. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: E-Contracts Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Ethics - BUSPROG: Techn - BUSPROG: Ethics - BUSPROG: Technology KEYWORDS: Bloom's: Knowledge 23. In contract law, the term consideration refers to the serious thought that underlies a party’s intent to enter into a contract. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Consideration LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 24. To be legally sufficient, consideration must be evidenced by something tangible. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Consideration LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 25. The element of bargained-for exchange distinguishes contracts from gifts. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Consideration LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 26. A promise to do what one already has a legal duty to does not constitute legally sufficient consideration. a. True Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Consideration LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 27. A promise to do what one already has a legal duty to do constitutes legally suf-ficient consideration. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Consideration LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 28. A contract entered into by a minor is voidable at the option of either of the contracting parties. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Contractual Capacity LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 29. A person who has been determined by a court to be mentally competent cannot form a legally binding contract with another party. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Contractual Capacity LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning©

KEYWORDS:

United States - BUSPROG - Analytic - BUSPROG: Analytic Bloom's: Comprehension

30. A contract entered into by an intoxicated person is never valid. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Contractual Capacity LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 31. A contract to do something that is prohibited by statutory law is void. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Contractual Capacity LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 32. In certain circumstances, bargains are so oppressive that the courts relieve innocent parties of part or all of their duties. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Legality LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 33. Every state has a statute that stipulates what types of contracts must be in writing. a. True b. False ANSWER: True POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Easy REFERENCES: Form LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 34. The writing requirement under the Statute of Frauds means that an agreement must be a formal written contract. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Form LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Comprehension 35. A contract involving property of any kind must be in writing to be enforceable. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Form LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge Multiple Choice 36. Cellphones & Calltime, Inc., makes an offer to Delores to enter into a contract to work as a salesperson for a certain base salary plus commission for ninety days subject to a one-year renewal based on her performance. Delores accepts the offer. A valid contract requires a. a price and a subject. b. a duration and termination provision. c. an offer and an acceptance. d. specific quality standards.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: An Overview of Contract Law LEARNING OBJECTIVES: LO-1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 37. Lucy agrees to work for Mung Manufacturing, Ltd., as a Chinese/ English/ French translator. In determining whether a contract has been formed, an element of prime importance is a. the parties’ intent. b. Mung’s base of operations. c. the duration of the work. d. Lucy’s language capabilities.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: An Overview of Contract Law LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 38. Ethan believes that he and Fiorina agreed that he would find the best location for a well on her ranch and then dig the well. In a later dispute, whether a contract was formed can be determined by a. the parties’ statements at the time of their alleged contract. b. what Ethan claims was the parties’ intent. c. what Fiorina claims was the parties’ intent. d. what the parties agree they intended.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: An Overview of Contract Law LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 39. Home & Barn Construction, Inc., contracts with Idyll Farms to build a new dairy barn on Idyll’s property for which Idyll agrees to pay. The elements of this, and any other, contract include a. the parties’ capability. b. consideration. c. necessity of purpose. d. price.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: An Overview of Contract Law LEARNING OBJECTIVES: LO-1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 40. Omar asserts that a deal he entered into with Patty to sponsor and host a motivational conference for independent sales representatives is an unenforce-able contract. Defenses to the enforcement of a contract include a. a desire not to perform. b. insufficient capital. c. preliminary indications of unsatisfactory results. d. the lack of a party’s voluntary consent.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: An Overview of Contract Law LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 41. Jonah tells Levi he will give him an Xbox if Levi does Jonah’s chores for a month. Levi promises to do the chores.

Jonah and Levi have formed a a. a bilateral contract. b. a formal contract. c. a unilateral contract. d. no contract.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Types of Contracts LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 42. Following negotiations, Office Park, Inc., enters into an informal contract with Quality Janitorial Company for custodial services for Office Park’s buildings. This means that the parties’ contract a. requires no special form. b. is freely open to either party’s interpretation. c. is subject to change by either party, within reason. d. is not yet completely formed.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Types of Contracts LEARNING OBJECTIVES: LO-2 - LO - 2 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 43. Bilbo signs a lease agreement for an apartment with Cato, who owns and manages the Deer Creek Apartments complex. These parties have a. an express contract. b. an implied contract. c. a unilateral contract. d. no contract.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Types of Contracts LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 44. On Monday, O’Shea tells Patterson that she will pay Patterson $1,000 if O-Shea’s bill processing and office filing are completed by Friday. On Wednesday, when Patterson has finished more than half of the work, O’Shea says that she has changed his mind. Under the modern-day view, these parties had a. an expired contract when O’Shea said that she changed her mind. b. a bilateral contract when O’Shea offered to pay for the work. c. a unilateral contract as soon as Patterson began to perform. d. no contract.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Types of Contracts LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 45. Lamar offers to pay Melanie $150 for a hot-air balloon ride for Nina. They agree to meet at dawn the next day to exchange the cash for the ride. At this point, these parties have a. a bilateral contract. b. a trilateral contract. c. a unilateral contract. d. no contract.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Types of Contrtacts Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 46. Bruce, a minor, enters into a contract with Coralee to buy her car. Later, Bruce opts to avoid the deal. With respect to the contract, this releases a. both parties. b. neither party. c. only Bruce. d. only Coralee.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Types of Contracts LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 47. Vita asks Walter, a cobbler and shoe salesperson, to repair a pair of work boots. There is no discussion of a price, and Vita and Walter do not sign any documents. After the repair, Walter hands Vita a bill. With respect to Vita’s obligation to pay the bill, this is a. an express contract. b. an implied contract. c. a unilateral contract. d. no contract.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Types of Contracts LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 48. Signe offers to sell Thomas her textbook but conditions the sale on Thomas accepting the offer by March 1. Signe may revoke the offer a. before Thomas accepts the offer. b. before March 1, whether or not Thomas has accepted the offer. c. only after Thomas accepts the offer. d. only after March 1.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: Agreement LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 49. Iggy tells Jade, “I might sell the snowboard that I bought this winter since I haven’t used it and the season is almost over.” This is a. an acceptance of an offer. b. a preliminary negotiation. c. an offer. d. a statement of future intent.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Agreement LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 50. Fabien offers to sell his Graphic Signs, LLC, business to Hana for $100,000. Hana replies, “The price is too high. I will buy it for $75,000.” Hana has a. accepted the offer. b. made a counteroffer without rejecting the offer. c. rejected the offer and made a counteroffer. d. rejected the offer without making a counteroffer.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Agreement LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 51. Deluxe Awnings, Inc., offers Elbert a job as an installer. No time for acceptance is specified in the offer. The offer will terminate a. after a reasonable period of time. b. after a typical workweek (five business days). c. after a usual month (thirty calendar days). d. never.

Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Agreement LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 52. Deb buys a song through eSongs, an online music vendor. Before completing the purchase and downloading the song, Deb must review a provision stating that she will not make and sell copies of the song and is required to click “I agree.”

This provision is a. a browse-wrap term. b. a click-on agreement. c. a shrink-wrap agreement. d. none of the choices.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: E-Contracts LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 53. On behalf of Bobble Head Manufacturing Company, Carmela types her name at the bottom of an e-mail purchase order and submits the order to Designer Parts Company. Under the UETA, Carmela’s typed name qualifies as a. a “signature.” b. a statement of future intent. c. an assignment. d. a preliminary negotiation.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: E-Contracts LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Ethics - BUSPROG: Techn - BUSPROG: Ethics - BUSPROG: Technology KEYWORDS: Bloom's: Application 54. Mark is creating Nu2U.com, a Web site through which he will enter into contracts over the Internet. Important terms to include in his offers include a. provisions specifying the remedies if the contract is breached.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. a detailed history of his business. c. glowing reviews from former customers. d. his educational background.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: E-Contracts LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 55. Ricci, a user of SmartPhoneApps.com’s Web site, can download apps for free if she first clicks on “I accept” after viewing certain terms. This is a. a contract that does not include the terms. b. a contract that includes the terms. c. not a contract but the terms are enforceable. d. unenforceable.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: E-Contracts LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 56. Bret buys a subscription to the catalog of music provided by Concerto, an online music vendor. Before accessing the catalog, Bret must agree to a provision stating that she will not make and sell copies of the music. This provision is a. a browse-wrap term. b. a click-on agreement. c. a shrink-wrap agreement. d. a partnering agreement.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: E-Contracts LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 57. Kelby enters into a contract with Lara on a social media network to buy her stock in Mobile Devices Corporation.

Neither party prints out a hard copy. Under the Electronic Signatures in Global and National Commerce Act (E-SIGN Act), this contract can Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© a. be “denied legal effect” if it falls under UCC Article 2. b. be “denied legal effect” unless a hard copy is printed. c. be “denied legal effect” until it is signed on paper. d. not be “denied legal effect” solely because it is in electronic form.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: E-Contracts LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 58. Moby negotiates a contract with Nora via e-mail. It is reasonable to infer that Moby has consented to a. transact business electronically. b. submit to the jurisdiction of any selected forum. c. respond to any message sent to that e-mail address. d. nothing.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: E-Contracts LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Ethics - BUSPROG: Techn - BUSPROG: Ethics - BUSPROG: Technology KEYWORDS: Bloom's: Application 59. Chicken & Egg Farms promises to pay Dex $500 to install a sump pump in its warehouse. Dex completes the installation. The act of installing the pump a. imposes a moral obligation on Chicken & Egg to pay Dex. b. imposes no obligation on Chicken & Egg unless it is satisfied with the job. c. is not sufficient consideration because it is not goods or money. d. is the consideration that creates Chicken & Egg’s obligation to pay Dex. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Consideration LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 60. Henry promises not to open his Hank’s Lunchbox Café before 10:00 A.M. if Isis, who owns Isis’s Danish & Donuts next door, promises to close by 4:00 P.M. Henry’s consideration is Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© a. the destruction of a legal relationship. b. the creation of a legal relationship. c. a forbearance. d. an exchange of money.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Consideration LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 61. Esmeralda promises to pay Fiorello $400 because “he does not have as much money as other people.” Esmeralda’s promise is not enforceable because a. society does not want gifts cheapened by making them legally enforceable. b. the redistribution of wealth on a one-to-one basis is not a valid social goal. c. Esmeralda could have paid more. d. Fiorello has not given consideration in return.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Consideration LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 62. Genovese Contracting, Inc., agrees to build a warehouse for Hawthorne Wholesale Distributors. When Genovese runs into the types of difficulties that contractors ordinarily confront, Hawthorne agrees to pay extra compensation to overcome them. Regarding the agreement to pay more, a court would likely a. enforce it. b. rescind it. c. order the parties to renegotiate it. d. not enforce it.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Consideration LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 63. Under a contract with Bucolic Farms, Agro Excavation, Inc., begins digging an agricultural pond. In mid-project, Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© Agro asks for $15,000 over the contract price, claiming an increase in the “cost of doing business.” Bucolic agrees but later refuses to pay. Their agreement is a. unenforceable because Agro’s performance was a preexisting duty. b. unenforceable because Bucolic’s promise was illusory. c. enforceable. d. unenforceable because its performance is unforeseeably difficult.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Consideration LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 64. Panini Vittles, Inc., contracts with Qino to deliver its sandwiches. Later, the parties decide to cancel their contract.

They can a. rescind their entire contract. b. rescind their contract to the extent that it is executory. c. rescind their contract if they make a new contract at the same time. d. not rescind their contract.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Consideration LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 65. Stella is fifteen. In most states, for contractual purposes, Stella would be considered a minor until she is a. sixteen. b. eighteen. c. seventeen. d. twenty-one.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Contractual Capacity LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 66. Intoxicated but still capable of comprehending the consequences of her actions, Cricket signs a contract to sell her Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© phone app design to Downloads, Inc. This contract is a. unenforceable because Cricket was intoxicated. b. enforceable. c. unenforceable if Cricket disaffirms it. d. unenforceable if Downloads disaffirms it.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Contractual Capacity LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 67. Odina signs a covenant not to compete with her employer, Penultimate Sales Corporation. A court decides that the covenant is overly restrictive. Depending on the jurisdiction, the court will likely a. enforce it as written so as not to undercut the freedom of contract. b. enforce it but evaluate its effects over time. c. reform its terms to prevent any undue burden. d. refuse to enforce it unless Penultimate pays a fine to the court.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Legality LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 68. Jolie signs a contract with Keaton, an unlicensed physician, to perform a medical procedure. This contract is enforceable by a. Jolie. b. Jolie’s medical insurance company. c. Keaton. d. no one.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Legality LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 69. Jolie signs a contract with Keaton, an unlicensed physician, to perform plastic surgery—a medical procedure. This Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© contract is enforceable by a. Jolie. b. Jolie’s medical insurance company. c. Keaton. d. no one.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Legality LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 70. Sonya and Taylor enter into an oral contract that is required to be in writing to be enforceable. Such a contract is normally a. voidable by a party who does not wish to follow through with it. b. void. c. valid. d. voidable but only by consent of both parties.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Form LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application Essay 71. Philo, a businessperson, is a friend of Quiana, the owner of Rise n’ Shine, a coffee stand. Every day, Philo spends a few minutes at the stand, watching the brewing, considering the options, and usually buying a cup of coffee and something extra—a bagel, a muffin, a cookie, or a sandwich. One afternoon, Philo comes to the stand and picks up a bottle of iced coffee and a sandwich priced at $5 each. Philo waves the items at Quiana without saying a word and walks out. Is there a con-tract? If so, how would it be classified in terms of formation, perform-ance, and enforceability?

ANSWER: The facts presented here indicate the presence of all the ele-ments necessary for a valid contract. A serious offer and accep-tance are made, consideration is ex-changed (a bottle of iced coffee and a sandwich for $5 apiece), both parties have capacity, the selling of the items is legal, and no particular form is required for this type of contract. Thus, a contract exists.

For the rea-sons given here, this contract is classified as valid, enforce-able, and informal. In addi-tion, this is a classic case of an implied con-tract. There is no ex-plicit agreement between the parties. Rather, an agree-ment is implied by Philo’s action of waving the items and by his past con-duct. By his con-duct Philo is telling Quiana that he will pay for the items later. The contract is also bilateral (as opposed to uni-lateral) because Quiana im-pliedly promises to sell the items to Philo in ex-change for Philo’s implied promise to pay. The contract is partially executory, as Philo has engaged to pay for the items in the future.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© Because the contract is for a legal pur-pose, both parties have capacity, and voluntariness of consent is not an issue, the con-tract is neither voidable nor void.

POINTS: DIFFICULTY: REFERENCES:

1 Challenging An Overview of Contract Law Types of Contracts LEARNING OBJECTIVES: LO-1 LO-2 - LO - 2 NATIONAL STANDARDS: United States - BB_17.3 - BB-Decision Modeling United States - BUSPROG: Reflective KEYWORDS: Bloom's: Analysis 72. Corporate Code, Inc., sells business software—accounting and book-keeping programs, blank business forms, inventory control functions, and the like—in different combinations, in different packages, at different prices. Each package includes a shrink-wrap agreement that limits warranties and remedies. Developmental Research Corporation (DRC) buys a Corporate Code package and uses the product. Later, DRC files a suit against the software seller, claiming that the product was flawed and that the flaws caused DRC to suffer business losses. DRC asks for relief that exceeds the limits in the shrink-wrap agreement. What is a shrink-wrap agreement? Are such agreements al-ways enforced? Under what circumstances is a court likely to enforce this agree-ment?

ANSWER: A shrink-wrap agreement is an agreement whose terms are expressed inside a package that contains computer hardware or software. The terms usually focus on warranties, remedies, or other issues related to the product’s use.

Shrink-wrap agreements have not always been enforced. The most important factor is the time at which the manufacturer communicates the terms to the end-user.

A court is likely to enforce the agree-ment in this problem, and similar agreements, if the buyer had an opportunity to read the agreement before using the product. These agreements are enforced partly because from a business perspective, it is more practical to enclose the full terms of a sale in a pack-age rather than, for example, to read them over a phone while taking an order for a product. Such an agreement might not be enforced, however, if a court reasons that the buyer learned of the terms after the parties made their contract, and the buyer did not then agree to the terms. On this basis, the terms would be proposals for additions to the contract, which would require the buyer’s express assent.

POINTS: 1 DIFFICULTY: Challenging REFERENCES: E-Contracts LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - BB_17.3 - BB-Decision Modeling United States - BUSPROG: Ethics - BUSPROG: Techn - BUSPROG: Ethics - BUSPROG: Technology KEYWORDS: Bloom's: Analysis

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© True / False 1. A material fact is a fact that a reasonable person would consider important when determining his or her course of action. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Voluntary Consent LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 2. Voluntary consent may be lacking because of misrepresentation but not because of a mistake. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Voluntary Consent LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 3. Words or terms in contracts that are subject to more than one reasonable interpretation can lead to bilateral mistakes. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Voluntary Consent LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 4. Any party who does not receive what he or she considers a fair bargain can argue mistake. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: Voluntary Consent LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Comprehension 5. A contract may not be enforceable if one party is aware that the other party made a mistake of fact. a. True b. False ANSWER: True POINTS: 1 REFERENCES: Voluntary Consent LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic 6. An innocent party does not need to suffer an injury to collect damages as a result of a misrepresentation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Voluntary Consent LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 7. Duress is a defense to the enforcement of a contract, but not a ground for rescission of a contract. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Voluntary Consent LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 8. When the dominant party in a fiduciary relationship benefits from that relationship, a presumption of undue influence arises. a. True b. False ANSWER: True Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© POINTS: 1 DIFFICULTY: Easy REFERENCES: Voluntary Consent LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 9. Misrepresentation of a material fact can occur by words or action. a. True b. False ANSWER: True POINTS: 1 REFERENCES: Voluntary Consent LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective 10. Most courts require a showing of injury when an action is to rescind a contract for fraud. a. True b. False ANSWER: False POINTS: 1 REFERENCES: Voluntary Consent LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic 11. As a general rule, contract duties can be delegated. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Third Party Rights LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 12. Intended beneficiaries can sue to enforce a contract. a. True b. False ANSWER: True Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© POINTS: 1 DIFFICULTY: Easy REFERENCES: Third Party Rights LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 13. When a party’s performance is perfect, it is said to be complete. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Performance and Discharge LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 14. A party who in good faith performs substantially all of the terms of a contract can enforce the contract against the other party. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Performance and Discharge LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 15. Most contracts need to be performed only to the satisfaction of a reasonable person unless they expressly state otherwise. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Performance and Discharge LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning©

16. In most contracts, promises of performance are not expressly conditioned. a. True b. False ANSWER: True POINTS: 1 REFERENCES: Performance and Discharge LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic 17. A condition is a qualification in a contract based on a future event that is certain to occur. a. True b. False ANSWER: False POINTS: 1 REFERENCES: Performance and Discharge LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Critical Thinking United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic 18. A party who in good faith performs substantially all of the terms of a con-tract can enforce the contract

against the other party. a. True b. False ANSWER: True POINTS: 1 REFERENCES: Performance and Discharge LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic 19. Most contracts need to be performed only to the satisfaction of a reasonable person unless they expressly

state otherwise. a. True b. False ANSWER: True POINTS: 1 REFERENCES: Performance and Discharge LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Critical Thinking United States - BUSPROG: Reflective 20. Any breach entitles the nonbreaching party to sue for damages. a. True Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Performance and Discharge LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 21. The law allows an innocent party to be discharged when the other party has materially altered a written contract without consent. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Performance and Discharge LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 22. An occurrence or event that makes performance temporarily impossible operates to discharge the parties’ contractual duties. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Performance and Discharge LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Comprehension 23. A contract will be discharged if supervening circumstances make it impossible to attain the purpose both parties had in mind when they made the contract. a. True b. False ANSWER: True POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Easy REFERENCES: Performance and Discharge LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 24. Damages that compensate the nonbreaching party for the loss of a bargain are known as consequential damages. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Damages LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Critical Thinking United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 25. Compensatory damages compensate a party injured by a breach of contract by punishing the party that breached the contract. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Damages LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Comprehension 26. A party seeking to recover compensatory damages cannot also recover incidental damages. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Damages LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Comprehension Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 27. Ordinarily, a waiver by a contracting party will not operate to waive subsequent, additional, or future breaches of contract. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Damages LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 28. The standard measure of compensatory damages is the value of breaching party’s promised performance. a. True b. False ANSWER: False POINTS: 1 REFERENCES: Damages LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic 29. A liquidated damages provision in a contract specifies a certain amount to be paid in the event of a default or

breach of contract. a. True b. False ANSWER: False POINTS: 1 REFERENCES: Damages LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic 30. Consequential damages are awarded for damage caused by special circumstances beyond a contract itself. a. True b. False ANSWER: True POINTS: 1 REFERENCES: Damages LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic 31. Rescission is an equitable remedy used when the parties have imperfectly expressed their agreement in writing.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Equitable Remedies LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Comprehension 32. Ordinarily, the remedy for a seller’s breach of a contract for a sale of real estate is specific performance. a. True b. False ANSWER: True POINTS: 1 REFERENCES: Equitable Remedies LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic 33. Specific performance will not be granted unless the party’s legal remedy is inadequate. a. True b. False ANSWER: True POINTS: 1 REFERENCES: Equitable Remedies LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic 34. Reformation is an equitable remedy that allows a court to rewrite a contract to suit itself. a. True b. False ANSWER: False POINTS: 1 REFERENCES: Equitable Remedies LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective 35. A contract may include a clause stating that damages will be limited to a maximum amount. a. True b. False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: True POINTS: 1 REFERENCES: Contract Provisions Limiting Remedies LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic Multiple Choice 36. Nora enters into a contract with Oceanic Transport, Inc., to insure and ship a painting from France to the United States for a certain price. But Oceanic makes a mistake in adding the costs, which results in a contract price that is $1,000 less than the true cost. Most likely, a court would a. allow the parties to rescind the contract. b. award damages to Nora for the mistake. c. award damages to Oceanic for the mistake. d. enforce the contract as is.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Voluntary Consent LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 37. Garth owns two all-terrain vehicles (ATVs), worth $1,000 and $500, respectively. Helen agrees to buy “Garth’s ATV” for $750. Garth believes, in good faith, that he is selling the $500 ATV. Helen believes, in good faith, that she is buying the $1,000 ATV. In this situation a. Garth is entitled to $750 for the $500 ATV. b. Helen is entitled to the $1,000 ATV for $750. c. Helen must buy both ATVs for $1,500. d. there is no contract.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Voluntary Consent LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 38. Byron agrees to sell to Charity, for $1,500, a remote parcel of land. They believe the land to be worthless, but beneath it is a gold mine. Byron can a. not rescind the contract. b. rescind the contract on the basis of fraud.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© c. rescind the contract on the basis of mistake. d. rescind the contract on the basis of undue influence.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Voluntary Consent LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 39. Kari, a real estate agent, assures Linc that a certain parcel of commercial property fronts on the most highly trafficked street in Metro City. Linc buys the property and then discovers that the street has no more traffic than any other in its vicinity. Linc is most likely a victim of a. opinion. b. fraud. c. mistake. d. nothing.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Voluntary Consent LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 40. Mona is induced by her guardian Newt to sign a contract to invest her student loan funds in Overseas Bank through Newt’s investment firm. Unknown to Mona, Newt realizes ongoing commissions from the investment. Most likely, Mona may a. not rescind the contract. b. rescind the contract on the basis of undue influence. c. rescind the contract on the basis of mistake. d. rescind the contract on the basis of unconscionability.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Voluntary Consent LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 41. Drake enters into a contract with Eve, who claims to have access to a stock-trading algorithm that will multiply an investment many times over. When the results do not match this promise, Drake learns that Eve does not have access to Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© any unique software and files a suit against her, alleging fraud. Proof of an injury is required to a. recover damages. b. rescind the contract. c. undo Eve’s influence. d. punish the defendant.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Voluntary Consent LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 42. Seth offers to buy a house from Tia for less than Tia paid for it, stating that he would “hate to see anything bad happen to Tia or her house.” Tia agrees to sell. Regarding this agreement, a court would likely a. enforce it. b. not enforce it. c. reform it to reflect the true market value of the property. d. order the parties to renegotiate the price.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Voluntary Consent LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application Fact Pattern 11-1 Lewis, an employee of Silos, Inc., makes a substantial mathematical error in totaling the estimated costs for a project for which AgriCo-op is seeking bids. Consequently, Silos’s bid is significantly low.

43. Refer to Fact Pattern 11–1. Any contract with AgriCo-op that includes the mistake may be rescinded a. if AgriCo-op knew or should have known of the mistake. b. if Lewis’s supervisor did not know of the mistake. c. if Silos knew or should have known of the mistake. d. under no circumstances.

ANSWER: a POINTS: 1 REFERENCES: Voluntary Consent LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 44. Refer to Fact Pattern 11–1. Any contract with AgriCo-op that includes the mistake may be rescinded a. if the error was made inadvertently and without gross negligence. b. if the error was made intentionally or negligently. c. if the error was made intelligently but distractedly. d. under no circumstances.

ANSWER: a POINTS: 1 REFERENCES: Voluntary Consent LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective 45. Refer to Fact Pattern 11–1. Any contract with AgriCo-op that includes the mistake may be rescinded a. if the mistake involves a material fact. b. if the mistake involves any fact. c. if the mistake is one of value or quality. d. under no circumstances.

ANSWER: a POINTS: 1 REFERENCES: Voluntary Consent LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective 46. Garland induces Jules to enter into a contract for the purchase of a Chef’s Burger House restaurant. Garland

knowingly misrepresents a number of material features about the restaurant and the business. When Jules discovers the truth, he can a. not rescind the contract because Jules assumed the risk that the bargain would prove to be different from what he thought. b. rescind the contract on the basis of fraud. c. rescind the contract on the basis of mistake. d. rescind the contract on the basis of undue influence.

ANSWER: b POINTS: 1 REFERENCES: Voluntary Consent LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective 47. Illya owes Jenny $1,000. In a separate deal, Kasey owes Illya $1,000. Illya unconditionally assigns his rights in the deal with Kasey to Jenny. Illya’s right to the $1,000 is then a. unchanged. b. extinguished. c. incidental.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© d. assigned to a court.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Third Party Rights LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 48. Loren and Kendra enter into a contract for the distribution of Loren’s produce to local restaurants for which he agrees to pay Kendra. Kendra transfers her right to payment under the contract to County Bank. This transfer is a. a delegation. b. an assignment. c. a third party beneficiary contract. d. prohibited.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Third Party Rights LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 49. App Developers, Inc. (ADI), enters into a contract with Carmen, the chief executive officer of SalesCorp, to create an app for the firm. To fulfill the contract, ADI hires Max and ten other student interns. With respect to the contract between ADI and Carmen, Max is a. an intended beneficiary. b. an incidental beneficiary. c. a delegate. d. an assignee.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Third Party Rights LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 50. Herb’s Hot Dog Vending, Inc., enters into a contract to pay Idris for a business survey and review of Herb’s competitors, which Idris delivers on August 1. Herb’s offer, on the same date, to pay Idris is is a. a concurrent condition. b. a novation.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© c. tender. d. mutual rescission.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Performance and Discharge LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 51. Ed’s Electric substantially performs its contract with Forest Hills Apartments, Inc., to deliver and install an alarm system and parking lot lighting. Forest Hills is entitled to a. damages. b. nothing more. c. to be excused from performance. d. suspend performance.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Performance and Discharge LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 52. Even-Bilt Construction contracts to build a warehouse for Discount E-Sales Company. Even-Bilt completely performs.

Discount E-Sales is entitled to a. damages. b. nothing more. c. to be excused from performance. d. suspend performance.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Performance and Discharge LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 53. Drainage & Irrigation Equipment, Inc., contracts to sell its assets to Earth & Sky Aquatic Corpo-ration. Before either party has performed, rescission of this con-tract requires a. a mutual agreement to rescind. b. an accord and satisfaction.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© c. a novation. d. a settlement agreement.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Performance and Discharge LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 54. Gliding Light, LLC, and Hang Gliders, Inc., are parties to a contract. They subsequently agree that High Riders Inc. should take Gliding Light’s place and assume all of its rights and duties under the contract. This is a. a mutual agreement to rescind. b. an accord and satisfaction. c. a novation. d. a settlement agreement.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Performance and Discharge LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 55. Emil enters into a contract to buy Foley’s cultivated bottomland and hill and bench acreage if County

AgriCredit will lend Emil the funds to pay for the land. Emil’s duty to perform is a. absolute. b. conditional. c. manifest d. irresolute ANSWER: b POINTS: 1 REFERENCES: Performance and Discharge LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective 56. CrossCountry Trucking & Transport enters into a contract with Discount Outlet Stores to load, transport, deliver, and unload the cargo that Discount designates. CrossCountry’s offer to perform, when the company is ready, willing, and able to do so, is a. complete. b. substantial. c. tender.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© d. absolute.

ANSWER: c POINTS: 1 REFERENCES: Performance and Discharge LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective 57. Water Rites, LLC, enters into a contract to site and dig a well for Rancho Verde. Water Rites completely

performs. Rancho Verde is entitled to a. a discount. b. rescission. c. novation. d. nothing more.

ANSWER: d POINTS: 1 REFERENCES: Performance and Discharge LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective 58. Business Computer Solutions Education Service enters into a contract to employ Chandra as an instructor for two years to begin June 1. One month before the term begins, Business Computer is underbid by a competitor and loses a major client, Debt Consolidation Corporation. Business Computer now refuses to hire Chandra. Business Computer’s repudiation of its contract to employ Chandra is most likely a. a material breach. b. a minor breach. c. a condition subsequent. d. not a breach.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Performance and Discharge LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 59. Dry Gulch Farms hires Elliot to repair its irrigation system on site on a certain date for $2,500, but Elliot does not show up as agreed. Dry Gulch hires Fernando to do the job for $2,000. Dry Gulch may recover from Elliot a. nothing. b. compensatory damages. c. consequential damages. d. nominal damages.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Damages LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 60. Rashi contracts to work for Social Data Analysis Corporation during June for $4,500. On May 31, Social Data cancels the contract. Rashi declines a job of a different type and rank with Tech Collection, Inc., which would have paid $3500.

Rashi files a suit against Social Data. As compensatory damages, Rashi can recover a. $4,500. b. $4,000. c. $500. d. $0.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Damages LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 61. Dondi contracts to buy a custom espresso maker from Caffee Specialties, Inc., for $4,500, but Caffee fails to deliver.

Dondi buys the appliance else-where for $5,500. Dondi’s measure of damages is a. $1,000. b. $1,000 plus incidental damages. c. incidental damages only. d. $0 ANSWER: b POINTS: 1 REFERENCES: Damages LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective 62. Nogales Ceramics pays Omar $15,000 to propose an online marketing campaign. Two days later, Omar tells Nogales that he has accepted a job in Silicon Valley and cannot plan the campaign. As compensatory damages, Nogales can recover a. $150,000. b. $15,000. c. $1,500. d. $0.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: b POINTS: 1 REFERENCES: Damages LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective 63. Damon contracts to repair the turf on a soccer field for Carousel Sports Park. Damon knows that without the repair, Carousel will have to cancel an upcoming game. Damon does not perform as promised. As consequential damages, Carousel can recover a. the cost of new turf. b. the difference between Damon's price and the actual cost of repair. c. the loss of profit from the canceled game. d. nothing.

ANSWER: c POINTS: 1 REFERENCES: Damages LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective 64. SFX Paintball Games, Inc., and Truck & Trailer Delivery Corporation sign an agree-ment that provides for the payment of “$1,000 by whichever party commits a material breach of the contract that creates damages difficult to estimate but approximately $1,000.” This is a. a liquidated damages clause. b. a mitigation of damages clause. c. a nominal damages clause. d. a penalty clause.

ANSWER: a POINTS: 1 REFERENCES: Damages LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective 65. Rural Power Utility, Inc., enters into a contract with Shovel Excavation Service to dig up, replace, and rebury Rural’s cables in a certain location. Rural advances Shovel 10 percent of its cost. The parties rescind the contract. Shovel’s refund of the payment is a. a penalty. b. liquidated damages. c. restitution. d. a breach of contract.

ANSWER: c POINTS: 1 REFERENCES: Damages Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective 66. Ambrose enters into a contract to buy 350 acres from Belle Vista Farms to cultivate grapes and open a winery. If Ambrose breaches the contract, Belle Vista’s remedy would most likely be a. a certain ratio of the amount that Ambrose expected to invest in the project. b. a percentage of Ambrose’s unrealized profit. c. the difference between the land’s contract and market prices. d. specific performance.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Equitable Remedies LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 67. Nonny agrees to buy a unique collection of Olympics memorabilia for $7,000 from Piper and sends $1,500 as a down payment. When Nonny sends Piper the rest of the price, she refuses to ship the collection. Nonny should seek a. damages. b. quasi-contractual recovery. c. rescission. d. specific performance.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Equitable Remedies LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 68. Resourced Minerals Inc. agrees to deliver ten tons of coal to Static Energy Corporation. The agreement states that delivery is to be within “9” days, although the parties intend “90” days. Resourced Minerals cannot convince Static Energy to amend the contract. Resourced Minerals should seek a. damages. b. reformation. c. rescission. d. specific performance.

ANSWER: b POINTS: 1 REFERENCES: Equitable Remedies LEARNING OBJECTIVES: LO-5 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective 69. Rikki agrees to sell her Sunrise Breakfast Café to Tia. As part of the deal, Rikki signs a covenant not to open a competing business within a hundred-mile radius for ten years. If this covenant is later determined to be unreasonable, the appropriate remedy is most likely a. damages. b. reformation. c. rescission. d. specific performance.

ANSWER: b POINTS: 1 REFERENCES: Equitable Remedies LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective 70. River Vista Inc. enters into a contract with Stable Realty Management to manage and maintain River Vista’s commercial real estate. Their contract provides that neither party can recover damages for a non-fraudulent or unintentional breach. This is a. a limitation-of-liability clause. b. an exculpatory clause. c. a liquidated damages clause. d. a quasi contract ANSWER: a POINTS: 1 REFERENCES: Contract Provisions Limiting Remedies LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Essay 71. Lucy contracts to buy six cases of vintage wine from Mountainside Vineyards for $1,200. The contract states that delivery is to be made at Lucy’s residence "on or before June 1, to be used for niece’s wedding reception on June 2." On June 1, Mountainside’s delivery vehicle is involved in an accident, and no wine is delivered to Lucy. On the morning of June 2, Lucy buys the wine from Nature’s Vintner. That afternoon, just before the reception, Mountainside tenders delivery of the wine at Lucy’s residence. Lucy refuses tender. Mountainside sues Lucy for breach of contract. How is the court most likely to rule?

ANSWER:

In most courts, the decision will rest on whether the inclusion of the contract clause “to be used for niece’s wedding reception on June 2” created an ex-press condition render-ing the time of performance vital to the purpose of the contract.

If the time stated is of the essence, the time for performance must be strictly complied with.

Any failure of full per-formance constitutes a material breach and discharges any duty or liability of the other party. If the time for per-formance is not of the essence, a reasonable time for perfor-mance is allowed. A late performance in such a case does not constitute a

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© material breach, but the party rendering late performance is liable for damages caused by the de-lay.

In this problem, although June 2 would ordinarily be a reasonable time for perfor-mance, the inclusion of the phrase giving the use of the wine and date of the recep-tion would render the time vital to performance and would require strict compliance. Mountainside’s failure to deliver on June 1 is a material breach releasing Lucy from any liability under the contract.

POINTS: 1 DIFFICULTY: Challenging REFERENCES: Performance and Discharge LEARNING OBJECTIVES: LO-2 - LO - 2 LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Decision Modeling United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 72. Gretchen buys a tractor from Haulers Equipment Company, paying $1,000 down and agreeing to pay off the balance in thirty-six monthly payments of $200 each. The terms of the agreement call for Gretchen to make a payment on or before the first of each month, beginning March 1. During the first six months, Haulers receives a $200 payment before the first of each month. Starting in September, however, and continuing for the subsequent five months, Gretchen’s payment is never made until the fifth of the month. Haulers accepts and cashes the payment check each time. Before the next payment is due, Haulers decides that it is no longer willing to accept late payments. Can Haulers sue Gretchen immediately for breach? Can Gretchen continue to make late payments without liability? Explain.

ANSWER:

The dispute between these parties turns on whether Haulers’s acceptance of six late payments consti-tutes a waiver of Gretchen’s agreement to pay on or before the first of each month. When a nonbreaching party waives the breach, he or she relinquishes the legal right to claim failure of full performance. Haulers’s acceptance of six late payments not only consti-tutes a waiver but also constitutes a pattern of conduct of waiver, and thus the waiver ex-tends to the thirteenth and future payments—until such time as Haulers gives no-tice to Gretchen that full compliance with the contract will be required in the fu-ture. Haulers cannot immediately hold liable Gretchen for breach on the late thirteenth payment but can notify Gretchen that any further tender of late payments will constitute a breach. In other words, on notice from Haulers, Gretchen can no longer make late payments without liability.

POINTS: 1 DIFFICULTY: Challenging REFERENCES: Damages LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Decision Modeling United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© True / False 1. A contract for a sale of real property or services is a contract for a sale of goods. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: The Scope of Articles 2 and 2A LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 2. Even if a contract in which goods and services are mixed is primarily a goods contract, any dispute over the services portion will not be decided under the UCC. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Scope of Articles 2 and 2A LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 3. Goods associated with real estate often fall within the scope of Article 2. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: The Scope of Articles 2 and 2A LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 4. The UCC imposes special business standards on casual and inexperienced sellers and buyers. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: The Scope of Articles 2 and 2A LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 5. Goods associated with real estate never fall within the scope of UCC Article 2. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: The Scope of Articles 2 and 2A LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 6. Under the UCC, good faith means honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Formation of Sales and Lease Contracts LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 7. Under the UCC, a sales or lease contract will fail for indefiniteness if one or more terms are left open. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Formation of Sales and Lease Contracts LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 8. If the parties to a contract for a sale of goods have not agreed on a price, a court will determine a reasonable price at the time for delivery.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Formation of Sales and Lease Contracts LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 9. Under the UCC, a firm offer for a sale or lease of goods made by a merchant can be revoked at any time before acceptance. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Formation of Sales and Lease Contracts LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 10. Acceptance of an offer to buy, sell, or lease goods generally may be made in any reasonable manner and by any reasonable means. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Formation of Sales and Lease Contracts LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 11. Merchants are held to a higher standard of performance or duty than are nonmerchants. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Performance Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 12. If goods in every respect conform to a contract, the buyer or lessee does not have a right to reject the goods. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Performance LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 13. Once the time for performance under a contract has expired, the seller or lessor no longer has a right to cure. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Performance LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 14. If, before the time for contract performance, one party clearly communicates to the other the intention not to perform, such an action is not a breach of the contract. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Performance LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 15. Under a shipment contract, if the seller does not make a reasonable contract for transportation or notify the buyer of the shipment, the buyer can reject the goods if a material loss results. a. True Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Remedies for Breach LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 16. A buyer’s failure to cover will bar him or her from using any other remedies available under the UCC. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Remedies for Breach LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Comprehension 17. A buyer who rightfully rejects nonconforming goods may obtain cover or cancel the contact, but may not seek damages. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Remedies for Breach LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 18. The parties to a sales or lease contract can expressly provide for remedies in addition to those provided in the UCC. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Remedies for Breach Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 19. If either the goods or their tender fails to conform to the contract in any respect, the buyer or lessee must reject all of the goods. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Remedies for Breach LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 20. A warranty of good title means that a seller warrants that he or she has valid title to the goods and that transfer of the title is rightful. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Warranties LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 21. Statements of fact made during the bargaining process are express warranties. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Warranties LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 22. An expression of opinion will usually create a warranty. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Warranties LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 23. Goods must be of the highest quality possible to be merchantable. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Warranties LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 24. Merchants are not required to warrant that the goods they sell are fit for their ordinary purpose. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Warranties LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Comprehension 25. In most sales, sellers warrant that they have good and valid title to the goods sold. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Warranties LEARNING OBJECTIVES: LO-4 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 26. Every sale or lease by a merchant who deals in goods of the kind sold or leased automatically gives rise to an implied warranty of merchantability. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Warranties LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 27. Generally, the implied warranties of merchantability and fitness for a particular purpose cannot be disclaimed. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Warranties LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 28. Due care must be exercised in designing a product. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Product Liability LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA: BB-Legal KEYWORDS: Bloom's: Knowledge 29. A manufacturer's duty of care does not extend to the inspection and testing of products bought to incorporate in the final product. a. True b. False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Product Liability LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA: BB-Legal KEYWORDS: Bloom's: Comprehension 30. Misrepresentation on a label is not enough to show an intent to induce the reliance of anyone who may use the product. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Product Liability LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA: BB-Legal KEYWORDS: Bloom's: Application 31. To support the imposition of strict product liability, a product must be mishandled between the time it is sold and the time an injury occurs. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Product Liability LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA: BB-Legal KEYWORDS: Bloom's: Comprehension 32. Sellers or lessors are liable only for products that are reasonably dangerous. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Product Liability LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - BUSPROG: Analytic Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LOCAL STANDARDS: KEYWORDS:

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

33. An action in strict product liability requires that the product not be in a defective condition when the defendant sells it. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Product Liability LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA: BB-Legal KEYWORDS: Bloom's: Knowledge 34. The types of product defects that have traditionally been recognized in product liability law include inadequate warnings. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Product Liability LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA: BB-Legal KEYWORDS: Bloom's: Knowledge 35. A seller must take steps to guard against the foreseeable misuse of a product. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: Product Liability LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA: BB-Legal KEYWORDS: Bloom's: Comprehension Multiple Choice 36. Canyon Creek Corporation is a Delaware-based firm that does business throughout the United States. With respect to this circumstance, the UCC has been adopted by, and applies in, Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© a. a few of the states. b. all of the states, in whole or in part. c. half of the states. d. none of the states, to date.

ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: Introduction LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 37. Ferris is refinishing his kitchen floor and needs a floor sander to complete the job. Ferris’s neighbor Gerda suggests that he call Home Repair Rentals, Inc. Home Repair leases Ferris a floor sander. In this transaction, the lessor is a. Ferris. b. Gerda. c. Home Repair. d. none of the parties.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Scope of Articles 2 and 2A LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 38. Danko sells new and used sports equipment to per-sons who come into his store, Eyes on the Prize. One afternoon, Danko sells a used display shelf to Felipe. At a garage sale at his home, Danko sells a used flat-screen TV to Faye. Under the UCC, Danko is a merchant of a. sports equipment only. b. sports equipment and display shelves only. c. sports equipment, display shelves, and flat-screen TVs. d. anything that he chooses to sell.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Scope of Articles 2 and 2A LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 39. Over the course of a year, Discount Market Company sells goods from its inventory and also sells one of its Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© warehouses. In exchange, Discount receives checks, which Discount uses to repay a loan from Evermore Credit Inc. Article 2 of the UCC governs a. the checks. b. the payment of the loan. c. the sale of the buildings. d. the sale of the goods.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Scope of Articles 2 and 2A LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 40. Fresh Dairy, Inc., is the offeror and Gelato Ice Cream Company is the offeree under a unilateral sales contract in which Hector’s Helado Corporation is also interested. Gelato is not notified of Fresh Dairy’s performance within a reasonable time. Gelato a. may treat the offer as having lapsed. b. must assume that Fresh Dairy has started to perform. c. must contact Fresh Dairy. d. must notify Hector’s.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Formation of Sales and Lease Contracts LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 41. Nature’s Products, Inc., sends its standard order form to Omni Distribution Corporation to evidence a sale of packing materials. Omni responds with its own standard purchase order form. Additional terms in the purchase order automatically become part of the contract unless a. the terms materially alter the original contract. b. the original offer expressly required acceptance of its terms. c. the offeror objects to the new terms within a reasonable time. d. any of the choices.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Formation of Sales and Lease Contracts LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS:

Bloom's: Application

42. iSharp, Inc., and Jenene, the owner of a Kitchen Time shop, orally agree to a sale of knives and other utensils for $12,000. Jenene gives iSharp a check for $4,000 as a partial payment. This contract is a. enforceable to the extent of $4,000. b. fully enforceable because it is for specially selected goods. c. fully enforceable because it is oral. d. not enforceable.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Formation of Sales and Lease Contracts LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 43. Fuel Connector Products, Inc., agrees to sell Go-Flo, Inc., a certain quantity of hose couplings and fittings, but the contract does not specify a place of delivery. Go-Flo is expected to pick up the goods. The place of delivery is a. Fuel Connector’s place of business. b. Go-Flo’s place of business. c. the current location of the hose couplings and fittings. d. the U.S. Postal Service office nearest to Go-Flo’s place of business.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Formation of Sales and Lease Contracts LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 44. Quality Metals Company and Superior Fabrication, Inc., enter into a contract under which Quality Metals agrees to deliver a certain quantity of sheet metal to Superior Fabrication each month. The contract does not include a price term. In a suit between the par-ties over the price, a court will a. determine a reasonable price. b. impose the lowest market price. c. impose the highest market price. d. return the parties to the positions they held before the contract.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Formation of Sales and Lease Contracts LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning©

KEYWORDS:

United States - BUSPROG: Reflective Bloom"s: Application

45. Car n’ Truck Body & Paint Company orders custom paint from Diverse Hues Inc., but Diverse does not deliver. Car n’ Truck will probably be unable to enforce the agreement if the parties omitted a. a price term. b. a payment term. c. a quantity term. d. shipping arrangements.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Formation of Sales and Lease Contracts LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 46. On July 10, Pet Supply Store orders fifty small dog collars from Quality Collars, Inc. to be delivered by July 15. On July 13, Quality Collars tenders fifty large dog collars. Pet Supply rejects the shipment. Quality Collars has a. no right to cure. b. until July 15 to cure. c. until the end of the business day on July 13 to cure. d. unlimited time to cure.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Performance LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 47. Sweet Fruits contracts with Fruits to You, Inc. for a delivery of two hundred pounds of strawberries to be delivered by Keep Kool Trucking, a trucking company with refrigerated trucks. On the day of delivery, the refrigeration units on Keep Kool’s trucks are not working. Fruits to You a. may ship the goods to Sweet Fruits using another trucking company with refrigerated trucks. b. must refund Sweet Fruits’ money and cancel the contract. c. must wait to ship the strawberries until Keep Kool has fixed its trucks. d. must ship the goods through a different carrier and pay Sweet Fruits incidental damages.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Performance LEARNING OBJECTIVES: LO-2 - LO - 2 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 48. Beef Burgers, Inc. contracts to buy five hundred steers from Fattening Feedlots. Before Fattening Feedlots can deliver the steers, there is an outbreak of disease in the feedlot, and all the cattle are quarantined. In this case the perfect tender rule a. applies to both parties. b. does not apply. c. applies only to Beef Burgers. d. applies only to Fattening Feedlots.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Performance LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 49. Shane’s Auto Parts orders twenty tires from Tough Tires, Inc. The truck delivering the tires to Shane’s is in an accident and ten of the tires are damaged. Shane’s Auto Parts a. cannot reject the entire shipment. b. must still pay for all twenty tires at the original contract price. c. may inspect the tires and accept the shipment with a reduction in price. d. must reject the entire shipment.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Performance LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 50. Mantas Moderno Company, which is based in New York, agrees to sell fifty woven carpets, imported from Mexico and currently stored in New Jersey, to NuDecor, Inc., which is based in Connecticut. If the contract does not indicate where the goods will be delivered, the place of deliv-ery is a. New York. b. Mexico. c. New Jersey. d. Connecticut.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: Remedies for Breach LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 51. Coffee Roasters, Inc., sells whole bean and ground coffee to Delicioso Deli under an existing con-tract. When the cost of coffee beans increases, Delicioso agrees to a price increase, but later wants to cancel the con-tract. Delicioso may a. cancel the contract immediately. b. cancel the contract only after accepting a final shipment. c. cancel the contract only on reasonable notice. d. not cancel the contract.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Remedies for Breach LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 52. Commercial Leasing Corporation and Quarry Construction Company enter into a contract for a lease of three excavators. Under the perfect tender rule, Commercial Leasing must ship or tender goods to the lessee that a. approximately conform to the contract description. b. entirely conform to the contract description in most ways. c. conform to the contract description in every way. d. substantially conform to the contract description.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Remedies for Breach LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 53. Fruit of the Plant, Inc., agrees to sell a certain quantity of a high-quality grain seed to Grange Co-op. Fruit of the Plant can obtain only half of the quantity ordered, so the seller also ships a lesser quality seed in twice the amount of the remainder of the order for the same price. Grange Co-op rejects the lesser quality seed. With time for performance not yet expired, Fruit of the Plant can a. attempt to cure the defect. b. cancel the contract.

Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© c. recover the purchase price plus incidental damages. d. resell or dispose of the goods and hold Grange Co-op liable for any loss.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Remedies for Breach LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Appllication Fact Pattern 12-1 Daily Bread Bakeries, Inc., contracts to buy all of its ingredient requirements for bread making, at a certain minimum per year, from Enriched Flour & Grain Corporation for six years. After three years, Daily Bread tells Enriched that it plans to sell its assets to Flat Bread Shops, Inc. Flat Bread refuses to assure Enriched that it will continue Daily Bread’s contract.

54. Refer to Fact Pattern 12-1. Flat Bread’s refusal is a. a justified response based on Flat Bread’s relation to the contract. b. an assignment of Daily Bread’s rights under the contract. c. a reasonable suspension of performance under the contract. d. a repudiation of the contract.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Remedies for Breach LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 55. Refer to Fact Pattern 12-1. Enriched can a. assign its rights under the contract but cannot terminate it. b. terminate the contract and seek damages. c. suspend performance under the contract until Enriched is fully paid. d. do nothing.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Remedies for Breach LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS:

Bloom's: Application

56. Hydro Source Company contracts to sell pumps, tanks, and water storage systems to Inflo Irrigation, Inc. Before the goods are delivered, Inflo indicates that it will not be able to pay. Hydro Source can a. force Inflo to accept and pay for the goods. b. require Inflo to find a buyer for the goods. c. resell the goods and recover any damages from Inflo. d. do nothing.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Remedies for Breach LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 57. Precious Stones, Inc., and Sparkling Jewelry stores enter into a contract for a sale of gemstones. Precious Stones does not deliver. The buyer can normally recover as damages the difference between a. any loss avoided and any profit gained. b. the actual price and the hoped-for price. c. the contract price and the market price. d. the current prices in the parties’ locations.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Remedies for Breach LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 58. Arnold buys a backhoe from Big Dig Equipment Inc. Arnold is unaware that Credit Collection Company holds a lien against the backhoe when he buys it. If Credit Collection repossesses the backhoe, Arnold can a. recover from Big Dig for breach of warranty. b. do nothing. c. file criminal charges against Big Dig and Credit Collection. d. recover damages from Credit Collection for breach of warranty.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Warranties LEARNING OBJECTIVES: LO-4 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 59. Riverside Ranch is a horse breeding facility. Steed Stables is a customer looking for a new stallion for its breeding program. Riverside’s representative Tomas shows Steed a stallion that he says is very fertile and can easily breed twenty mares per year. This statement is a. an express warranty. b. an implied warranty. c. a warranty of title. d. puffery.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Warranties LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 60. Livestock Feedlot orders one hundred sacks of cattle feed from MegaNutrient Feed, Inc. Each sack is stamped with the phrase “Twenty percent protein.” This is a. an express warranty. b. an implied warranty. c. a warranty of title. d. puffery.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Warranties LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 61. Chord Guitars Inc. sells guitars and other stringed instruments to consumers. A Chord salesperson says to a potential customer, “This Chord is the best guitar you’ll find anywhere, even online.” This statement is a. an implied warranty of fitness for a particular purpose. b. an implied warranty of merchantability. c. an express warranty. d. none of the choices.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Warranties Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 62. Trucks & Trailers, Inc. (T&T), and United Delivery Service enter into a contract for a lease of trucks. T&T is a merchant who deals in goods of the kind leased. Under the UCC, an implied warranty of merchantability arises a. automatically. b. only if the lessee asks for such a warranty. c. only if the lessor expresses such a warranty. d. only in conjunction with sales contracts, not lease contracts.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Warranties LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 63. Construction Products Company and Dante enter into a contract for a sale of bricks and stones. Construction Products knows the purpose for which Dante will use the goods. Under the UCC, an implied warranty of fitness of a particular purpose arises a. if the buyer is relying on the seller to select suitable goods. b. if the buyer asks for it. c. if the seller is a merchant who deals in goods of the kind sold. d. in conjunction with lease contracts, not sales contracts.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Warranties LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 64. Welding Systems, Inc. (WSI), makes welding torches, masks, and related products. A WSI product may be unreasonably dangerous due to a. a defect in its design. b. the expectations of its seller. c. the intentions of its distributor. d. the method of accounting of its maker.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: Product Liability LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA: BB-Legal KEYWORDS: Bloom's: Comprehension 65. Green Glass Corporation makes glass bottles for food and beverage makers to package their products for wholesale distribution and retail sale. Liability may be imposed on Green Glass based on a. the "reasonableness" of the manufacturer's quality control efforts. b. the type of the manufacturer's insurance coverage. c. a manufacturing defect. d. the opinion and testimony of non-experts.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Product Liability LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA: BB-Legal KEYWORDS: Bloom's: Application 66. Horizon Corporation makes cell phones. Gina files a product liability suit against Horizon, alleging a design defect. In deciding whether to hold Horizon liable, the court may consider the "reasonableness" of a. the manufacturer's intentions. b. the seller's method of accounting. c. the manufacturer's quality control efforts. d. an available alternative design.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Product Liability LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA: BB-Legal KEYWORDS: Bloom's: Application 67. Country Style, Inc., makes landscaping tools. Country could be liable for a warning defect if there is a foreseeable risk of harm posed by a product and a. the omission of a warning renders the product not reasonably safe. b. there is a reasonable alternative design. c. there is a lack of care in making of the product. d. there is insufficient insurance coverage.

ANSWER: a POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Easy REFERENCES: Product Liability LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA: BB-Legal KEYWORDS: Bloom's: Knowledge 68. The brakes on Dirk’s Tour de Valle bicycle malfunction, but he continues to ride it because he likes the thrill of the unstoppable acceleration. One night, enjoying a fast downhill pace, he speeds through a stop sign and is struck by a truck.

In Dirk’s suit against Tour de Valle, the bike maker can raise the defense of a. comparative negligence. b. assumption of risk. c. commonly known dangers. d. product misuse.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Product Liability LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA: BB-Legal KEYWORDS: Bloom's: Application 69. Furious Toyz Corporation makes skateboards, which it sells to consumers, including Gitana. Gitana is injured due to a defect in the board that causes an accident in which Haley, a bystander, is also injured. In a product liability suit based on strict product liability, Furious Toyz may be liable to a. Gitana and Haley. b. Gitana only. c. Haley only. d. no one.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Product Liability LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA: BB-Legal KEYWORDS: Bloom's: Application 70. Toyoda Company buys gas pedals and other parts from subcontractors and puts them in its vehicles without changing their composition. If the pedals or other parts are defective, strictly liable for any damage caused by the defects are a. neither Toyoda nor the subcontractors. b. Toyoda and the subcontractors. c. the subcontractors only.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© d. Toyoda only.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Product Liability LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA: BB-Legal KEYWORDS: Bloom's: Application Essay 71. Key of G Products, Inc., offers to sell to Harmony Company one hundred MP3 players at $50 a piece, subject to certain specific delivery dates. Harmony replies with a signed purchase order that reads, “Accept your of-fer for 100 Iappliances at $50 each. Must be delivered to our ware-house.” Key of G does not respond or deliver the goods. Harmony files a suit for breach of contract, to which Key of G answers that there is no contract because Harmony’s purchase order contained additional terms and is not signed by Key of G. Can Harmony recover? Explain.

ANSWER: Additional or different terms in an unconditional ac-cep-tance, which is otherwise definite and timely, are interpreted as pro-pos-als for additional terms to a contract, unless the contract is between mer-chants. In that situation, the terms become part of the contract unless (1) the offer expressly limits acceptance to its terms, (2) the addi-tional terms materially alter the contract, or (3) the offeree objects to the addi-tional terms within a reasonable time.

Here, the offer did not ex-pressly limit the acceptance, the extra terms did not materially change the con-tract, and Key of G did not object within a reasonable time. If either or both of the par-ties is not a merchant, a contract is formed according to the terms of the original offer. Thus, here, the additional term (delivery to Harmony’s warehouse) would have become part of the contract even if one or both parties had not been merchants.

Key of G’s Statute of Frauds claim (that the purchase order was not signed by Key of G) also fails. For a con-tract for a sale of goods between merchants, when one party sends a writ-ten con-firmation within a reasonable time after terms have been reached orally, the confirmation is binding unless the recipient objects within ten days of receipt. The merchant receiving the communication must have reason to know its contents, but it needs to be signed only by the party who sends it. Here, Key of G received the signed writing, but did not object within the ten days.

POINTS: 1 DIFFICULTY: Challenging REFERENCES: Formation of Sales and Lease Contracts LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - BB_17.3 - BB-Decision Modeling United States - BUSPROG: Reflective KEYWORDS: Bloom's: Analysis 72. VuPlay Company contracts to deliver one hundred 60-inch 3D HD television sets to a new retail customer, Watchbox Store, on May 1, with payment to be made on delivery. VuPlay tenders delivery in its own truck. Watchbox’s manager notices that some of the cartons have scrape marks. Watchbox’s owner phones VuPlay’s office and asks whether the sets might have been damaged as they were being loaded. VuPlay assures Watchbox that the sets are in perfect condition.

Watchbox tenders VuPlay a check, which VuPlay refuses, claiming that the first delivery to new customers is always for cash. Watchbox promises to pay the cash within two days. VuPlay leaves the sets with Watchbox, which stores them in Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© its warehouse pending its "Grand Opening Sale" on May 15. Two days later, Watchbox’s stocker opens some of the cartons and discovers that a number of the sets are damaged beyond ordinary repair. VuPlay claims Watchbox has accepted the sets and is in breach by not paying on delivery. Will VuPlay succeed on these claims? Explain.

ANSWER: VuPlay will lose on both claims.

Acceptance of the goods by a buyer takes place when the buyer either signifies that the goods are conforming after inspection or fails to reject af-ter a reasonable time for inspection or acts inconsistently with the seller’s ownership. Once the goods are accepted, the buyer loses the right to revoke acceptance of noncon-forming goods unless acceptance was based on a reasonable assurance that the goods were conforming.

In this question, although Watchbox accepted the goods, it did so on VuPlay’s assurance that the sets were in perfect condition. Thus, on discovery of the damaged sets, Watchbox can revoke acceptance on the basis of substantial im-pairment of value.

In addition, although the contract called for payment on delivery, no method of payment was specified. Therefore, tender of payment is sufficient if it is by any means currently used in the ordinary course of business—a check is such a means. VuPlay does have a right to demand cash but must give Watchbox a reasonable extension of time in which to procure the cash. Thus, VuPlay’s claim of Watchbox’s breach for non-payment on delivery is not valid.

POINTS: DIFFICULTY: REFERENCES:

1 Challenging Formation of Sales and Lease Contracts Performance Remedies for Breach LEARNING OBJECTIVES: LO-2 - LO - 2 LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - BB_17.3 - BB-Decision Modeling United States - BUSPROG: Reflective KEYWORDS: Bloom's: Analysis

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© True / False 1. With a mechanic’s lien, real estate becomes security for a debt. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Laws Assisting Creditors LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 2. If a debtor does not pay a mechanic’s lien, the debtor’s property can be sold to sat-isfy the debt. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Laws Assisting Creditors LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 3. A writ of execution applies to a debtor’s nonexempt real or personal property wherever located. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Laws Assisting Creditors LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 4. If a creditor wins a judgment against a debtor and the debtor will not or cannot pay the amount due, the dispute is at an end. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: Laws Assisting Creditors LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 5. There is no limit to the amount that can be taken from a debtor’s weekly take-home pay through garnishment. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Laws Assisting Creditors LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 6. Only a few types of property—a debtor’s wages or bank account, for example—can be garnished. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Laws Assisting Creditors LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 7. Liens generally take priority over other claims against the same property. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Laws Assisting Creditors LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Risk Analysis KEYWORDS: Bloom's: Knowledge 8. A fixed-rate mortgage is a standard mortgage with a rate of interest that changes periodically. a. True b. False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Mortgages LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 9. If a homeowner defaults, or fails to make the mortgage payments, the lender has the right to foreclose on the mortgaged property. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Mortgages LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 10. Foreclosure is the legal process by which a lender repossesses and auctions off property that has secured a loan. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Mortgages LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 11. The lender does not have to strictly comply with the state statute governing foreclosure—substantial compliance is sufficient. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Mortgages LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS:

Bloom's: Comprehension

12. A surety can be required to pay an obligation only after the principal debtor defaults and usually only after the creditor has made an attempt to collect from the debtor. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Laws Assisting Creditors LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 13. When a surety or guarantor pays a debt owed to a creditor, he or she acquires any right that the creditor had against the debtor. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Laws Assisting Creditors LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 14. A surety is entitled to receive from the debtor the actual amount of the debt paid to the creditor on behalf of the suretyship arrangement but not other expenses incurred. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Laws Assisting Creditors LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 15. A guaranty contract must always be in writing to be enforceable. a. True b. False ANSWER: False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© POINTS: 1 DIFFICULTY: Easy REFERENCES: Laws Assisting Creditors LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 16. A homestead exemption allows a debtor to subtract the value of the family home from the amount of a debt. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Protection for Debtors LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 17. Personal property that is most often exempt from satisfaction of judgment debts does not include equipment that the debtor uses in a business or trade. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Protection for Debtors LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 18. One goal of bankruptcy law is to ensure equitable treatment of creditors who are competing for a debtor’s assets a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Bankruptcy Law LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS:

Bloom's: Knowledge

19. Rulings from bankruptcy courts are final—they cannot be appealed. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Bankruptcy Law LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 20. The clerk of a bankruptcy court must provide consumer-debtors with information on the types of services available from credit counseling agencies. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Chapter 7—Liquidation LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 21. The means test forces more people to file for Chapter 7 bankruptcy rather than gave their debts discharged under Chapter 13. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Chapter 7—Liquidation LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 22. An involuntary bankruptcy occurs when the debtor forces his or her creditors into bankruptcy proceedings. a. True Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Chapter 7—Liquidation LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 23. An individual debtor cannot exempt or exclude any property from the bankruptcy. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Chapter 7—Liquidation LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 24. An involuntary bankruptcy occurs when a debtor’s creditors are forced to accept a discharge of the debtor’s debts. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Chapter 7—Liquidation LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 25. When a debtor has no assets, creditors are notified of the debtor’s petition for bankruptcy but are instructed not to file a claim. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Chapter 7—Liquidation Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 26. In the distribution of the debtor’s estate, unsecured creditors take priority over secured creditors. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Chapter 7—Liquidation LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 27. Certain debtors may not qualify to have all debts discharged in bankruptcy. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Chapter 7—Liquidation LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 28. A bankruptcy court may deny a discharge based on a debtor’s conduct. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Chapter 7—Liquidation LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 29. In a Chapter 11 case, the court cannot confirm a reorganization plan over the objections of a class of creditors. a. True Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Chapter 11—Reorganization LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 30. Generally, in a Chapter 11 case, no orders affecting the estate will be entered without the consent of the creditors’ committee or after a hearing in which the judge is informed of the committee’s position a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Chapter 11—Reorganization LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 31. For individual debtors, the plan in a reorganization case must be completed before discharge will be granted. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Chapter 11—Reorganization LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 32. If the circumstances indicate bad faith, a court can dismiss a debtors’ Chapter 13 petition. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Bankruptcy Relief under Chapter 12 and Chapter 13 LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning©

KEYWORDS:

United States - BUSPROG - Analytic - BUSPROG: Analytic Bloom's: Knowledge

33. In putting together a repayment plan under Chapter 13, a debtor must apply the means test to identify the amount of disposable income that will be available to repay creditors. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: Bankruptcy Relief under Chapter 12 and Chapter 13 LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Comprehension 34. In a repayment plan case, the plan must provide for payment of all obligations in full. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Bankruptcy Relief under Chapter 12 and Chapter 13 LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 35. The procedure for filing a family-farmer bankruptcy plan is very similar to the proce-dure for filing a repayment plan. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Bankruptcy Relief under Chapter 12 and Chapter 13 LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge Multiple Choice 36. Portia owes Bon $500 on their roof repair contract, but refuses to pay. To collect, Bon files a mechanic’s lien. Under a mechanic’s lien, security for the debt is represented by a. Portia’s personal property.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. Portia’s real estate. c. the $500 owed under the contract. d. the contract.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Laws Assisting Creditors LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Risk Analysis KEYWORDS: Bloom's: Application 37. At Riley's request, Speedy Auto Repair fixes his car, but he does not pay for the work. Speedy imposes a lien on the car. The lien will end a. in thirty days. b. in sixty days. c. if Speedy voluntarily surrenders possession of the car. d. if Riley obtains possession of the car, with or without Speedy's consent.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Laws Assisting Creditors LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Risk Analysis KEYWORDS: Bloom's: Application 38. A court awards a judgment to Loan Collection Agency, who is the creditor, against Margret, who is the debtor. After the judgment, the creditor requests a court order to seize Margret’s property to ensure that the judgment will be collectible. This is a. a judicial lien. b. a writ of attachment. c. a writ of execution. d. a violation of most state laws.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging REFERENCES: Laws Assisting Creditors LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Risk Analysis KEYWORDS: Bloom's: Application 39. Sasha’s debt to Tully is past due. Tully brings a legal action against Sasha to collect the debt. To ensure that a judgment in Tully’s favor will be collectible, he asks the court to order the seizure of Sasha’s property. This is a request Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© for a. a contract of suretyship. b. an order that would violate most state laws. c. a writ of attachment. d. an order of receivership.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Laws Assisting Creditors LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 40. Ronaldo’s debt to Sofia is past due. Ronaldo obtains a judgment against Sofia to collect the debt, but Sofia will not pay. Ronaldo requests a writ of execution. The property that is seized under the writ of execution must be a. in Ronaldo’s possession. b. in Sofia’s possession. c. in the possession of Sofia’s employer or other third party. d. located within the court’s geographic jurisdiction.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging REFERENCES: Laws Assisting Creditors LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Risk Analysis KEYWORDS: Bloom's: Application 41. Nell’s debt to Olsen is past due. Olsen obtains an order of garnishment to require Nell’s employer Pro Transmission Service, Inc., to pay part of Nell’s paycheck to Olsen. The law a. limits the amount that can be taken from Nell’s take-home pay. b. permits Olsen to dismiss Nell because her wages are garnished. c. practically does not allow Olsen to collect the awarded amount. d. requires Pro to retain Nell as an employee until the debt is paid.

ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: Laws Assisting Creditors LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 42. Dina asks Edie to co-sign a credit application so that she can borrow money and buy a piano from First Chair, a Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© musical instruments and supplies seller. If, after the loan agreement is signed, Dina agrees to a higher rate of interest without telling Edie, then Edie is a. discharged from the agreement. b. liable at the higher rate of interest. c. liable at the lower rate of interest. d. liable for the principal only.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging REFERENCES: Laws Assisting Creditors LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Risk Analysis KEYWORDS: Bloom's: Application 43. Jordan is a surety for Kelly’s loan from Lenders Credit Corporation. When the loan comes due, Kelly tries to pay Lenders Credit, but the creditor rejects the payment. Jordan is a. released from any obligation on the debt. b. required to pay the amount of the debt to Lenders Credit. c. required to pay up to half of the amount of the debt to Lenders Credit. d. required to pay the amount of the debt to Kelly.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging REFERENCES: Laws Assisting Creditors LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Risk Analysis KEYWORDS: Bloom's: Application 44. Fleet Trucking, LLC, buys a white van from Go Motors, Inc. , on credit under a guaranty signed by Herbie, Fleet’s president, making him personally liable if the company does not pay. Herbie is a. a surety. b. a lienor. c. a guarantor. d. a creditor.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Laws Assisting Creditors LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 45. George borrows funds from Hometown Credit Union (HCU) to buy real property. George signs a written instrument that gives HCU an interest in the property as security for the debt’s payment. This is a. a mortgage. b. an artisan’s lien. c. a workout agreement. d. a suretyship arrangement.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Mortgages LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Risk Analysis KEYWORDS: Bloom's: Application 46. Ridgeline Bank provides Shirley with a mortgage to buy a home. The rate of interest is fixed for three years and then adjusts annually. This is a. a fixed-rate mortgage. b. an adjustable-rate mortgage. c. a creditor’s composition agreement. d. a guaranty agreement.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Mortgages LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Risk Analysis KEYWORDS: Bloom's: Application 47. Erin and Dooley, a married couple, borrow $120,000 from Capital & Credit Bank to buy a home. When Erin and Dooley divorce, they are unable to make payments on the mortgage. The market value of the home has declined to less than the balance of the loan. Capital & Credit agrees to a sale of the property for this amount. This is a. a prepayment penalty. b. forbearance. c. foreclosure. d. a short sale.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging REFERENCES: Mortgages LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Risk Analysis KEYWORDS: Bloom's: Application Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning©

48. Vito borrows $110,000 from Watershed Bank to buy a home. If he fails to make payments on the mortgage, the bank has the right to repossess and auction off the property securing the loan. This is a. a short sale. b. forbearance. c. foreclosure. d. the right of redemption.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Mortgages LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Risk Analysis KEYWORDS: Bloom's: Application 49. Gena borrows $350,000 from Fish Island Bank to buy a home, which secures the mortgage. In the seventh year of the loan, Gena stops making payments. After the bank repossesses the property but before it is sold, Gena may buy it by paying a. an amount that equals the potential proceeds from the property’s sale. b. an amount that exceeds the potential proceeds from the property’s sale. c. the amount of the missed payments, but not more. d. the full amount of the debt, plus any interest and costs.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging REFERENCES: Mortgages LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Risk Analysis KEYWORDS: Bloom's: Application 50. Denise borrows $90,000 from Clear Lake Credit Union to buy a home. Denise loses her job and fails to make payments on the mortgage, but assures Clear Lake Credit that she will soon secure a new job. The lender agrees to postpone the payments. This is a. a right of redemption. b. a forbearance. c. a short sale. d. a workout agreement.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Mortgages LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning©

KEYWORDS:

United States - BUSPROG: Reflective Bloom's: Application

51. Beatrix defaults on a debt to Credit Loan Corporation (CLC). As a creditor, CLC can place liens on all of Beatrix’s property except a. motor vehicles used to commute to work. b. stock in various corporations. c. items that the debtor selects. d. vacant commercial property.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging REFERENCES: Protection for Debtors LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Risk Analysis KEYWORDS: Bloom's: Application 52. Nancy joins with other creditors to force Odette, a debtor, into bankruptcy. One of the goals of bankruptcy law with respect to creditors is to a. provide that creditors will continue to lend to insolvent debtors. b. protect creditor assets from diminution in value. c. ensure equitable treatment of creditors who are competing for a debtor’s assets. d. make all debtor property available for creditors.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Bankruptcy Law LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Risk Analysis KEYWORDS: Bloom's: Application 53. Bess wishes to appeal a decision of a bankruptcy court. Bess may appeal to a. no court—there is no appeal from a bankruptcy court decision. b. a federal district court. c. the U.S. Supreme Court. d. a state court.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Bankruptcy Law LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Risk Analysis KEYWORDS: Bloom's: Application 54. Roland files a petition in bankruptcy. After all his assets have been sold and the proceeds distributed among his creditors, Roland’s remaining debts a. are discharged. b. will be paid by the court. c. must be paid by Roland. d. are put on hold until Roland has sufficient means to pay ths.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Chapter 7—Liquidation LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Risk Analysis KEYWORDS: Bloom's: Application 55. Charlton files a petition in bankruptcy in a liquidation proceeding. If the court administers the means test and concludes that Charlton is abusing the bankruptcy process by filing for a liquidation, most likely a. Charlton will be forced to file for relief through an individual repayment plan. b. the court will discharge Charlton’s debts. c. the court will distribute Charlton’s property to Charlton’s creditors. d. the court will issue an automatic stay against any actions by Charlton’s creditors.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Chapter 7—Liquidation LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 56. Gerald files a petition in bankruptcy. An automatic stay will apply to actions by creditors seeking to collect Gerald’s debts comprised of a. alimony. b. child-support. c. none of the choices. d. car payments.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: Chapter 7—Liquidation LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Risk Analysis KEYWORDS: Bloom's: Application 57. Norma files a petition in bankruptcy. She turns her assets over to O’Brien, who sells them and then distributes the proceeds to Norma’s creditors. O’Brien is a a. preferred creditor. b. bankruptcy court judge. c. bankruptcy trustee. d. debtor.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Chapter 7—Liquidation LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Risk Analysis KEYWORDS: Bloom's: Application 58. Leif files a petition in bankruptcy. Among his debts are unpaid taxes, fines owed to the government, student loans owed to Metro University, and support owed to his ex-wife Nadia. Most likely to be discharged are a. back taxes accrued within the previous three years. b. fines outstanding less than eight years. c. student loans whose payment would impose undue hardship. d. spousal-support debts unpaid for more than eighteen months.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging REFERENCES: Chapter 7—Liquidation LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Risk Analysis KEYWORDS: Bloom's: Application 59. Sheri files a petition for bankruptcy. She must include with the petition a. a plan to turn over her future income to a trustee. b. a certificate proving credit-counseling from an approved agency. c. a provision of adequate means to make periodic cash payments to creditors. d. a statement of preference for one creditor over another.

ANSWER: b POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Moderate REFERENCES: Chapter 7—Liquidation LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application Fact Pattern 13-1 Damian owns a pick-up truck and a motorcycle. He sells the motorcycle to Eden for $10,000. Eden pays for the cycle with a check, knowing that she had insufficient funds in her account to cover the amount. A week later, Damian files a petition in bankruptcy for relief through a liquidation.

60. Refer to Fact Pattern 13-1. Regarding the sale of the cycle, the bankruptcy trustee can a. cancel it as a fraudulent transfer. b. cancel it as a voidable preference. c. not cancel it or sue to recover the price because it occurred before Damian filed his petition in bankruptcy. d. not cancel it, but can sue Eden to recover the price.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Chapter 7—Liquidation LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 61. Refer to Fact Pattern 13-1. Regarding the pick-up truck, Damian a. can exempt an interest in it up to $3,675 from the bankruptcy. b. must include it as part of the estate because Damian sold the cycle. c. must include it as part of the estate because Eden’s check did not cover the cost of the cycle. d. must include it as part of the estate unless the trustee recovers the price from Eden.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Chapter 7—Liquidation LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 62. Milos files a petition in bankruptcy. His dischargeable debts include a. domestic-support obligations. b. student loans unless the lender would suffer undue hardship.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© c. court costs, trustee fees, and attorney’s fees associated with the bankruptcy. d. unsecured credit-card debt.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Chapter 7—Liquidation LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 63. Paxton agrees to pay QuikChek Lenders a debt that is otherwise dis-chargeable in bankruptcy. This is a. a reaffirmation. b. a rescission. c. a reorganization. d. a revocation.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Chapter 7—Liquidation LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 64. Wild River Tours Corporation wants to formulate a plan under which it pays a portion of its debts and is discharged of the remainder while continuing in business. To accomplish this goal, Wild River should file a petition in bankruptcy for relief through a. a liquidation. b. a reorganization. c. a repayment plan. d. a family-farmer bankruptcy plan.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Chapter 11—Reorganization LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 65. Shale Oil, Inc., files a petition in bankruptcy for relief through a reorganization and assumes the role of a debtor in possession. In this role, Shale Oil is simi-lar to a. a creditor at a creditors’ meeting. b. an individual debtor who is denied a discharge under the means test.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© c. a secured creditor in possession of collateral. d. a trustee in a liquidation.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Chapter 11—Reorganization LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 66. Dorothy files a petition for bankruptcy in bankruptcy for relief through an individual’s repayment plan. If she is granted a discharge, debts that will most likely be discharged include a. claims not provided for by the plan. b. payments on retirement accounts. c. claims for domestic support obligations. d. credit-card debt incurred more than one year before filing.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging REFERENCES: Bankruptcy Relief under Chapter 12 and Chapter 13 LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Risk Analysis KEYWORDS: Bloom's: Application 67. To adjust debt and institute a repayment plan, Bianca—who is not a corpo-ration, a partnership, or a family farmer or fisherman—may file a peti-tion in bankruptcy for relief through a. a liquidation. b. a reorganization. c. a repayment plan. d. a family-farmer bankruptcy plan.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Bankruptcy Relief under Chapter 12 and Chapter 13 LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 68. Eduardo is a debtor. Furniture Mart is Eduardo’s employer. Guaranty Credit, Inc., and the government are Eduardo’s creditors. For these parties, a petition in bankruptcy for relief through an individual’s repayment plan could be filed by a. Eduardo alone, Furniture Mart alone, or Guaranty Credit and the government jointly. b. Eduardo only.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© c. Guaranty Credit and the government only. d. the government only.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging REFERENCES: Bankruptcy Relief under Chapter 12 and Chapter 13 LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Risk Analysis KEYWORDS: Bloom's: Application 69. Philo files a petition in bankruptcy for relief through an individual’s repayment plan. He is granted a discharge. Debts that will not be discharged include claims for a. all debts provided for by the plan. b. money owed for services rendered. c. allowed claims not provided for by the plan. d. credit-card debt.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Bankruptcy Relief under Chapter 12 and Chapter 13 LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Appllication 70. To adjust debt and institute a repayment plan, Delton, a family fisherman in the Gulf of Mexico, may file a petition in bankruptcy for relief under the Bankruptcy Code’s Chapter a. 1. b. 3. c. 5. d. 12.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Bankruptcy Relief under Chapter 12 and Chapter 13 LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application Essay 71. Big Data Enterprises borrows $10,000 from Creditworthy Loans, Inc., but cannot repay the loan when it comes due.

Creditworthy refuses to ex-tend the time for repayment unless Big Data can provide an acceptable surety. Dependable Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© Capital, LLC, agrees to act as a surety for the loan af-ter Big Data offers Dependable a stake in the company and shows Dependable financial statements, compiled with Creditworthy’s assistance, that misrepresent Big Data’s financial situation. Later, Big Data again defaults on repayment of the loan, and Creditworthy files a suit against Dependable to collect the amount of the debt. Is Dependable liable? Why or why not?

ANSWER: No, Dependable is not liable, because Big Data committed fraud in obtaining Dependable’s agreement to serve as surety and Creditworthy knew about, and assisted in, the fraud.

A surety is released from an obligation to pay a debt that he or she agreed to pay if the creditor fraudulently induced the surety to guarantee the debt. The surety can assert the fraud as a defense.

In this problem, the debtor defrauded the surety, but the debtor did it with the help of the creditor. Thus, the creditor could not claim to be innocent of the fraud. Even if the creditor had only known about the fraud, and had not ac-tively partici-pated by supplying the financial statements that misrepre-sented the debtor’s financial condition, the surety could still avoid liabil-ity because nondisclosure of a material fact is a form of fraud.

POINTS: 1 DIFFICULTY: Challenging REFERENCES: Laws Assisting Creditors LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Decision Modeling United States - BUSPROG: Reflective KEYWORDS: Bloom's: Analysis 72. Federal Bank is a secured party on a $50,000 loan to Gigi, who owns Home HealthCare, an assisted living facility.

When Gigi experiences financial difficulty, creditors other than Federal Bank petition her into involuntary bankruptcy.

The value of the secured collateral has substantially decreased in value. On its sale, the debt to Federal Bank is reduced to $25,000. Gigi’s estate consists of $100,000 in exempt assets and $20,000 in nonexempt assets. After the bankruptcy costs and back wages to Gigi’s employees are paid, nothing is left for unsecured creditors. Gigi receives a discharge in bankruptcy. Later she decides to go back into business. By selling a few exempt assets and getting a small loan, she is able to buy Indulgence, a small, profitable nightclub. Gigi goes to Federal Bank for the loan. The bank claims that the balance of its secured debt was not discharged in Gigi’s bankruptcy. She signs an agreement to pay Federal Bank the $25,000, and the bank makes a new unsecured loan to her. Is Federal Bank correct that the balance of its secured debt was not discharged in bankruptcy? What is the legal effect of Gigi’s agreement to pay the bank $25,000 after the discharge in bankruptcy?

ANSWER: A secured creditor is entitled to priority to the proceeds from the dis-posal of the secured collateral of the bankrupt debtor up to the amount of the debt owed. Should the proceeds not cover the secured debt, the secured party be-comes an unsecured creditor for the balance.

Unless the debtor is denied a dis-charge in bankruptcy, all debts of the debtor are rendered void on the grant-ing of the discharge. In this case, Federal Bank is incor-rect. Federal Bank became an unsecured creditor to the balance of $25,000 owed. Gigi’s discharge in bankruptcy discharged her obligation to pay the debt.

The Bankruptcy Code restricts the legality of reaffirma-tions—agreements to pay debts discharged in bankruptcy. For these agree-ments to be binding, they must be executed before the discharge in bankruptcy is granted. All reaf-firmation agreements must be filed with the court. Unless the debtor (Gigi) is repre-sented by an attorney, court approval is required.

The court will only approve the reaf-firmation if the agreement will not cause the debtor a hardship and is in her best interests. If Gigi is represented by an attor-ney, the attorney must file a declaration or affidavit stat-ing that Gigi was fully informed of the consequences, the agreement was voluntarily made, and the agreement does not impose a hardship on Gigi or her de-pendents. Gigi has a right to rescind this agreement. Because the reaffirma-tion agreement in this case was made after Gigi’s discharge in bankruptcy, she is not le-gally Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© obligated to pay the $25,000 debt previously discharged in bankruptcy.

POINTS: 1 DIFFICULTY: Challenging REFERENCES: Chapter 7—Liquidation LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Decision Modeling United States - BUSPROG: Reflective KEYWORDS: Bloom's: Analysis

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© True / False 1. The simplest form of business is a sole proprietorship. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Sole Proprietorships LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 2. A sole proprietor owns the entire business but does not receive all of the profit. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Sole Proprietorships LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 3. A sole proprietorship lacks continuity on the death of the proprietor. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Sole Proprietorships LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 4. A sole proprietor has unlimited liability for all obligations that arise in doing business. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: Sole Proprietorships LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 5. A sole proprietor pays personal and business income taxes on the business’s profits. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Sole Proprietorships LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 6. A sharing of profits from the ownership of property creates a presumption that a partnership exists. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Partnerships LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 7. Federal law permits a partnership to be treated as an entity in suits in federal courts. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Partnerships LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 8. A partner's profit from a partnership is taxed as income to the firm. a. True Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Partnerships LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 9. Withdrawal from a partnership for a term prematurely does not constitute a breach of the partnership agreement. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Partnerships LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 10. Under no circumstances can a non-partner be regarded as an agent whose acts are binding on the partnership. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Partnerships LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 11. In a general partnership, the partners are personally liable for the debts of the partnership. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Partnerships LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LOCAL STANDARDS: KEYWORDS:

United States - OH - Default City - AICPA Legal Bloom's: Knowledge

12. Unlike most agents, each partner in a partnership has an ownership interest in the firm. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Partnerships LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 13. The majority rule controls decisions on ordinary matters connected with partnership business. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Partnerships LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 14. A partner owes to the partnership and the other partners a duty of loyalty. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Partnerships LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 15. A partner who pursues his or her own interests automatically violates the partner's fiduciary duties to the partnership. a. True b. False ANSWER: False POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Easy REFERENCES: Partnerships LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 16. A partner always has the power and the right to dissociate from the partnership. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Partnerships LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 17. On a partner’s dissociation, his or her right to participate in the management and conduct of the partnership business terminates. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Partnerships LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 18. The departure of a partner will always end the partnership. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Partnerships LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 19. A limited liability partnership allows its partners to avoid personal liability for the malpractice of other partners. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Limited Liability Partnerships LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 20. In a limited partnership, a limited partner is personally liable to the partnership's creditors. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Limited Partnerships LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 21. Limited liability companies (LLCs) are governed by state LLC statutes. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Limited Liability Companies LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 22. A limited liability company can be taxed as a partnership. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Limited Liability Companies Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 23. For federal income tax purposes, one-member limited liability companies are automatically taxed as sole proprietorships. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Limited Liability Companies LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 24. The liability of the members of a limited liability company is limited to the amount of their investments. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Limited Liability Companies LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 25. A limited liability company must be managed by non-member managers. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Limited Liability Companies LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 26. Some states provide that in the absence of an agreement to the contrary each member of a limited liability company has one vote.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Limited Liability Companies LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 27. As with partnerships, a court can order a limited liability company to dissolve in certain circumstances. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Limited Liability Companies LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 28. When a member dissociates from a limited liability company, the member's duty of loyalty continues. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Limited Liability Companies LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 29. Normally, a dissociated member of a limited liability company (LLC) has the right to have his or her interest in the LLC bought by the other members. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Limited Liability Companies LEARNING OBJECTIVES: LO-5 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 30. Laws governing franchising are designed in part to prevent franchisors from terminating franchises without good cause. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Franchises LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 31. The franchise relationship is defined by a contract. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Franchises LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 32. Typically, the franchisee determines the territory to be served by the franchise. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Franchises LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 33. Good faith and fair dealing are important in terminating a franchise relationship. a. True b. False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Franchises LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 34. The federal government regulates franchising through laws that apply to specific industries. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Franchises LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 35. As a general rule, the validity of a provision permitting the franchisor to establish and enforce certain quality standards is questionable. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Franchises LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge Multiple Choice 36. Bernie wants to go into the business of construction contracting. Among the reasons that would probably convince Bernie to set up his business as a sole proprietorship would be a. its greater flexibility. b. its limited liability. c. its perpetual existence. d. the ease of transferring the business to other family members.

ANSWER: a POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Moderate REFERENCES: Sole Proprietorships LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 37. Kelly, the owner of Llama Farms, a sole proprietorship, wants to obtain additional business capital but to maintain control. This can best be accomplished by a. borrowing funds. b. bringing in partners. c. issuing stock. d. selling the business.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Sole Proprietorships LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 38. Jody owns KuppaJava Kiosks, a sole proprietorship. Jody's liability is a. limited by state statute and varies from state to state. b. limited to the extent of capital expenditures. c. limited to the extent of his or her original investment. d. unlimited.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Sole Proprietorships LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 39. Kari is the sole proprietor of Living Earth Garden Shop. As a sole proprietor, on the business’s profits, Kari pays a. no income taxes. b. only personal income taxes. c. only business income taxes. d. both personal and business income taxes.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: Sole Proprietorships LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 40. Silvano owns Textbooks Plus, a sole proprietorship that sells textbooks and other school supplies. When Silvano dies, Textbooks Plus will automatically a. dissolve. b. pass to Silvano’s heirs. c. pass to the state. d. be offered for sale to its creditors and competitors.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Sole Proprietorships LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application Fact Pattern 14-1 Desi starts up eSites, an Internet service, and leases office space in a building owned by Fred. The lease requires Desi to pay Fred a base rental of $1,250, plus 10 percent of eSites' profits, each month. The term is two years. Desi hires Gwen to work at eSites' tech support desk at an hourly wage of $12.50, plus a commission of 10 percent of the profits. The term is also two years.

41. Refer to Fact Pattern 14-1. Desi and Fred are a. not partners, because Fred does not have an ownership interest or management rights in eSites. b. not partners, because the lease includes a "base rental." c. not partners, because the rent includes only 10 percent of the profits. d. partners in a partnership for two years.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Partnerships LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 42. Refer to Fact Pattern 14-1. Desi and Gwen are a. not partners, because Gwen does not have an ownership interest or management rights in eSites. b. not partners, because the pay includes an hourly wage. c. not partners, because the pay includes only 10 percent of the profits.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© d. partners in a partnership for two years.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Partnerships LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 43. Luke and Maya form Northwest Air Express, a general partnership. The essential elements of this partnership do not include a. a sharing of profits and losses. b. a joint ownership of the business. c. an equal right to management in the business. d. goodwill.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Partnerships LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 44. Flannery and Gustavo agree while talking on the phone to form a partner-ship—The Home Source—to deal in transfers of real property. To be enforceable, their agreement must a. be filed in the appropriate state office. b. be in writing. c. involve the exchange of valid consideration. d. not involve a third party.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Partnerships LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 45. Noah and Orin do business as Pest Control Partners. In most states, for the purposes of suing and being sued, Pest Control Partners would be treated as a. an aggregate of the individual partners. b. a natural person.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© c. an entity. d. a non-existent party.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Partnerships LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 46. Rona and Savannah do business as Treasure Island Traders. Acting in good faith on the firm's behalf in a deal with Unlimited Potential, Inc., Rona makes an honest error in overestimating the profit. To her firm, Rona is a. liable for breach of the duty of care. b. liable for breach of the duty of economic sense. c. liable for breach of the duty of loyalty. d. not liable.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Partnerships LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 47. Megan and Nicole do business as One World Realty. In acting on the firm's behalf in a deal with Property Acquisition Company, Megan fails to account for the profit. To her firm, Megan is a. liable for breach of the duty of care. b. liable for breach of the duty of economic sense. c. liable for breach of the duty of loyalty. d. not liable.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Partnerships LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 48. Corbin, a partner in Doctors Medical Clinic, applies for a loan with Evermore Bank allegedly on Doctors' behalf but without the authorization of the other partners. Evermore knows that Corbin is not authorized to take out the loan. Corbin defaults on the loan. Liability for its unpaid amount is imposed on Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© a. Corbin and Doctors, jointly. b. Corbin only. c. Doctors only. d. Evermore only.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Partnerships LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 49. Bryn, Cornell, and Duke are general partners in Equity Lending, a consumer credit, mortgage, and investment firm.

Bryn’s dissociation from the firm results in a. the automatic termination of the firm’s legal existence. b. the partnership’s buyout of Bryn’s interest in the firm. c. the immediate maturity of all partnership debts. d. Bryn’s purchase of her interest in the partnership from the firm.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Partnerships LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application Fact Pattern 14-2 Luann and Mace are partners in Networx, a computer peripherals firm.

50. Refer to Fact Pattern 14-2. Luann signs a contract with Oleo Chips, a retail component supplier, apparently on Networx's behalf. The contract is binding on a. Luann, Mace, and Networx. b. Luann only. c. Networx only. d. Oleo only.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Partnerships LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS:

Bloom's: Application

51. Refer to Fact Pattern 14-2. Mace dissociates from Networx. Luann signs a contract with Physik Drives, a wholesale component supplier, apparently on Networx's behalf. Physik does not know of Mace's dissociation. The contract is binding on a. Luann, Mace, and Networx. b. Luann only. c. Networx only. d. Physik only.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Partnerships LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 52. Hud and Iggy form Jerry-Bilt Construction to enter into a contract to build one bridge. Under their partnership agreement, Jerry-Bilt is to dissolve when the bridge is built. Iggy signs a contract for the firm to build a second bridge.

Jerry-Bilt a. dissolves as soon as the first bridge is built. b. dissolves as soon as the second bridge is built. c. dissolves immediately on Iggy's signing of the second contract. d. does not dissolve.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Partnerships LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 53. Kelly, Lars, and Mona agree to be partners in Neighborhood Delivery Service (NDS), splitting the profits equally.

Kelly contributes 67 percent of the capital. When NDS is dissolved, its liabilities are greater than its assets. The losses are paid by a. all of the partners in proportion to their capital contributions. b. all of the partners in proportion to their shares of the profits. c. Kelly because she contributed most of the capital. d. Lars and Mona because they contributed the least of the capital.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Partnerships Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 54. Esteban and Florian want to form a limited liability company (LLC) to manage their business, Gordian Nuts. LLC statutes have been adopted in a. every state. b. no state. c. less than one-fifth of the states. d. only Wyoming.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Limited Liability Companies LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 55. Greta is a member of Hovercraft LLC. As a member, Greta is a. a manager or officer, but not an owner. b. an investor, but not a manager, officer, or owner. c. an owner. d. a participant, but not an investor, manager, officer, or owner.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Limited Liability Companies LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 56. Coco is considering forms of business organization for her concessions business⎯ Coco's Cupcakes. Most states require that a limited liability company have a. no minimum number of members. b. at least one member. c. at least two members. d. at least three members, including at least one general partner.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Limited Liability Companies Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 57. Location! Realty LLC is a limited liability company (LLC). Like other LLCs, for federal jurisdictional purposes, Location! Realty is most likely a citizen of a. all states. b. every state in which its members are citizens. c. no state. d. only the state in which it was formed.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Limited Liability Companies LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Appication 58. Sustainable Café LLC is a limited liability company. Like any other LLC, unless Sustainable Café chooses otherwise, the firm will be taxed as a. a corporation. b. a sole proprietorship. c. a partnership. d. none of these choices.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Limited Liability Companies LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 59. Jay is a member of Kitchen Cookouts, LLC, a limited liability company. Jay is liable for Kappa's debts a. in proportion to the total number of members. b. to the extent of his investment in the firm. c. to the extent that the other members do not pay the debts. d. to the full extent.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Limited Liability Companies Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 60. B2B, LLC, is a limited liability company. Among its members, a dispute arises that the operating agreement does not cover. The dispute is governed by a. the applicable state LLC statute. b. the federal Uniform LLC Law. c. the principles of partnership law. d. the state corporation statute.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Limited Liability Companies LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 61. Pizza & Cookies, LLC, is a limited liability company. Among its members, a dispute arises that the operating agreement and the state LLC statute do not cover. The dispute is governed by a. no law. b. the federal Uniform LLC Law. c. the principles of partnership law. d. the state corporation statute.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Limited Liability Companies LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 62. CPA Accounting, LLC, is a limited liability company. If the law in CPA's state is like the law in most states, unless the members have agreed otherwise, participants in the firm's management will be considered to include a. all members. b. no member. c. one member. d. two members, including at least one general partner.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: Limited Liability Companies LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 63. Cecilia's Day Spa, LLC, is a member-managed limited liability company. If the law in Cecilia's state is like the law in most states, unless the members have agreed otherwise, voting rights are apportioned according to a. capital contributions. b. participation in management. c. the number of members. d. transactions with the firm.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Limited Liability Companies LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 64. Felipe is a member of Great States Trucking LLC. Felipe's relationship to Great States ends, but the firm continues to do business. This is a. dissociation. b. dissolution. c. winding up. d. wrongful.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Limited Liability Companies LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 65. Real Events Promotion Corporation licenses Stadium Souvenirs, Inc., to sell Real Events caps, sweatshirts, and similar goods. This is a. a franchise. b. an entrepreneur. c. a principal-agent relationship. d. a sole proprietorship.

ANSWER: a POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Moderate REFERENCES: Franchises LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 66. Sylvester buys a franchise from Resistance Athletic Shoes Inc. This relationship, like all other franchise relationships, is governed by a. contract law. b. no law. c. the Franchise Disclosure Document, or FDD. d. the Uniform Commercial Code.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Franchises LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 67. Tumble Gymnastics & Karate, Inc., grants a franchise to Stefan to operate a Tumble gym. Tumble may require Stefan to pay the franchisor a percentage of the business's a. annual sales or volume. b. weekly payroll expense. c. monthly overhead savings. d. none of these choices.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Franchises LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 68. A franchise agreement between Software2 Company and Games3, Inc., is silent on a time for termination of the franchise. Software2 may a. never terminate. b. terminate at any time. c. terminate on reasonable notice. d. terminate on three days notice.

ANSWER: c Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© POINTS: 1 DIFFICULTY: Moderate REFERENCES: Franchises LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 69. FreezE Yogurt Corporation provides its prospective franchisees with projected earnings figures based on actual data.

FreezE Yogurt must also disclose a. the number and percentage of franchisees that achieved the figures. b. hypothetical examples of potential earnings. c. an answer to the entrepreneur’s question, “How much will I make?” d. none of the choices.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Franchises LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 70. Sasha contracts to buy a franchise from TrustMe Financial Consultants Inc. The contract is silent on the issue of territorial rights. When TrustMe allows a competing franchise to be established near Sasha’s office, she suffers a significant loss in profits. This is most likely a violation of a. no law. b. the ban on certain types of anticompetitive agreements. c. the Federal Trade Commission’s Franchise Rule. d. the implied covenant of good faith and fair dealing.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Franchises LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application Essay 71. Ewa, the owner of Face-2-Face Enterprises, is a sole proprietor. What are the chief characteristics, advantages, and disadvantages of this form of business organization? Ewa wants to obtain additional capital to expand Face-2-Face, but she does not want to lose control of the firm. As a sole proprietor, what is her best option to attain these goals?

ANSWER: A sole proprietorship is the simplest form of business organization. In a sole proprietorship, Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© the owner and the business are the same. Anyone who creates a business without designating a specific form for its organization is doing business as a sole proprietorship. An advantage of the sole proprietorship is its greater flexibility over other forms of business organization.

The owner makes all of the decisions and can operate the enterprise without any formalities.

A significant disadvantage of this form of organization, however, is that unlike most other forms of business organization, there are no limits on the liability of the owner for the debts and obligations of the firm. Another disadvantage of the sole proprietorship form of doing business is indicated by Ewa's dilemma in this questions. The ability of a sole proprietor to raise capital while maintaining control, and retaining the same form, is limited chiefly to borrowing funds. Bringing in partners would convert the business to a partnership. Issuing stock would require incorporating or establishing another form of business. Selling the business would sacrifice all control. The only way to obtain additional business capital without accumulating it through business profit is by borrowing funds.

POINTS: 1 DIFFICULTY: Challenging REFERENCES: Sole Proprietorships LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Decision Modeling KEYWORDS: Bloom's: Application 72. Sally and Tom decide to go into business, selling discounted merchandise through their Web site "e-Buy." They sign a partnership agreement that requires Sally to contribute $12,000 and Tom to contribute $8,000 in capital to start the firm.

The agreement also states that only Sally will have the authority to bind the partnership in deals with third parties, but the agreement says nothing about the management of the firm or a division of profits. Without Sally's knowledge, Tom tells United Computer Products, Inc., that he represents the firm and signs a contract with United to buy hard drives for resale on e-Buy. In the first year, e-Buy makes a profit of $50,000. What are the partners' rights with respect to the management of the firm? Is the partnership bound to the contract with United? Do the partners split the first year's profits? If so, how much is each entitled to?

ANSWER: The partners' rights with respect to the management of the partnership business and the profits of the firm is a split of each equally. The partnership is bound to the contract with United. Because the agreement is silent on the subject of the firm's management, each partner has an equal right to manage the business. For the same reason, each partner has a right to an equal share of the profits, even though their capital contributions were not equal. The apparent authority of a partner to bind a partnership in dealing with third parties cannot be limited by an agreement between the partners of which third parties are unaware. Every partner is an agent of the partnership and may bind the firm to contracts with third parties.

Only if the third party is aware that a partner's authority is limited will the liability of the firm also be limited to the same extent.

POINTS: 1 DIFFICULTY: Challenging REFERENCES: Partnerships LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Decision Modeling KEYWORDS: Bloom's: Application

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© True / False 1. A corporation is an artificial being. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Nature and Classification LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 2. State laws regarding corporations are uniform. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Nature and Classification LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 3. A corporation does not possess the same right of access to the courts as natural persons. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Nature and Classification LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 4. A corporation cannot be held liable for the criminal acts of its employees. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: Nature and Classification LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 5. One of the key advantages of the corporate form is the unlimited liability of its owners. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Nature and Classification LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 6. A corporation formed in another country but doing business in the United States is referred to in the United States as an alien corporation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Nature and Classification LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 7. The Revised Model Business Corporation Act gives a close corporation less flexibility in determining its rules of operation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Nature and Classification LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 8. An S corporation is treated the same as a regular corporation for tax purposes. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Nature and Classification LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 9. The first step in the incorporation process is to select a state in which to operate. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Nature and Classification LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 10. The primary document needed to incorporate a business is the articles of incorporation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Formation and Powers LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 11. The articles of incorporation serve as a primary source of authority for a corporation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Formation and Powers LEARNING OBJECTIVES: LO-1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 12. A new corporation's name can be deceptively similar to, but not the same, as the name of an existing corporation doing business within the state. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Formation and Powers LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 13. Bonds represent the borrowing of funds by firms. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Formation and Powers LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 14. A corporation has an implied power to extend credit to those with whom it has a legal or contractual relationship. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Formation and Powers LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 15. Express powers of a corporation are found in its articles of incorporation. a. True b. False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Formation and Powers LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 16. When the corporate privilege is abused for personal benefit, the courts will require the owners to assume personal liability. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Piercing the Corporate Veil LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 17. To pierce the corporate veil means to ignore the corporate structure, exposing the shareholders to personal liability. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Piercing the Corporate Veil LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 18. In certain instances of fraud, a court may "pierce the corporate veil" to hold the shareholders individually liable. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Piercing the Corporate Veil LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS:

Bloom's: Knowledge

19. Shareholders are the ultimate authority in every corporation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Directors and Officers LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 20. Many qualifications are required for directors. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Directors and Officers LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 21. Directors have a right to participate in all board of directors' meetings. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Directors and Officers LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 22. Officers hire the directors and other executive employees. a. True b. False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Directors and Officers LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 23. In most states, one individual cannot be both an officer and a director. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Directors and Officers LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal 24. The board of directors normally can remove a corporate officer at any time with or without cause. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Directors and Officers LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 25. A director or officer is not liable to the corporation for a bad business decision. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Directors and Officers LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LOCAL STANDARDS: KEYWORDS:

United States - OH - Default City - AICPA Legal Bloom's: Knowledge

26. Directors are entitled to use confidential corporate information for their personal advantage. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Directors and Officers LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 27. Directors are not obligated to refrain from self-dealing. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Directors and Officers LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 28. A director must make a full disclosure of any potential conflict of interest that might arise in any corporate transaction. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Directors and Officers LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 29. A director does not need to disclose any conflict of interest before voting on a proposed transaction. a. True b. False ANSWER: False POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Easy REFERENCES: Directors and Officers LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 30. Shareholders must approve fundamental changes affecting the corporation before the changes can be implemented. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Shareholders LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Blom's: Knowledge 31. Shareholders' meetings need not occur at any certain interval. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Shareholders LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 32. Every shareholder is entitled to examine specified corporate records. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Shareholders LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 33. Before shareholders can bring a derivative suit, they must submit a written demand to the corporation, asking the Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© board of directors to take action. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Shareholders LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 34. When a third party harms a corporation, only the shareholders can bring a suit in the corporation's name against that party. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Shareholders LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 35. Shareholders are personally liable for the debts of a corporation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Shareholders LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge Multiple Choice 36. Charlie is the founder of Dream Job Apps Corporation. Eloise is a shareholder and director, and Francie is an officer.

The daily business operations of Dream Job Apps are overseen by a. Charlie. b. Eloise. c. Francie.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© d. Charlie and Eloise.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Nature and Classification LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 37. Skyla and Terry want to form and do business as Unbound Games Corporation. Most statutes governing the formation and use of corporations are guided by a. city or county corporate codes. b. the Entrepreneur's Corporate Handbook. c. the federal Administrative Procedure Act. d. the Revised Model Business Corporation Act. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Nature and Classification LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 38. Erin is a shareholder in First Aides, Inc., a home healthcare company. As a shareholder, Erin a. owns shares of stock in First Aides. b. cannot be sued by First Aides. c. cannot sue First Aides. d. is liable for all the debts of First Aides.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Nature and Classification LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 39. Mountaintop Clearview Corporation authorizes Niles, its employee, to oversee its timber operation. In the course of his employment, Niles disposes of the operation's waste illegally. Orson is a Mountaintop shareholder. Liability for this crime most likely rests with Orson to a. no extent. b. the proportionate extent of the number of shares Orson owns.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© c. the amount of Orson's investment in the firm. d. the full extent.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Nature and Classification LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 40. Ruby Red Restaurant Corporation is incorporated in South Carolina. In that state, Ruby Red is a. a domestic corporation. b. a foreign corporation. c. an alien corporation. d. a de jure corporation.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Nature and Classification LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 41. Wiley incorporates his business as Wiley Wire Corporation in Texas. He and his group of shareholders intend to make a profit from their sales of fencing wire. Wiley Wire Corporation is a. a nonprofit corporation. b. not a corporation. c. an alien corporation. d. a private corporation.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Nature and Classification LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 42. Miracle Mobile Devices, Inc., is a private, for-profit corporation that (1) was formed for the purpose of manufacturing and distributing a newly pat-ented tablet, (2) is owned by five share-holders, (3) is subject to double taxation, and (4) has made no public offering of its shares. Miracle iss a. an S corporation Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. a close corporation. c. a nonprofit corporation. d. a professional corporation.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Nature and Classification LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal 43. Convenience Mart, Inc., is a closely held corporation. Convenience Mart is a. eligible to make public offerings of securities. b. exempt from filing a certificate of incorporation. c. generally allowed to restrict the transfer of its stock. d. taxed in the same manner as a partnership.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Nature and Classification LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 44. Frida and Gregor want to market a new line of fishing gear. To avoid income taxes at the corporate level, they should form a. a C corporation. b. a close corporation. c. an S corporation. d. a private corporation.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Nature and Classification LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Risk Analysis KEYWORDS: Bloom's: Application 45. Boutique Corporation would like to change its corporate status to avoid income taxes at the corporate level. To qualify, the shareholders must not be a. corporations. b. estates.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© c. individuals. d. partnerships.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Nature and Classification LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 46. The abbreviation "P.A." in the name "Painless Dental, P.A." means that this organization is a. a private association. b. a professional association. c. a public association. d. a publicly administered corporation.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Nature and Classification LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Analytic - AACSB: Group Dynamics LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 47. Sullivan and Taylor want to form a corporation to provide catering services. The first step in the incorporation procedure is to a. file the articles of incorporation. b. hold the first organizational meeting. c. secure a corporate name. d. select a state in which to incorporate.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Formation and Powers LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 48. Like the bylaws of other corporations, the bylaws of Farmland Equipment, Inc. a. establish the operating name of the corporation. b. establish the value and classes of corporate stock. c. were adopted at its first organizational meeting.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© d. were submitted for approval to the public official in charge.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Formation and Powers LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's; Application 49. Lyla is a common shareholder in Norman’s Nutty Nuts Corporation. As a common shareholder, Lyla is a. guaranteed regular payments of dividends. b. not guaranteed any payments of dividends. c. not given any voting rights. d. liable for all of Norman’s Nutty Nuts’s debts.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Formation and Powers LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 50. Hailey and Ike hold the first organizational meeting of Java Drive-In Corporation. Probably the most important function of this meeting is a. adopting Java's bylaws. b. agreeing on Java's purpose. c. drafting Java's articles. d. obtaining a charter for Java.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Formation and Powers LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 51. Wings2Go Corporation fails to hold an organizational meeting. In this circumstance, at common law Wings2Go is most likely a. a corporation by estoppel. b. a de facto corporation. c. a de jure corporation.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© d. ultra vires.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Formation and Powers LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 52. Rapid Pest Control itself out to others as being a corporation but makes no attempt to incorporate. Ponce signs a contract with Rapid Pest Control that is not performed. Ponce files a suit against the firm. The court will likely hold that Rapid Pest Control is a. a corporation by estoppel. b. an alien corporation. c. an S corporation. d. ultra vires.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Formation and Powers LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 53. Wild & Scenic River Tours, Inc., is a corporation. Wild & Scenic has the implied power to a. issue stocks and bonds. b. execute contracts and negotiable instruments. c. buy and sell (or lease) property. d. perform all acts reasonably appropriate and necessary to accomplish its corporate purposes.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Formation and Powers LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 54. Niki owns O.K. Oil Corporation. Niki uses O.K.'s funds to pay her personal expenses, creates Pure Fuel Corporation to engage in the same business as O.K., transfers O.K.'s assets to Pure Fuel, and petitions O.K. into bankruptcy. This most likely warrants a. a bonus to Niki for financial maneuvers.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. a discharge for O.K. in bankruptcy. c. a pierce of O.K.'s corporate veil. d. a review of Pure Fuel's articles of incorporation.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Piercing the Corporate Veil LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 55. Bret and Courtney form Delite Day Care, Inc. Ultimate responsibility for policy decisions necessary to the management of corporate affairs rests with Delite's a. board of directors. b. incorporators. c. officers. d. shareholders.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Directors and Officers LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 56. Sophie and Tiny incorporate their beverage-container business as U-Twist Products, Inc. The first board of directors may be appointed by the firm's a. board of directors. b. incorporators. c. officers. d. shareholders.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Directors and Officers LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 57. Reba is a director of Quantum Mechanix Corporation. Reba's rights, as a director, do not include a right to a. indemnification. b. inspection. c. participation. d. self-dealing.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Directors and Officers LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 58. Raul is chairman of the board of Swif-Vac Corporation. Pinky, a consumer, is injured while using a Swif-Vac product.

Pinky sues Swif-Vac, and Raul individually. Swif-Vac may pay Raul's legal fees under a. the director's right to certification. b. the director's right to compensation. c. the director's right to indemnification. d. no circumstances.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Directors and Officers LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 59. Viola is a director of Water Pure Corporation. With respect to Water Pure, Viola's most important right is the right of a. compensation. b. indemnification. c. participation. d. certification.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Directors and Officers LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS:

Bloom's: Application

60. VeriVisual Company makes HD 3D film and video equipment. VeriVisual is like most corporations in that its officers are hired by the firm's a. board of directors. b. incorporators. c. other officers. d. shareholders.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Directors and Officers LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 61. Odell is a director of Price Rite, Inc. As a director, with respect to the corporation, Odell is a. a fiduciary. b. a forum. c. a proxy. d. a quorum.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Directors and Officers LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 62. Rocco is a director of Spa Lids & Tubs, Inc. Under the standard of due care owed by directors of a corporation, Rocco's decisions must be a. unwavering and unquestionable. b. arguable and defensible. c. informed and reasonable. d. perfect and unassailable.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Directors and Officers LEARNING OBJECTIVES: LO-4 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 63. Genna is a director of Fab Stuff Corporation. Without informing Fab, Genna starts up Evertrendy, Inc., to compete with Fab. Genna is liable for breach of a. no duty or rule b. the business judgment rule. c. the duty of loyalty. d. the right of participation.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Directors and Officers LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Appllication 64. Naomi and Ogden are shareholders of MediCare Residences, Inc. As shareholders, they must approve a. conducting a merger. b. deciding to pursue new business opportunities. c. terminating a managerial employee. d. negotiating a contract between management and labor.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Shareholders LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 65. Gladys is a shareholder of Frozen Yogurt, Inc. As a shareholder, Gladys must approve a. amending the bylaws. b. declaring a corporate dividend. c. hiring a chief executive officer. d. issuing additional shares.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Shareholders LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Reflective Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LOCAL STANDARDS: KEYWORDS:

United States - OH - Default City - AICPA Legal Bloom's: Application

66. Heidi and Ian are directors and shareholders of Globe Software, Inc. Heidi's written authorization to Ian to vote Heidi's shares at a Globe shareholders' meeting is a. a violation of the duty of loyalty. b. a stock certificate. c. a proxy. d. a quorum.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Shareholders LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 67. Zero Sum Games Corporation has forty-three shareholders. The minimum number that must be present at a meeting for a shareholders' vote is a. all of the shareholders. b. a quorum. c. a proxy. d. three of the shareholders.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Shareholders LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 68. Urban Commerce, Inc., issues bonds, which are also known as a. cumulative investments. b. fixed-income securities. c. equity securities. d. preferred stock.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Shareholders LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Reflective Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LOCAL STANDARDS: KEYWORDS:

United States - OH - Default City - AICPA Legal Bloom's: Application

69. Ricardo is a shareholder of Speedy Bikes Company (SBC). When the directors fail to undertake an action to redress a wrong suffered by SBC, Ricardo files a suit on the firm's behalf. Any damages recovered by Ricardo's suit will normally go to a. Ricardo. b. SBC. c. SBC's directors. d. the state in which SBC is incorporated.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Shareholders LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 70. Orin is a shareholder of Pinkwater Corporation. In some states, Orin might incur personal liability for Pinkwater obligations if he a. accepts a dividend knowing that it was paid from retained earnings. b. buys stock for less than its fair-market value. c. fails to fulfill his fiduciary duty to the majority shareholders. d. sells his shares.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Shareholders LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application Essay 71. Officers and employees of Apples Corporation and Oranges Corporation are convicted of conspiring to violate a federal law that is punishable by a term of imprisonment and a fine. Can Apples and Oranges be held liable for these crimes? If so, how can they be punished?

ANSWER: Yes, the corporations can be held liable for the crimes of their officers and employees committed within the course and scope of their employment. This liability follows the doctrine of respondeat superior. As for punishment fro the crimes, the corporations cannot be imprisoned, but they can be fined. Under certain circumstances, corporate directors and officers may also be imprisoned for the criminal acts of employees and others under their direct supervision.

POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Challenging REFERENCES: Nature and Classification LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Decision Modeling KEYWORDS: Bloom's: Application 72. Starr Cardio, Inc., is a small business. Ted, Uma, and eleven other members of the Starr family own all of its stock.

Currently, Starr's income is taxed at the corporate level and, after being distributed to the family members, at the shareholder level. Can Starr retain its corporate status but otherwise avoid this double taxation? If so, how?

ANSWER: Starr can re-form as an S corporation to avoid this double income-taxation. S corporations were created specifically to permit small businesses to avoid this sort of taxation. Any small business that meets certain requirements can qualify. The requirements are (1) the firm must be a domestic corporation, (2) the firm must not be a member of an affiliated group of corporations, (3) the firm must have less than a certain number of shareholders, (4) the shareholders must be individuals, estates, or qualified trusts (or corporations in some cases), (5) there can be only one class of stock, and (6) no shareholder can be a nonresident alien.

Based on the facts presented in this question, it would appear that Starr would qualify.

POINTS: 1 DIFFICULTY: Challenging REFERENCES: Nature and Classification LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AACSB Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Decision Modeling KEYWORDS: Bloom's: Analysis

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© True / False 1. A principal has the right to control an agent’s conduct in matters entrusted to the agent. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Introduction LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 2. Through agents, a principal can conduct multiple business operations simultaneously. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Introduction LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 3. In a principal-agent relationship, the parties agree that the principal will act on behalf and instead of the agent in negotiating and transacting business with third persons. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Agency Relationships LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG:Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 4. Employees who deal with third parties are agents of their employers. a. True b. False ANSWER: True POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Easy REFERENCES: Agency Relationships LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 5. An employer has no control over an employee’s work. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Agency Relationships LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 6. Real estate brokers are independent contractors. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Agency Relationships LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Risk Analysis LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 7. An independent contractor is an employee. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Agency Relationships LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 8. The relationship between a principal and an independent contractor always involves an agency relationship.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Agency Relationships LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 9. An independent contractor is an employer who controls his or her agent’s performance. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Agency Relationships LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 10. An agency relationship can only be formed with a written agreement. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Formation of Agencies LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 11. A person must have contractual capacity to be an agent. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Formation of Agencies LEARNING OBJECTIVES: LO - 2 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 12. An agency relationship created for an illegal purpose is enforceable. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Formation of Agencies LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 13. An agency relationship must be based on an express or implied agreement that the agent will act for principal and that the principal agrees to have the agent so act. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Formation of Agencies LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG:Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 14. An agency relationship cannot exist in the absence of a formal agreement. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Formation of Agencies LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 15. A principal who causes a third person to believe that another person is the principal’s agent can be estopped from denying the agency relationship. a. True Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Formation of Agencies LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 16. An agency relationship may occur by operation of law in a family. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Formation of Agencies LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 17. Generally, the agent owes the principal no duties. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Duties of Agents and Principals LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 18. Remedies of the agent for breach of duty by the principal arise out of contract and tort law a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Duties of Agents and Principals LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG:Analytic Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LOCAL STANDARDS: KEYWORDS:

United States - OH - Default City - AICPA Legal Bloom's: Knowledge

19. It is basic tenet of agency law that notice to the agent is notice to the principal. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Duties of Agents and Principals LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 20. An agent has a duty to keep and make available to the principal an account of all property and funds received and paid out on behalf of the principal. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Duties of Agents and Principals LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 21. If a principal cannot be contacted in an emergency situation, an agent cannot deviate from previously given instructions. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Duties of Agents and Principals LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 22. A principal owes an agent a duty of compensation. a. True b. False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Duties of Agents and Principals LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 23. Authority declared in clear, direct, definite terms is express authority. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Duties of Agents and Principals LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG:Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 24. Giving an agent a power of attorney confers implied authority. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Agent’s Authority LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 25. The equal dignity rule requires that a principal and agent treat each other with “equal dignity.” a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Agent’s Authority LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS:

Bloom's: Knowledge

26. For an agent’s implied authority to be effective, a principal must ratify it. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Agent’s Authority LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 27. If a principal does not ratify an authorized contract, the principal is not bound. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Agent’s Authority LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 28. If a principal ratifies a contract without knowing all of the facts, the principal can rescind the contract. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Liability in Agency Relationships LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 29. If a principal does not ratify an unauthorized contract, the principal is not bound. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: Liability in Agency Relationships LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 30. A disclosed principal is a principal whose identity is not known by the third party at the time the contract is made by the agent. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Liability in Agency Relationships LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 31. A principal is not liable on any contract made by the agent acting outside the scope of his or her authority. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Liability in Agency Relationships LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG:Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 32. Under the doctrine of respondeat superior, an agent is liable for the principal’s negligence. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Liability in Agency Relationships LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 33. A principal is responsible for all intentional torts committed by an agent.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Liability in Agency Relationships LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 34. An agency can terminate once its purpose is achieved. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Termination of Agency Relationships LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 35. When an agency relationship is terminated, the principal has a duty to personally notify third parties who knew of its existence. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Termination of Agency Relationships LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge Multiple Choice 36. Ozzy is an officer of Prudent Financial Corporation. Ozzy serves in a representative capacity for Prudent Financial’s owners. With respect to binding Prudent Financial to contracts, Ozzy is a. an agent and has the authority. b. an agent but does not have the authority. c. not an agent and does not have the authority. d. not an agent but does have the authority.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Introduction LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 37. Jackson Lumber hires Owen to purchase wood from various sources on behalf of Jackson Lumber. In this relationship, Jackson Lumber is the a. employee. b. independent contractor. c. principal. d. agent.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Introduction LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 38. KupaJava hires Lola to manage one of KupaJava’s seven drive-through coffee stands. KupaJava agrees to pay Lola a salary, plus commission. KupaJava stipulates the standards that should be observed, the goals that should be attained, and the methods that should be used. Lola is most likely KupaJava’s a. employee. b. independent contractor. c. principal. d. power of attorney.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Agency Relationships LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 39. Clara is a salesperson in The Corner Store. When Carla makes a sale to Jenny, the sale is a. binding on The Corner Store. b. binding on Carla. c. binding on The Corner Store only if the owner of The Corner Store is present when the sale is made.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© d. not binding on anyone.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Agency Relationships LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 40. Genetic Seed Company hires Howie to work on Genetic’s shipping dock, accepting deliveries and dealing with other companies’ drivers. With respect to Genetic, Howie is most likely a. an agent. b. an independent contractor. c. a principal. d. a work for hire.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Agency Relationships LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 41. Ester is a lighting technician who hires out on a per-project basis to film and television production companies, as well as theatres and other venues that stage dramatic and musical performances. In this capacity, Ester is a. an agent. b. an employee. c. an independent contractor. d. a principal.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Agency Relationships LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 42. Delite Candy Company hires Elton to sell Delite’s products in a certain area. Delite agrees to pay Elton a salary, plus commission, for a trial period. They also agree that Elton can sell using any methods and during any hours that seem appropriate. The most important factor in whether Elton is Delite’s employee is a. the amount of Elton’s salary.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. the control Delite has over the details of the work. c. the length of the trial period. d. the title that designates Elton’s position.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Agency Relationships LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 43. George and James create an agency relationship to facilitate the sale of illegal narcotics. This agency relationship a. is illegal. b. is legal. c. will be recognized by some states, but not others. d. can exist, but will be subject to sanctions for illegal activity.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Formation of Agency Relationships LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 44. Jim agrees to act on Kit’s behalf, subject to Kit’s control, and Kit trusts Jim to so act. This describes a relationship between a. a business and its competitors. b. a government and its governed. c. a parent and a child. d. a principal and an agent.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Formation of Agency Relationships LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 45. Sela agrees to act on Thom’s behalf, subject to Thom’s control, and Thom trusts Sela to so act. They set out the terms in a written document, which they both sign. This is a. an agency by agreement.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. an agency by estoppel. c. an agency by ratification. d. not the creation of an agency relationship.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Formation of Agency Relationships LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 46. Gayla asks Jessie to contract with Jessie’s high school classmates to babysit for Gayla’s new baby. Jessie orally agrees to do so. This is a. an agency by agreement. b. an agency by estoppel. c. an agency by ratification. d. not the creation of an agency relationship.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Formation of Agency Relationships LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 47. Carol is married to Andy. Carol buys food for their children’s lunches and charges the cost to Andy’s account. This is a. an agency by operation of law. b. an agency by estoppel. c. an agency by ratification. d. not the creation of an agency relationship.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Formation of Agency Relationships LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 48. Dizzy is not Edwina’s agent but enters into a contract with Frida on Edwina’s behalf. Edwina later contacts Frida to affirm the contract. This is a. an agency by agreement.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. an agency by estoppel. c. an agency by ratification. d. not the creation of an agency relationship.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Formation of Agency Relationships LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 49. Bernard is an expert on exotic flowers. Fine Floral Fixtures, Inc. (FFF) hires Bernard to order exotic flowers from various greenhouses. Bernard does not bother to examine the quality of the flowers he purchases on behalf of FFF. Bernard has breached a. the duty of performance. b. the duty of loyalty. c. no duty. d. the duty of notification.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Duties of Agents and Principals LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 50. Rita is appointed as an agent for Superior Sales, Inc. The agency agreement is silent as to the level of sales that Rita is expected to achieve. She must a. achieve nothing because the agreement says nothing on the issue. b. attain the level that Rita achieved with her previous employer. c. maintain the level Superior attained before Rita became an agent. d. use reasonable diligence and skill in selling.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Duties of Agents and Principals LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 51. Mackenzie, an agent for Lindsay, signs an agreement with Kirk on Lindsay’s behalf but neglects to tell her that the agreement Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© requires the payment of a certain tax. The government prosecutes Lindsay for failing to pay the tax. She is a. liable, because notice to Mackenzie is notice to Lindsay. b. liable, because notice to Kirk is notice to Lindsay. c. not liable, because Mackenzie did not tell Lindsay about the tax. d. not liable, because Kirk did not tell Lindsay about the tax.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging REFERENCES: Duties of Agents and Principals LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 52. Bob, a salesperson at a Carpets Galore store, tells Dita, a customer, “Buy your carpet here, and I’ll install it for half of what the store would charge.” Dita buys the carpet, which Bob installs for half the store’s price. Bob keeps the money.

Bob has breached a. no duty. b. the duty of loyalty. c. the duty of notification. d. the duty of obedience.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Duties of Agents and Principals LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 53. Will is an agent for MaryElise. MaryElise gives Will clear instructions to only enter into contracts on Mondays, Wednesdays, or Fridays. Will enters into a contract on MaryElise’s behalf on Tuesday. Will has breached a. the duty of performance. b. the duty of loyalty. c. no duty. d. the duty of obedience.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Duties of Agents and Principals LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning©

54. Julia is an agent who purchases wool for Kara’s Knitting Company. In the course of her performance for Kara’s Knitting Company, Julia pays for the gas for the company car and for some storage boxes for the wool. Kara’s Knitting Company must reimburse Julia because of the principal’s a. duty of performance. b. duty of loyalty. c. duty of compensation. d. duty of reimbursement.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Duties of Agents and Principals LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 55. Rangle contracts with Siena to buy a certain horse for her. Rangle makes a deal with Timberline Stables, the owner of the horse, and makes a down payment. Siena fails to pay the rest of the price. Timberline sues Rangle for breach of contract. His right to hold Siena liable for any damages that he has to pay is the right of a. avoidance. b. cooperation. c. indemnification. d. reimbursement.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging REFERENCES: Duties of Agents and Principals LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 56. Lather Up Soap Products Company grants its agent Kathy an exclusive territory in which to sell Lather Up products.

The firm cannot compete with Kathy in that territory under the principal’s duty of a. avoidance. b. cooperation. c. indemnification. d. reimbursement.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Duties of Agents and Principals LEARNING OBJECTIVES: LO - 3 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 57. Cory employs Daily Delivery Agency as an agent under a writ-ten agreement that describes the rights and duties of both parties. This is a. apparent authority. b. equal authority. c. express authority. d. implied authority.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Agent’s Authority LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 58. Geoff serves in a representative capacity for Huck. To accomplish the objectives of this relationship, Geoff’s authority can be implied a. by contradiction. b. by custom. c. by lack of reason. d. under no circumstances.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Agent’s Authority LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 59. Sonia manages a Tasty Pastry store for United Food Company. To manage the business, Sonia’s authority can be implied by a. an inference from the position Sonia occupies. b. any inference a reasonable customer or supplier would make. c. any inference Sonia chooses to make. d. no inference.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Agent’s Authority Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 60. Based on Nan’s conduct, Odel reasonably believes that Poppy has the authority to act on Nan’s behalf even though Poppy does not have the actual authority to do so. In this circumstance, Poppy has a. apparent authority. b. express authority. c. implied authority. d. no authority.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Agent’s Authority LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 61. Without authorization, Rolf contracts on behalf of Sari to have Tige paint the interior and exterior of Sari’s house. Sari ratifies the contract. Later, Sari tries to rescind the part of the contract relating to the exterior. This attempt will be a. partly successful. b. partly unsuccessful. c. totally successful. d. totally unsuccessful.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging REFERENCES: Agent’s Authority LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 62. Bud approves on behalf of Cody—but without authorization—a contract with Dik to build a new silo. Cody does not ratify the contract. Later, Dik tries to enforce the deal. This attempt will be a. partly successful. b. partly unsuccessful. c. totally successful. d. totally unsuccessful.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: Agent’s Authority LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 63. Iggy hires Joy to act as his agent to purchase Kup-a-Koffee Company. Iggy tells Joy to reveal only that she is buying the firm on behalf of a third party, without telling Kup-a-Koffee’s seller who that third party is. Iggy is a. a disclosed principal. b. an implied principal. c. an undisclosed principal. d. a partially disclosed principal.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging REFERENCES: Liability in Agency Relationships LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 64. Joli, acting within the scope of her authority for the Cake Bake Shop, contracts with Valley View Berry Farms to buy an assortment of fruit. Cake Bake is liable on the contract, and Joli is not, if Cake Bake is a. a disclosed principal. b. a partially disclosed principal. c. an undisclosed principal. d. an apparent agent.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging REFERENCES: Liability in Agency Relationships LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 65. Brad is an employee of Custodial Service, Inc. In deciding whether Brad acts within the scope of his employment when he commits a tort against Didi, a court will not consider whether a. Brad was acting within the scope of the agency. b. Brad was acting within the scope of his employment. c. Custodial authorized the act. d. Custodial was personally at fault.

ANSWER: d POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Challenging REFERENCES: Liability in Agency Relationships LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 66. Picabo drives a truck as an employee for Quik Delivery, Inc. Picabo would most likely be considered acting outside the scope of her employment if she a. crashed into a car at the airport while off duty. b. hit a pedestrian in a parking lot during a “working” lunch. c. ran over an attendant at Quik’s gas station while refueling the truck. d. smashed into a store-front while intoxicated on-duty.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Liability in Agency Relationships LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 67. Bayou Development Corporation (BDC) hires Gulfview Brokerage Associates to sell the condominiums in a building at BDC’s coastal resort. The agency will terminate a. after the condos have been sold. b. if the prices of the condos must be reduced to sell them. c. once BDC obtains insurance to cover the property. d. when BDC pays Gulfview its first commission.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Termination of Agency Relationships LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 68. Miklos employs Nathalie to handle a list of financial transactions on Miklos’s behalf. This power will terminate on a. any transaction causing a loss to Miklos. b. Miklos’s death or incapacity. c. Miklos’s sixty-fifth birthday. d. Nathalie’s handling of one of each stipulated transaction.

ANSWER: b POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Moderate REFERENCES: Termination of Agency Relationships LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 69. Frida hires Gert, a real estate broker, to act as her agent to sell her house. The house burns down before being sold.

The agency agreement is likely a. still in force if Frida gives Gert additional consideration. b. still in force if Gert does not tell prospective customers. c. terminated by mutual consent of the parties. d. terminated by operation of law.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Termination of Agency Relationships LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 70. Treadwell Tire Manufacturing Company employs Uri as an agent. To terminate Uri’s authority, Treadwell must notify a. only third parties who are aware of the agency relationship. b. the public generally. c. Uri and any third parties who are aware of the agency relationship. d. Uri only.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Termination of Agency Relationships LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application Essay 71. Principal Resources Corporation contracts with Quality Construction to build an addition to Principal’s corporate office building. Quality contracts with Rite Supply Company for materials for the addition but refuses to pick up the materials. Meanwhile, Principal hires Skye, a certified public accountant, to work in its cost-accounting division as an employee, with no authority to hire or supervise others. Skye asks Theo, an outside experienced accountant, to advise her on certain accounting procedures but fails to pay Theo for the service. Principal also contracts with Uma, a salesperson, to solicit orders for its products in a designated territory. Uma obtains an order from Verity Industries, Inc., which is assured the order will be filled soon. But Uma does not follow through with the paperwork and fails to submit the order to Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© Principal. Verity suffers a loss. Rite Supply, Theo, and Verity Industries claim Principal is liable under agency law.

Discuss fully whether an agency relationship was created by Principal with Quality Construction, Skye, or Uma. ANSWER: Whether Principal can be held liable by Rite Supply, Theo, and Verity Industries depends on the relationship created by Principal in its contracts with Quality Construction, Skye, and Uma. If the relationship is one of principal-agent, the parties agree that the agent will act on behalf of the principal, and any proper contracts made by an agent with a third person are binding on the principal. In analyzing the agency relationship in this problem, it is important to distinguish the principal-agent relationship from that of employer employee (master servant) or employer–independent contractor. Contracts made with third parties by employees or independent contractors who are not also agents are not binding and are not enforceable against the employer.

Quality Construction is employed as an independent contractor. It is neither an agent for Principal nor an employee. Because Quality Construction has no authority to make contracts on behalf of Principal, Quality is not an agent. In addition, because Principal has no control over the details of Quality’s conduct, Quality is not an employee. Therefore, only Quality, not Principal, can be liable to Rite Supply for nonperformance of contract.

Skye is hired strictly as an employee and has no authority to contract with third persons.

Consequently, Skye is not authorized to hire a consultant on Principal’s behalf. Therefore, Theo must look to Skye, not to Principal, for payment for services.

Uma is both an employee and an agent. As an agent she is hired specifically to solicit orders for Principal’s products from third persons. If she has authority to so contract, Principal is bound by her contract.

POINTS: 1 DIFFICULTY: Challenging REFERENCES: Agency Relationships LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Decision Modeling KEYWORDS: Bloom's: Application 72. Brenda is a purchasing agent for Commodities Exchange Corporation. Dennis, a Commodities corporate officer, gives Brenda written authority to buy for the firm as many computers and peripheral devices as necessary. The next day, Dennis calls Brenda and tells her to buy only fifty notebook computers and nothing else. Brenda shows the written authority to EProducts, Inc., and enters into a contract with E-Products to buy sixty note-book computers and a selection of printers, scanners, and extra storage media. E-Products ships the order to Commodities. Is Commodities liable to E-Products under the contract? Is Brenda liable? In each case, if so, why? If not, why not?

ANSWER: Commodities is liable to E-Products. Brenda is not liable to E-Products. A principal is liable for the contracts of its agents entered into with actual or apparent authority. Actual authority may be express or implied. Apparent authority arises from what the principal causes a third party reasonably to believe regarding the agent’s authority to act, even if the agent does not have actual authority to act. If the third party changes its position in reliance on the principal’s representations, the principal is estopped from denying that the agent had authority. In this problem, Brenda had the actual authority to order fifty notebook computers and apparent authority to order the rest of the equipment, according to the written authorization that Dennis gave to Brenda and Brenda showed to E-Products. E-Products’s contract rights are not limited by the limits placed on that authority by Dennis’s call to Brenda. Brenda is not liable to E-Products because she acted with apparent authority. Brenda is liable to Commodities, however, for exceeding her authority.

POINTS: 1 DIFFICULTY: Challenging Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© Agent’s Authority Liability in Agency Relationships LEARNING OBJECTIVES: LO - 3 LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Decision Modeling KEYWORDS: Bloom's: Application REFERENCES:

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© True / False 1. Under the employment-at-will doctrine, an employer can end an employment relationship at any time. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Employment at Will LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG:Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 2. A promise that an employer makes in an employee handbook regarding discharge will not be considered part of an implied contract. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Employment at Will LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 3. An employee who is fired outside of the terms of an implied employment contract may succeed in an action for breach of contract. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Employment at Will LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 4. A whistleblower is an employee who reveals confidential information about a fellow employee to an employer. a. True b. False ANSWER: False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© POINTS: 1 DIFFICULTY: Easy REFERENCES: Employment at Will LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 5. Whistleblower statutes protect employees from retaliatory discharge. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Employment at Will LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG:Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 6. Whistleblower statutes protect employers who report their employees’ wrongdoing. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Employment at Will LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG:Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 7. Children must be at least thirteen years old to work in hazardous occupations. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Wages, Hours, and Layoffs LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 8. Employees who receive tips on the job cannot be paid less in direct wages than the federal minimum wage. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Wages, Hours, and Layoffs LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 9. Employees are entitled to overtime pay only at their employer’s discretion. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Wages, Hours, and Layoffs LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 10. All employers must provide their employees with up to twelve months of family or medical leave. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Family and Medical Leave LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 11. Under federal law, only key employees who take temporary family or medical leave are entitled to job reinstatement. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Family and Medical Leave LEARNING OBJECTIVES: LO - 3 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 12. A key employee is defined as an employee whose pay falls within the top 10 percent of the firm’s workforce. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Family and Medical Leave LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 13. State workers’ compensation laws establish a procedure for employees injured on the job to sue their employers. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Worker Health and Safety LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 14. If an employee dies in a work-related incident, the employer must notify OSHA within eight hours. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Worker Health and Safety LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG:Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 15. Only the federal government sets safety standards governing workplaces. a. True b. False ANSWER: False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© POINTS: 1 DIFFICULTY: Easy REFERENCES: Worker Health and Safety LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 16. An employee can usually recover workers’ compensation for injuries occurring on the commute to and from work. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Worker Health and Safety LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 17. Both employers and employees contribute to help pay for benefits that will partially make up for the employees’ loss of income on retirement. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Income Security LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 18. The basis for an employee’s contribution to Social Security is the employee’s age. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Income Security LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning©

19. All unemployed workers who are willing and able to work are eligible for unemployment compensation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Income Security LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 20. There is federal regulation of employers’ retirement plans for employees. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Income Security LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 21. Employers that fall under the provisions of the Federal Unemployment Tax Act of 1935 are taxed at regular intervals. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Income Security LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 22. An employee can continue the health benefits provided by his or her employer for a period of time only on an involuntary loss of employment. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: Income Security LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 23. Generally, an employer’s monitoring of electronic communications in the workplace does not violate employees’ privacy rights. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Employee Privacy Rights LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 24. An employer may avoid laws regulating monitoring activities by informing employees that they are subject to monitoring. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: Employee Privacy Rights LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 25. Only federal law governs drug tests of private-sector employees. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Employee Privacy Rights LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 26. Employees of private employers have some privacy protection under tort law and state constitutions. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Employee Privacy Rights LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 27. Federal law does not restrict employers’ use of the results of genetics tests. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Employee Privacy Rights LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 28. An employer may not hire an illegal immigrant under any circumstances. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: Immigration Law LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 29. To hire employees from other countries, an employer must first obtain the approval of the U.S. Immigration and Customs Enforcement. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Immigration Law Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 30. The Norris-LaGuardia Act effectively declared a national policy permitting employees to organize. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Labor Unions LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 31. Unfair labor practices are defined by the Norris-LaGuardia Act. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Labor Unions LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 32. An employer can refuse to bargain collectively with a duly designated employee representative. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Labor Unions LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 33. Individual states may pass their own right-to-work laws. a. True b. False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Labor Unions LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 34. Management may never legally limit unionizing activities. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Labor Unions LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 35. An employer may not hire substitute workers to replace strikers. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Labor Unions LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge Multiple Choice 36. Workbilt Hardware Company employs workers, including Gina, at six locations in two states. Workbilt’s discharge of Gina outside the terms of an employment contract may result in a. Workbilt’s liability for damages. b. Gina’s deportation under the Immigration Act. c. discontinuance of Gina’s health-plan coverage. d. monitoring Workbilt’s communications for privacy violations.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: Employment at Will LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 37. Marvin is an employee of Wild Thing Farms. Marvin finds out that the head of Wild Thing Farms is illegally importing endangered animals to sell as pets. If Marvin reports his employer’s illegal activities he will probably be protected from retaliatory discharge by a. unemployment statutes. b. worker compensation statutes. c. whistleblower statutes. d. no statutes.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Employment at Will LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 38. Thelma is an employee at Foreign Food Mart. Thelma is called for jury duty and as a result cannot work her scheduled shift at Foreign Food Mart. Foreign Food Mart fires Thelma. This is a violation of a. an example of the doctrine. b. an exception based on contract theory. c. an exception based on public policy. d. an exception based on tort theory.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging REFERENCES: Employment at Will LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 39. Tyrone is seventeen years old. Under the Fair Labor Standards Act, he a. cannot work in a hazardous occupation. b. cannot work during school hours. c. must obtain a permit to work. d. none of the choices.

ANSWER: a POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Moderate REFERENCES: Wages, Hours, and Layoffs LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 40. Cash is an employee of Drowsy Resort, Inc., covered by federal overtime provisions, which apply only after an employee has worked more than a. eight hours in a day. b. forty hours in a week. c. 160 hours in a month. d. one year for the same employer.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Wages, Hours, and Layoffs LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 41. Mythic Games Company employs two hundred workers full-time. If Mythic Games plans to have a mass layoff, it must provide its employees with at least a. thirty days of notice. b. sixty days of notice. c. ninety days of notice. d. one year of notice.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Wages, Hours, and Layoffs LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 42. Café Cuisine Dining, Inc., employs one hundred workers at three locations in two states. Under federal law, Café Cuisine must provide its employees, during any twelve-month period, family or medical leave of up to a. twelve days. b. twelve weeks. c. twelve months. d. twelve years.

ANSWER: b Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© POINTS: 1 DIFFICULTY: Moderate REFERENCES: Family and Medical Leave LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 43. Big Drill Oil Company employees one hundred workers. Big Drill must do all of the following except a. keep occupational injury and illness records for each employee. b. report any work-related diseases directly to OSHA. c. report any employee death due to a work-related incident to OSHA within eight hours. d. pay employees higher wages for working in more dangerous areas.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Worker Health and Safety LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 44. Quinn is an employee of Regional Industries, Inc. Quinn is threatened with a discharge when he refuses a transfer to a Regional department in which several employees suffered serious injuries from exposure to hazardous chemicals. Quinn may be entitled to protection from discharge under a. no law. b. the Family and Medical Leave Act. c. the Occupational Safety and Health Act. d. the state workers’ compensation act.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Worker Health and Safety LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 45. Jo works for Tall Tales Publishing, Inc. The basis for Jo’s contribution under the Federal Insurance Contribution Act (FICA) is based on her a. seniority at Tall Tales. b. annual wage base. c. special job skills. d. county of residence.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Worker Health and Safety LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 46. Hoppy, who works as an employee for Imperial Power Corporation, suffers an injury in an accident. Hoppy will be compensated under state workers’ compensation laws a. only if the injury occurred during working hours. b. only if the injury occurred off the job. c. only if the injury occurred on the job. d. whenever and wherever the injury occurred.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Worker Health and Safety LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 47. Clive works for Digby Excavation Corporation. While operating a backhoe, Clive suffers an injury. Clive will be compensated under state workers’ compensation laws only if a. he does not have health insurance. b. he is completely disabled. c. his injury was accidental. d. his injury was intentional.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Worker Health and Safety LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 48. Phyllis intentionally injures herself while performing her job for Stone Cutters, Inc. Phyllis will be entitled to a. full workers’ compensations. b. half of the normal workers’ compensation. c. 10 percent of the normal workers’ compensation. d. no workers’ compensation.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Worker Health and Safety LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 49. Julie works as an employee for Organic Produce Express, Inc. (OPI). Rowan, who is unemployed, collects unemployment compensation. This compensation is provided by a tax on a. Julie and other employees. b. Julie, OPI, and other employees and employers. c. OPI and other employers. d. not Julie, OPI, or other employees or employers.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Income Security LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 50. Which of the following is not a common form of electronic surveillance of employees in the workplace? a. Reviewing employees’ emails b. Requiring employees to wear electronic location monitoring bracelets c. Video-recording job performance d. Listening to employees’ telephone conversations ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Employee Privacy Rights LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 51. Investors Fund, a large financial institution, announces that it will start monitoring its employees’ electronic communications. If Mary, an Investors Fund employee, resists this policy, her best argument is that the monitoring violates a. employee privacy rights. b. worker health and safety. c. federal labor law.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© d. the employment-at-will doctrine.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging REFERENCES: Employee Privacy Rights LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 52. Network Industries, Inc., wants to monitor its employees’ electronic communications. To avoid liability under laws related to employee monitoring, Network should announce the monitoring to a. no one. b. the employees. c. the government. d. the public generally.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Employee Privacy Rights LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 53. Samson is a government employee. Samson is limited in drug testing by the a. First Amendment. b. Second Amendment. c. Fourth Amendment. d. Eighth Amendment.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging REFERENCES: Employee Privacy Rights LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 54. The Employee Polygraph Protection Act of 1988 prohibits most private employers from doing all of the following except a. requiring or causing employees or job applicants to take lie-detector tests. b. using, accepting, or referring to, or asking about the results of lie-detector tests taken by employees or applicants.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© c. taking or threatening negative employment-related action against employees or applicants based on results of lie-detector tests. d. using lie-detector tests to investigate losses due to theft.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Employee Privacy Rights LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 55. Nimble Numbers Accounting Corporation, a private employer, handles bookkeeping for small employers. In most circumstances, with exceptions, federal law clearly prohibits Nimble from subjecting its employees to a. job-skills tests. b. monitoring of business communications. c. drug tests. d. lie-detector tests.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Employee Privacy Rights LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 56. Sunny Energy Company wants to genetically test its workers for potentially significant, future health problems. Sunny may a. discharge employees who test “positive.” b. discriminate against job applicants who test “positive.” c. deny group health insurance for its employees who test “positive.” d. not make employment decisions based on genetic testing.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Employee Privacy Rights LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 57. Southwestern Foods Corporation operates a packaging plant near the border between the United States and Mexico.

Due to the location, it would be easier for Southwestern to employ noncitizens. With respect to persons not authorized to Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© work in the United States, an employer can a. hire them. b. recruit them. c. refer them for a fee. d. not hire them, recruit them, or refer them for a fee.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Immigration Law LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 58. Mineral Mining Corporation is a U.S. employer. Mineral, and other U.S. employers, must perform I-9 verifications for a. a random selection of new hires. b. every other new hire. c. new hires with certain racial or ethnic characteristics. d. each new hire.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Immigration Law LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 59. Hu, Ivan, and Juana apply to work for King Meatpacking Company. These individuals’ identities and eligibility to work must be verified by a. the employer. b. the individuals. c. the individuals’ countries of origin. d. the U.S. Citizenship and Immigration Services.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Immigration Law LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 60. Fruits & Vegetables, Inc., employs hundreds of seasonal and permanent workers, both skilled and unskilled, in seven Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© states. Fruits & Vegetables can hire illegal immigrants a. if either the employer or the immigrants file special forms. b. only if the employer files a special form. c. only if the immigrants file special forms. d. under no circumstances.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Immigration Law LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 61. Finance Professionals Union represents the workers of Business & Commerce Banking Corporation. The management of the firm refuses to bargain with the union. This violates a. federal labor law. b. state right-to-work laws. c. federal wage and hour laws. d. no federal or state law.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Labor Unions LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 62. Employers are not allowed to interfere with employees’ efforts to form or join a union under a. the Norris-LaGuardia Act. b. the National Labor Relations Act. c. the Labor-Management Reporting and Disclosure Act. d. the Labor-Management Relations Act. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Labor Unions LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 63. Food Packagers Union represents the workers of Garden Variety, Inc. The company does not require its workers to Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© join the union as a prerequisite to obtaining employment. The union would like the employer to require the workers to join after a specified amount of time on the job. This would violate a. federal labor law. b. federal full employment law. c. federal employment discrimination law. d. no federal law.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging REFERENCES: Labor Unions LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 64. Clerical Workers Union represents the employees of Miracle Medical Research Company. The management of the firm refuses to bargain with the union over the hiring of unnecessary workers. This violates a. federal labor law. b. state right-to-work laws. c. federal employment discrimination law. d. no federal or state law.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging REFERENCES: Labor Unions LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 65. Elections for union officers are regulated by a. the Labor-Management Relations Act. b. the Civil Rights Act. c. the Labor-Management Reporting and Disclosure Act. d. no federal law.

ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: Labor Unions LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 66. During a union election campaign, Autowerks Repair, Inc., prohibits on-site solicitations by any party, including Mechanics Union, which is seeking the workers’ unionization. This violates a. federal labor law. b. federal elections law. c. federal employment discrimination law. d. no federal law.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Labor Unions LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 67. During a union election campaign, Sapphire Blue Finance Company prohibits on-site solicitations by Credit Workers Union, which is seeking the workers’ unionization, while permitting charities to solicit the same workers. This violates a. federal labor law. b. federal elections law. c. federal employment discrimination law. d. no federal law.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Labor Unions LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 68. Following a union election campaign by Service Employees International Union among the employees of Quality Hotels & Resorts, Inc., the union does not obtain a majority vote in the election. This most likely violates a. federal labor law. b. federal elections law. c. federal employment discrimination law. d. no federal law.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging REFERENCES: Labor Unions LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning©

69. Dag is an employee of Ridge Mining Company. Under federal labor law, Dag and other employees have the right to a. bargain collectively with Eagle through their representatives. b. insist that Ridge require union membership as a condition of work. c. interfere with the efforts of others to form labor organizations. d. refuse to bargain with Ridge through their representatives.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Labor Unions LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 70. The employee union at Top Tech Toys decides to go on strike. Their strike will be legal if a. the strikers form a picket line. b. the strikers form a massed barrier and deny management and nonunion workers access to Top Tech Toys’ plant. c. the strikers stay in Top Tech Toys’ plant without working. d. the strikers violently attack management.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Labor Unions LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application Essay 71. Borealis Power Company is subject to mandatory workers’ compensation laws in the states in which it does business.

Chad and Dex work for Borealis as part of a crew that travels to remote locations to repair downed power lines and other damaged equipment. At a distant site, Chad is injured in an accident that is entirely Dex’s fault. Chad files a claim for workers’ compensation. Should the claim be granted? What would be Borealis’s best defense against it?

ANSWER: Chad’s claim should probably be granted. Borealis’s best defense in this situation, as in all workers’ compensation cases, is that Chad’s injury did not arise out of and in the course of employment. That defense would not likely be successful here, however. Under workers’ compensation laws, employers are strictly liable without regard to whether or not they are at fault. Even if the employer is not negligent, he or she is liable if an employee’s injury arose out of and in the course of employment. “Liability” in this context means that an injured employee is entitled to workers’ compensation benefits for his or her injury. An injury must be work-related, arising out of activity that is normal for the kind of job involved. “In the course of employment” means that the employee was either at work or performing work at a different location. That a co-worker caused an injury to an employee does not block the Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© employee’s recovery of workers’ compensation benefits. Also, although an employee is not covered while driving to work from home, the employee is covered while performing a workrelated service at an off-site location.

POINTS: 1 DIFFICULTY: Challenging REFERENCES: Worker Health and Safety LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Decision Modeling KEYWORDS: Bloom's: Application 72. Healthy Harvest Company runs a candy and fruit processing and packaging plant. Most of Healthy Harvest’s business is done during holiday seasons, especially between Halloween and New Year’s Day, and in the spring. The company hires a large temporary workforce during its busiest times. Occasionally, a position opens for an individual with highly specialized skills, particularly to operate and maintain the company’s inventory and sales control systems. Can Healthy Harvest hire noncitizens for its temporary, seasonal work? Can the company hire a noncitizen with special skills for certain jobs? If so, what procedures must the employer follow in both situations to do this hiring? If not, how can Healthy Harvest be assured that it is hiring only citizens?

ANSWER: It is illegal to hire for work in the United States a person who is not authorized to work here.

Thus, under no circumstances can an employer legally hire a noncitizen who is in the United States unlawfully. But an employer may hire a noncitizen who is a lawful permanent resident.

The principal responsibility to verify an individual’s identity and eligibility to work rests with the employer. The U.S. Citizenship and Immigration Services (CIS) supplies a form—Form I-9, Employment Eligibility Verification—that an employer must complete within three days of hiring an employee (and retain for three years). An employer has some defenses against alleged violations but is otherwise subject to penalties for illegally employing noncitizens.

Lawful permanent residency can be proved by an I-551 Alien Registration Receipt, or “green card.” Subject to certain strict requirements, an employer may apply for a “green card” for a noncitizen. Persons who immigrate to the United States to work include those with special skills, such as an individual who might qualify to fill the job with Healthy Harvest in this question. To hire such an individual who is not otherwise authorized to work here, an employer must petition the CIS. The employer can obtain a visa for a person to work in the United States in a highly qualified, specialty occupation as part of the H-1B visa program.

POINTS: 1 DIFFICULTY: Challenging REFERENCES: Immigration Law LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Decision Modeling KEYWORDS: Bloom's: Application

Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© True / False 1. Title VII of the Civil Rights Act does not apply to employers with only five employees. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 2. The Civil Rights Act does not prohibit job discrimination in the hiring process. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 3. Any employee, except an undocumented alien, can bring an action for employment discrimination. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 4. Title VII of the Civil Rights Act prohibits only intentional discrimination. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 5. Making out a prima facie case of discrimination means that a plaintiff has met his or her initial burden of proof. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 6. Disparate-impact discrimination occurs when a protected class of individuals is adversely affected by an employer’s practices, even though they do not appear to be discriminatory. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 7. The Civil Rights Act does not prohibit job discrimination on the basis of national origin. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 8. The Civil Rights Act does not protect against reverse discrimination.

Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 9. The Civil Rights Act prohibits job discrimination against majority group individuals, such as white males. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 10. Employers cannot forbid their employees from participating in any religious activity. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 11. Employers can treat their employees more or less favorably based on their religious beliefs or practices. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 2 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 12. A plaintiff alleging wage discrimination must file a complaint within a certain period of time of the decision that set the discriminatory pay. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 13. Federal law does not prohibit employers from classifying jobs as male or female. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 14. Federal law does not prohibit employers from engaging in gender-based wage discrimination. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 15. Sexual harassment occurs only if sexual favors are demanded of an employee. a. True b. False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG:Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 16. An employee’s resignation must be the foreseeable result of an employer’s discriminatory action to support a showing of constructive discharge. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 17. Constructive discharge is a theory that plaintiffs can use to establish any type of discrimination claims under the Civil Rights Act. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 18. A tangible employment action is a significant change in employment status or benefits. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LOCAL STANDARDS: KEYWORDS:

United States - OH - Default City - AICPA Legal Bloom's: Knowledge

19. When the harassment by co-workers creates a hostile working environment, an employee may have a cause of action against the employer. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 20. An employer may be liable for the harassment by nonemployees if the employer knew about the harassment and failed to take corrective action. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 21. Protection against discrimination under the Civil Rights Act does not extend to situations in which individuals are harassed by members of the same gender. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 22. There is no cap on damages for discrimination in violation of the Civil Rights Act. a. True Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 23. A plaintiff who proves unlawful discrimination may be awarded reinstatement, back pay, but not retroactive promotions. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 24. Under the Age Discrimination in Employment Act, the plaintiff must show that unlawful discrimination was the reason for an adverse employment action. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Discrimination Based on Age LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 25. Under the Age Discrimination in Employment Act, a plaintiff must prove that he or she was replaced by a person “outside the protected class.” a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Discrimination Based on Age Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 26. State employers are not immune from private suits brought by employees under the Age Discrimination in Employment Act. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Discrimination Based on Age LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 27. State employers are not immune from private suits brought by employees under the Americans with Disabilities Act. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Discrimination Based on Disability LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 28. Under the Americans with Disabilities Act, an employer must hire unqualified applicants who have disabilities. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Discrimination Based on Disability LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 29. Employers can consider mitigating measures or medications when determining if an individual has a disability that fits the definition in the Americans with Disabilities Act. Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Discrimination Based on Disability LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG:Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 30. If a job applicant or an employee with a disability, with reasonable accommodation, can perform essential job functions, the employer must make the accommodation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Discrimination Based on Disability LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG:Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 31. The Americans with Disabilities Act requires that employers accommodate the needs of applicants or employees with disabilities who are not otherwise qualified for the work a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Discrimination Based on Disability LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 32. Employers who do not accommodate the needs of persons with disabilities must demonstrate that the accommodations would cause undue hardship. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: Discrimination Based on Disability LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 33. Gender can be a bona fide occupational qualification. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Defenses to Employment Discrimination LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 34. An employer may defend against a claim of unintentional discrimination by asserting that a practice that has a discriminatory effect is a business necessity. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Defenses to Employment Discrimination LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 35. Under Title VII of the Civil Rights Act, most private firms are required to implement affirmative action policies. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Affirmative Action LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge Multiple Choice Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning©

36. Lee is seventy years old and Mira is a high-school dropout. Based on this information, members of protected classes include a. Lee and Mira. b. Lee only. c. Mira only. d. neither Lee nor Mira.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Risk Analysis KEYWORDS: Bloom's: Application 37. Erica is sixty-year-old woman with cerebral palsy. Erica is a member of a. one protected class. b. two protected classes. c. three protected classes. d. no protected classes.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 38. Personnel Staffing Corporation meets all of the requirements to be subject to the federal employment discrimination laws. Among these, the most important statute prohibiting discrimination against members of protected classes is a. the Age Discrimination in Employment Act. b. the Americans with Disabilities Act. c. the National Labor Relations Act. d. Title VII of the Civil Rights Act. ANSWER: d POINTS: 1 DIFFICULTY: Challenging REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning©

39. Title VII of the Civil Rights Act applies to which of the following a. An employer with five employees b. An employer with ten employees c. A labor union with twenty-five members d. A labor union with twelve members ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 40. Hu believes that he is a victim of a form of employment discrimination that falls under Title VII of the Civil Rights Act. Compliance with this statute is monitored by a. employees and job applicants, not an administrative agency. b. employers and businesses, not an administrative agency. c. the courts and Congress, not an administrative agency. d. the Equal Employment Opportunity Commission.

ANSWER: d POINTS: 1 DIFFICULTY: Moderater REFERENCES: Title VII of the CIvil Rights Act LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Risk Analysis KEYWORDS: Bloom's: Application 41. Origami Paper Products Corporation meets all of the requirements to be subject to the federal employment discrimination laws. These laws restrict the ability of employers to discriminate against workers on the basis of a. experience. b. gender. c. intelligence. d. skill.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 1 KEYWORDS: Bloom's: Comprehension 42. Dakota believes that Credit Services Corporation (CSC) has dis-criminated against her on the basis of gender. She files a suit against CSC under the Civil Rights Act. To es-tablish a prima facie case of employment discrimi-nation, Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© Dakota must show that a. she is a member of a protected class. b. CSC has no legal defenses against the claim. c. discriminatory intent motivated CSC’s act. d. no other firm in CSC’s industry has committed a discriminatory act.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 1 KEYWORDS: Bloom's: Application 43. Cody believes that Delta Corporation has dis-criminated against him on the basis of gender. Cody files a suit against Delta under Title VII. To es-tablish a prima facie case of employment discrimi-nation, Cody must show that a. Cody is a member of a protected class. b. Delta has no legal defenses against the claim. c. discriminatory intent motivated Delta’s act. d. other firms in Delta’s industry have committed discriminatory acts.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 44. Sarah believes that she was rejected for a position at Trekking Travel Agency due to her race. Sarah files a suit against Trekking Travel Agency under Title VII of the Civil Rights Act on the basis of disparate-treatment discrimination. Sarah must show all of the following except that a. she is a member of a protected class. b. she applied and was qualified for the job in question. c. she was rejected by Trekking Travel Agency. d. other people of her race hold similar positions with other employers.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 45. Truman applies for a job at Skylight Canopy Corporation for which he is well quali-fied, but for which he is rejected.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© Skylight continues to seek applicants and eventually fills the posi-tion with a person who is not a member of a mi-nority.

Truman is most likely to succeed in a suit against Skylight for discrimination if he is a member of a. a protected class. b. a majority group. c. an employers’ association. d. a union.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 46. Lew, a member of a protected class, applies for a job with Mit-E Construction Company, but fails Mit-E’s employment test and is not hired. Lew believes that the test has an unintentionally discriminatory effect. If so, this is a. reverse discrimination. b. disparate-impact discrimination. c. disparate-treatment discrimination. d. not discrimination.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 47. Melanie files an employment discrimination suit against Natural Gas Industries Corp. under Title VII of the Civil Rights Act on a disparate-impact theory. To succeed, Melanie must show that a protected group of people are adversely affected by any of the following except the employer’s a. practices. b. procedures. c. tests. d. seniority system.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS:

Bloom's: Application

48. Olivia applies for a job with Petro Company. Petro does not hire Olivia because of her ethnicity, or national origin.

This is a. reverse discrimination. b. disparate-impact discrimination. c. disparate-treatment discrimination. d. not discrimination.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 49. Erasmus files a suit against Drain-Pro Plumbing & Repair LLC under the Civil Rights Act, claiming reverse discrimination. To support this claim, Erasmus must show that he is a member of a. a protected class. b. a majority group. c. an employers’ association. d. a union.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 50. Conrad and Delilah are employees of AgriBio Feed & Seed Corporation. Under the Equal Pay Act, AgriBio can legitimately pay different wages on the basis of a. seniority. b. job descriptions. c. substantial equality of skill, effort, and responsibility. d. gender.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LOCAL STANDARDS: KEYWORDS:

United States - OH - Default City - AICPA Legal Bloom's: Application

51. Greta is the only female employee in the maintenance department of Hydraulics Inc. Greta’s supervisor and coworkers tease and play tricks on her so relentlessly that she feels compelled to quit. This is a. a constructive discharge. b. a destructive discharge. c. an instructive discharge. d. not a discharge.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 52. Ruth is a supervisor for Subs & Suds, a restaurant. Tim is a Subs employee. The owner announces that some employees will be discharged. Ruth tells Tim that if he has sex with her, he can keep his job. This is a. harassment on the basis of sexual orientation. b. not harassment. c. quid pro quoharassment. d. same-gender harassment.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 53. The standard for determining whether constructive discharge has occurred is whether or not a. a reasonable person in the employee’s position would feel compelled to quit. b. the employee’s annual wage rate is fair. c. a person of another race in the employee’s position would feel compelled to quit. d. a person of the opposite gender in the employee’s position would feel compelled to quit.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LOCAL STANDARDS: KEYWORDS:

United States - OH - Default City - AICPA Legal Bloom's: Comprehension

54. Elsa participates in an investigation under Title VII of the Civil Rights Act at the firm where she works. As a result, Elsa’s employer demotes her. Elsa can file a a. harassment complaint. b. retaliation claim. c. constructive discharge claim. d. disparate-impact discrimination claim.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 55. Vinnie, the owner of Café Rico, knows about, but does not take any action to prevent, the sexual harassment of employees. Vinnie and the café may be liable for such harassment by a. an employee’s previous employer. b. a customer or a co-worker. c. an employee’s spouse or other close relative. d. none of the choices.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 56. Pikabo files an employment discrimination suit against Quantitative Analysis, Inc., under Title VII of the Civil Rights Act, based on its discharge of Pikabo. Possible relief includes a. imprisonment. b. reinstatement. c. fines. d. an order to shutdown the employer’s business.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 3 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 57. Lisa brings a lawsuit against her employer for unlawful discrimination. Lisa is successful in proving that she was unlawfully discriminated against by her employer. Lisa may be awarded a. back pay, but not retroactive promotions. b. retroactive promotions, but not back pay. c. damages, but not back pay. d. back pay, retroactive promotions and damages.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 58. Svetlana, a fifty-five-year-old member of a racial minority with a disability, believes that she is a victim of employment discrimination. Potentially the most widespread form of discrimination is based on a. age. b. disability. c. gender. d. race.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Discrimination Based on Age LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application Fact Pattern 30-1 Lita replaces Manny in his job at Neighborly Business Corporation (NBC).

59. Refer to Fact Pattern 30-1. Manny believes that he has been discriminated against on the basis of his age. For the Age Dis-crimination in Employment Act to apply a. all parties must be forty years of age or younger. b. Lita must be forty years of age or older. c. Manny must be forty years of age or older. d. NBC must have been in existence for at least forty years.

ANSWER: c POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Challenging REFERENCES: Discrimination Based on Age LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 60. Refer to Fact Pattern 30-1. To succeed with an age-discrimination claim against CBC, Manny will have to show that a. Lita is not qualified for Manny’s job. b. Manny is qualified for his job. c. NBC’s qualifications for Manny’s job are too high. d. no one could do Manny’s job as well as he could.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging REFERENCES: Discrimination Based on Age LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 61. Eton files a suit in a federal district court against Florida, alleging employment discrimina-tion under the Age Discrimination in Employment Act. The state asks the court to dismiss the suit. The court is most likely to rule that a. the state is immune from the suit. b. the suit can proceed. c. Eton is immune from any defense the state might offer. d. the court is immune from such request.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging REFERENCES: Discrimination Based on Age LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 62. Paula, a disabled person, applies for a job at Quantity Corporation for which she is well quali-fied, but for which she is rejected. Quantity continues to seek applicants and eventually fills the posi-tion with a person who is not disabled. Paula is most likely to succeed in a suit against Quantity for discrimination under the Americans with Disabilities Act if she can show that a. she was not hired solely because of her disabil-ity. b. she can function well with corrective devices or on medication. c. her disability causes her undue hardship. d. she could not perform the job even with reasonable accommodation.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: a POINTS: 1 DIFFICULTY: Challenging REFERENCES: Discrimination Based on Disability LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 63. Dick works for First City Bank. When his spouse Elin is diagnosed with Lou Gehrig’s disease, Dick asks to take temporary leave to care for her. First City discharges him. He files a suit against the bank under the Americans with Disabilities Act. Most likely, Dick can a. recover for association discrimination. b. recover for reverse discrimination. c. recover for disparate-impact discrimination. d. not recover.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging REFERENCES: Discrimination Based on Disability LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application Fact Pattern 30-2 Beth, who has a disability, is an employee of Corporate Office Company (COC). After the installation of new doors on COC’s building, Beth finds it nearly im-possible to get in and out. For repeatedly failing to be on time, COC replaces Beth with Dian, who does not have a disability.

64. Refer to Fact Pattern 30-2. To succeed with a claim against COC under the Americans with Disabilities Act, Beth will have to show that a. Beth consistently met the essential requirements of her job. b. COC refused to make reasonable accommodation for Beth. c. Dian is unqualified for Beth’s position. d. the doors were installed as an act of intentional discrimination.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging REFERENCES: Discrimination Based on Disability LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 65. Refer to Fact Pattern 30-2. To successfully defend against Beth’s claim, COC will have to show that a. Beth consistently failed to meet the essential requirements of her job. b. COC cannot make changes to the doors without undue hardship. c. Dian is qualified for Beth’s position. d. the doors were not installed as an act of intentional discrimination.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging REFERENCES: Discrimination Based on Disability LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 66. Flynn is a drug addict who has completed a supervised drug-rehabilitation program. Gert used drugs casually in the past. Heath reports to work while under the influence of alcohol. Considered to have a disability under the Americans with Disabilities Act is a. Flynn. b. Gert. c. Heath. d. all of the choices.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging REFERENCES: Discrimination Based on Disability LEARNING OBJECTIVES: LO - 4 KEYWORDS: Bloom's: Application 67. Silky Coordinates, a women’s clothing store, employs female attendants to as-sist customers in the dressing rooms.

Radley, a forty-one-year-old male, ap-plies for an atten-dant’s job, but is not hired. In Radley’s suit against Silky for employment discrimination under Title VII of the Civil Rights Act, the store has a. no defense. b. a bona fide occupational qualification defense. c. a business necessity defense. d. a seniority systems defense.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging REFERENCES: Defenses to Employment Discrimination LEARNING OBJECTIVES: LO - 5 KEYWORDS: Bloom's: Application 68. Machine Corporation requires its employees to have a high school diploma, claiming a definite connection between a high school edu-ca-tion and job performance. In a suit against Machine Corporation under Title VII of the Civil Rights Act, this requirement is shown to have a discriminatory effect. The employer has Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© a. no defense. b. a bona fide occupational qualification defense. c. a business necessity defense. d. a seniority systems defense.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging REFERENCES: Defenses to Employment Discrimination LEARNING OBJECTIVES: LO - 5 KEYWORDS: Bloom's: Application 69. Valerie is a pilot for Wayfarer Airlines. Wayfarer’s policy is to restrict Valerie and its other pilots from flight responsibilities after a certain age. This is most likely a. a legitimate bona fide occupational qualification. b. discrimination on the basis of age. c. reverse discrimination. d. discrimination on the basis of disability.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging REFERENCES: Defenses to Employment Discrimination LEARNING OBJECTIVES: LO - 5 KEYWORDS: Bloom's: Application 70. Jason and Katrina work on the loading dock for Longhaul Transport Company. Jason has a disability. Katrina has seniority. Jason asks for a transfer, which would represent an accommodation for his disability. Longhaul gives the transfer to Katrina on the basis of her seniority. Jason files a suit against Longhaul for discrimination on the basis of his disability. The court is most likely to rule that a. Katrina’s seniority is a good defense. b. Jason’s disability is a sufficient basis for relief. c. Longhaul’s action was a business necessity. d. Longhaul’s action was a reasonable accommodation.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging REFERENCES: Defenses to Employment Discrimination LEARNING OBJECTIVES: LO - 5 KEYWORDS: Bloom's: Application Essay 71. Gelato Cheese Company, a major processor of cheese sold throughout the United States, employs one hundred workers at its principal processing plant. The plant is located in Heartland Corners, which has a population that is 50 percent white and 25 percent African American, with the balance Hispanic American, Asian American, and others. Gelato requires a high school diploma as a condition of employment for its cleaning crew. Three-fourths of the white population Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© completed high school, compared with only one-fourth of those in the minority groups. Gelato has an all-white cleaning crew. Has Gelato violated the Civil Rights Act? Explain ANSWER: An employer can legally impose an educational requirement if the requirement is directly related to, and necessary for, performance of the job. In this situation, the employer is requiring a high school diploma as a condition of employment for its cleaning crew. A high school diploma is not related to, or necessary for, the competent performance of a job on a cleaning crew. Gelato as an employer falls under the Civil Rights Act. Therefore, if someone were to challenge Gelato’s practices, a court would be likely to consider the disparate impact that the educational requirement had on Gelato’s hiring of minorities. Gelato’s educational requirement resulted in its hiring an all-white cleaning crew in an area in which 75 percent of the pool of qualified applicants were minorities. Therefore, Gelato’s educational requirement would likely be considered unintentional (disparate-impact) discrimination against minorities.

POINTS: 1 DIFFICULTY: Challenging REFERENCES: Title VII of the Civil Rights Act LEARNING OBJECTIVES: LO - 1 LO - 2 NATIONAL STANDARDS: United States - BB_17.3 - BB-Decision Modeling United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 72. For twenty years, Ozzie works for Players Paradise, a destination for vacationers from across the United States, maintaining golf carts. After a steady stream of positive job evaluations and merit pay raises, Ozzie is promoted to the position of supervisor of golf-cart maintenance at three of Players’s courses. Five years later, a new employee, Quentin, is hired to oversee operations at all ten of Players’s courses. Quentin demotes Ozzie, who is now over the age of forty, to running only one of the three cart facilities, and freezes his salary. Quentin demotes five other employees over the age of forty and places one of Ozzie’s former facilities under the supervision of Richie, who is twenty-three. Ozzie overhears Richie say, “We’re going to have to do away with these old, senile men.” Less than a year later, Quentin reconsolidates the three cart facilities’ operations under Richie’s charge. Ozzie quits and files a suit against Players for employment discrimination. Should he prevail? Explain.

ANSWER: The Age Discrimination in Employment Act (ADEA) prohibits discrimination in employment on the basis of age against individuals forty years of age or older. For the ADEA to apply, an employer must have twenty or more employees, and interstate com-merce must be affected by the employer’s business activi-ties. Ozzie worked at Players Paradise, which with ten golf courses most likely employed more than twenty persons. The court would also probably find that Players’s activities affected inter-state commerce because it is a vacation destination with visitors from many states. Ozzie could likely establish the rest of a prima facie case. Because Ozzie was not demoted due to any apparent job-performance prob-lems, the fact that he was replaced by a person approximately half his age, coupled with Richie’s state-ment about get-ting rid of all the “old, senile men,” would be enough to shift the burden to Players to show that it was not discriminating on the basis of age. Ultimately, based on the facts in the question, Ozzie would probably prevail.

POINTS: 1 DIFFICULTY: Challenging REFERENCES: Discrimination Based on Age LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BB_17.3 - BB-Decision Modeling United States - BUSPROG: Reflective Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS:

Bloom's: Application

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© True / False 1. Like statutory law, administrative law is created by legislatures. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Introduction LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Risk Analysis LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 2. Federal executive agencies are outside the federal executive departments. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Practical Significance LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 3. Independent regulatory agencies include the cabinet departments of the executive branch. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Practical Significance LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 4. State regulation, when not preempted, may cover many of the same activities as federal regulation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: Practical Significance LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 5. By delegating some of its authority to make and implement laws, Congress violates the U.S. Constitution. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Agency Creation and Powers LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 6. Federal administrative agencies can regulate beyond the powers granted by enabling legislation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Agency Creation and Powers LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 7. Administrative agencies cannot make legislative rules, or substantive rules, that are as legally binding as laws that the Congress passes. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Agency Creation and Powers LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 8. Interpretive rules simply declare policy and do not affect legal rights or obligations.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Agency Creation and Powers LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG:Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 9. A party seeking court review of an administrative action must first exhaust all of his or her administrative remedies before seeking court review. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Agency Creation and Powers LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 10. Under the exhaustion doctrine, a party must feel “exhausted” about an administrative action or regulation to challenge it in court. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Agency Creation and Powers LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 11. An administrative agency can issue an interpretive rule to indicate how the agency plans to interpret its statutory authority. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: Agency Creation and Powers LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 12. There is a precise definition of what makes an administrative rule arbitrary and capricious. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Agency Creation and Powers LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG:Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 13. A party can challenge an administrative regulation as so irrational as to be arbitrary and capricious. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Agency Creation and Powers LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 14. The Administrative Procedure Act does not apply to a particular agency procedure. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Agency Creation and Powers LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 15. Rulemaking—the formulation of new administrative regulations—is a major function of Congress, not administrative agencies.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: The Administrative Process LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 16. Unlike those who violate statutes, violators of agency rules are not punished. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: The Administrative Process LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: Risk Analysis LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 17. The period for persons to comment on a proposed administrative rule must be at least thirty days. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: The Administrative Process LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 18. Only experts can submit comments on a proposed administrative rule. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: The Administrative Process LEARNING OBJECTIVES: LO - 4 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 19. Final administrative rules do not have binding legal effect unless the courts later declare them to be binding. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: The Administrative Process LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 20. Final administrative rules have binding legal effect unless the courts later overturn them. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: The Administrative Process LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 21. Often, an administrative agency itself enforces its rules. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: The Administrative Process LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG:Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 22. If a business firm refuses to comply with an agency’s request to inspect facilities or business records, the agency must defer to the refusal. a. True b. False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: The Administrative Process LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 23. Administrative agencies can conduct warrantless searches in some situations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: The Administrative Process LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 24. In most instances, an agency is not required to obtain a search warrant before a physical search for evidence is conducted. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: The Administrative Process LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 25. Frequently, disputes over violations of administrative rules are resolved through informal adjudication proceedings. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: The Administrative Process LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS:

Bloom's: Knowledge

26. Administrative agencies generally exercise substantial discretion over the type of hearing procedures that they use. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: The Administrative Process LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 27. An administrative adjudicatory hearing does not have to meet the constitutional standards of due process. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: The Administrative Process LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 28. If the meaning of a statute’s language is unclear and an agency interprets it, a court must overturn the interpretation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Judicial Deference To Agency Decisions LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 29. If the meaning of a statute’s language is unclear and an agency interprets it, a court must follow the interpretation as long as it is reasonable. a. True b. False ANSWER: True POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Easy REFERENCES: Judicial Deference To Agency Decisions LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG:Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 30. All federal government agencies must make their records available electronically on the Internet. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Public Accountability LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: Risk Analysis LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 31. The federal government must disclose certain records to any person or entity on written request only if there is a rational reason for the request. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Public Accountability LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 32. Every portion of every meeting of a federal administrative agency does not have to be open to public observation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Public Accountability LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 33. The public must be provided with adequate advance notice of scheduled federal administrative agency meetings and agendas. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Public Accountability LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG:Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 34. Federal agencies must consider ways to reduce the economic impact of new regulations on small businesses. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Public Accountability LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 35. An agency must conduct a regulatory flexibility analysis whenever a new regulation will have an impact on a “small number of substantial entities.” a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Public Accountability LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge Multiple Choice 36. Independent regulatory agencies such as the Federal Trade Commission are a. not part of the government’s executive branch. b. outside the major departments of the government’s executive branch. c. subagencies of executive agencies.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© d. subject to more executive authority than executive agencies.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Practical Significance LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 37. The U.S. Social Security Administration is a federal agency. The Iowa Department of Social Services is a parallel state agency. If these agen-cies’ regulations conflict a. the federal agency’s regulations take precedence. b. the state agency’s regulations take precedence. c. the two agencies’ regulations take equal precedence. d. the two agencies’ regulations cancel each other.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Practical Significance LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 38. Congress leaves it to the Bureau of Prisons to oversee the promulgation of detailed regulations in areas under the agency’s juris-diction. This is a. divine right. b. the delegation of legislative powers. c. gap-filling power. d. unconstitutional conduct.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging REFERENCES: Agency Creation and Powers LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 39. Playground Equipment, Inc., is subject to regulations issued by the Occupational Safety and Health Administration (OSHA). Like other federal administrative agencies, the OSHA was created by a. Congress, through enabling legislation. b. the Federal Trade Commission, through the rulemaking process.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© c. the president, through an executive order. d. the U.S. Department of Labor, through a final order.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Agency Creation and Powers LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 40. Nemo’s Seafood Restaurant Company pays income and other taxes collected by the Internal Revenue Service (IRS).

Like other federal administrative agencies, the IRS was created by a. Congress, through enabling legislation. b. the courts, through the adjudicatory process. c. the U.S. Constitution, through the tax and spend clause. d. the U.S. Department of the Treasury, through a legislative rule.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging REFERENCES: Agency Creation and Powers LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 41. Persons who favor the creation of a National Biotech Agency to regu-late the production of genetically altered agricultural products should concentrate their lobbying efforts on a. Congress. b. federal administrative agencies that oversee agricultural products. c. the United States Supreme Court. d. the president of the United States.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Agency Creation and Powers LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 42. Plastix Produx Company is subject to a decision by the Consumer Product Safety Commission. Opposed to the decision, Plastix Produx wants a court to review it. First, however, the firm must use all of the potential administrative remedies. This is Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© a. an actual controversy at issue. b. standing to sue. c. the exhaustion doctrine. d. the ripeness doctrine.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging REFERENCES: Agency Creation and Powers LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 43. The Federal Aviation Administration uses notice-and-comment rulemak-ing. The final rule in such a proceeding is sometimes referred to as a. a legislative rule. b. an interpretive rule. c. an adjudicatory order. d. an executive edict.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Agency Creation and Powers LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 44. The Merit Systems Protection Board issues a rule. Like other adminis-tra-tive agencies’ “legislative rules,” this rule is as a. binding as a law passed by Congress. b. persuasive as an expert’s opinion. c. suggestive as a newspaper’s editorial. d. unenforceable as a salesperson’s puffery.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Agency Creation and Powers LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 45. Executive control over the Federal Communications Commission, and other agencies, may be exercised through a Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© pres-iden-tial veto of a. Congress’s modifications of the agency’s authority. b. the agency’s final rules. c. the agency’s final orders. d. none of the choices.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Agency Creation and Powers LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 46. Pure Water Company is subject to a decision by the Environmental Protection Agency. Pure Water appeals the decision, arguing that it is arbitrary and capricious. This could mean that the decision a. changed the agency’s prior policy without justification. b. followed a consideration of all relevant factors. c. was accompanied by a rational explanation. d. was plainly warranted by the evidence.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Agency Creation and Powers LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 47. Freight Transport Company is subject to a decision by the National Labor Relations Board. Freight Transport appeals the decision, arguing that it is arbitrary and capricious. This could mean that the decision a. followed a consideration of legally appropriate factors. b. justifiably changed the agency’s prior policy. c. was accompanied by a rational explanation. d. was plainly contrary to the evidence.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Agency Creation and Powers LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 48. Before adopting new regulations to govern Internet-based phone services, the Federal Communications Commission may not a. hold hearings to acquire facts pertinent to the proposed rules. b. ignore the Administrative Procedure Act to streamline proceedings. c. order manufacturers to provide certain documents. d. solicit testimony from interest groups and consumers.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging REFERENCES: The Administrative Process LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 49. To notify the public of a proposed rule, the Food Safety and Inspection Service, like other federal agencies, publishes the proposal in a. the news media. b. a trade journal available to members of the industry. c. the Federal Register. d. an office memo that employees are free to take home.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Administrative Process LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 50. The Securities and Exchange Commission decides to create a new rule relating to the dissemination of material nonpublic information through corporate Web sites. The first step is a. compile the rule with others in the Code of Federal Regulations. b. conduct an on-site inspection. c. publish a notice of the proposed rulemaking. d. solicit public comment.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Administrative Process LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning©

51. The U.S. Fish and Wildlife Service utilizes notice-and-comment rulemak-ing. This involves a period during which a. judges, legislators, and the president are asked about a proposed rule. b. potential violators of a proposed rule are notified and publicized. c. the administrators “notice” a problem and “comment” on it. d. the public is asked to comment on a proposed rule.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Administrative Process LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 52. The U.S. Citizenship and Immigration Service issues a rule. Like the rules of other federal administrative agencies, this rule is compiled in a. the Administrative Register of the Federal Government. b. the Code of Federal Regulations. c. the Federal Rules of Civil Procedure. d. the United States Code.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Administrative Process LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 53. The Consumer Product Safety Commission (CPSC) wants Monster Toy Company to produce certain records for review. To obtain the records, the CPSC will issue a. an order for specific performance. b. a rule for parol evidence. c. a formal complaint. d. a subpoena.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging REFERENCES: The Administrative Process LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning©

54. The Food and Drug Administration (FDA) is investigating reports that Caplets Pharmaceutical Corporation is putting potentially harmful ad-di-tives in Doze, a new pain-relief medication. The FDA’s demands for particular documents from Caplets a. must be specific and adequately describe the material being sought. b. must be non-specific so an incriminating item is not overlooked. c. must be general so as to force an uncooperative party’s compliance. d. may, but need not, be specific because the FDA is a federal agency.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging REFERENCES: The Administrative Process LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 55. The U.S. Patent and Trademark Office (USPTO) wants to review certain records of Verity Corporation. The USPTO can legitimately gain access to the records through a. agency coercion. b. infiltrating Verity’s computers without the firm’s knowledge. c. public comment. d. Verity’s consent.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Administrative Process LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 56. The Internal Revenue Service (IRS) wants to seize certain documents of Monetary Propriety, Inc. Whether it is permissible for the IRS to request or seize the documents depends on whether the docu-ments are a. incriminating. b. relevant. c. technical. d. valuable.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Administrative Process LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LOCAL STANDARDS: KEYWORDS:

United States - OH - Default City - AICPA Legal Bloom's: Application

57. Caleb is a witness in a contro-versy involving the U.S. Drug Enforcement Administration. Caleb can be compelled to appear before an adminis-trative law judge if he is served with a. an order for specific performance. b. a rule for parol evidence. c. a subpoena. d. a politely worded request.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Administrative Process LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 58. The Nuclear Regulatory Commission (NRC) files a complaint against General Construction Corporation (GCC). GCC may want to set-tle the dispute, before formal adjudicatory proceedings be-gin, to avoid a. appearing uncooperative. b. eliminating the need for additional proceedings. c. rectifying the problem to the NRC’s satisfaction. d. saving the expense of formal proceedings and later appeals.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging REFERENCES: The Administrative Process LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 59. The functions of the Social Security Administration, like those of other adminis-trative agencies, include a. adjudication. b. declaration. c. enunciation. d. pronunciation.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging REFERENCES: The Administrative Process LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LOCAL STANDARDS: KEYWORDS:

United States - OH - Default City - AICPA Risk Analysis Bloom's: Application

60. The U.S. Mine Safety Administration conducts searches of certain businesses. This agency and other administrative agencies can conduct warrantless searches in a. all industries. b. highly regulated industries. c. no industries. d. newly regulated industries only.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Administrative Process LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 61. The Federal Emergency Management Agency (FEMA) discovers that Goodnuff Trailers, Inc., is violating a FEMA regulation. If this situation is resolved like most such disputes, the outcome will be a. a negotiated settlement. b. a trial and a fine. c. a trial and an appeal to a higher authority. d. a trial and the dissolution of the business.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging REFERENCES: The Administrative Process LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 62. Nursing Home Care Company is charged with violating a rule of the Social Security Administration. Most likely, Nursing Home Care will be required to appear at a hearing presided over by a. a federal appellate court judge. b. a federal district court judge. c. an administrative law judge. d. a U.S Marshal.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Administrative Process LEARNING OBJECTIVES: LO - 5 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 63. Labor Recruiters, Inc., has been ordered to appear at a hearing be-fore an administrative law judge of the National Labor Relations Board. A significant difference between a trial and an administrative hearing is that a. attorneys are not allowed to attend administrative hearings. b. clients are not allowed to communicate with their attorneys dur-ing adminis-trative hearings c. hearsay can be introduced as evidence in an administrative hearing. d. the burden of proof is on the charged party to prove innocence.

ANSWER: c POINTS: 1 DIFFICULTY: Challeging REFERENCES: The Administrative Process LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Analysis 64. Guard Personnel Company is charged with using hiring practices that do not meet requirements set by the Transportation Safety Administration (TSA). The administra-tive law judge or-ders Guard to comply with the TSA’s regulations. Guard may a. appeal to the commission that governs the TSA. b. appeal to Congress, which created the TSA. c. appeal to a different, separate agency. d. ignore the order.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging REFERENCES: The Administrative Process LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 65. In reviewing the actions of the U.S. Office of Nuclear Energy and other agencies, the courts a. are usually reluctant to review questions of fact. b. rarely defer to the technical expertise of administrative agencies. c. often rule on the merits of policy determinations. d. never defer to an agency’s interpretation of law.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging REFERENCES: Judicial Deference to Agency Decisions Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 66. After notice-and-comment rulemaking, the U.S. Bureau of Land Management (BLM) issues a new rule and applies it to Clearcut Timber Company. Clearcut appeals the application to a federal court. The court will most likely defer to the BLM’s interpretation of a. the facts and the law. b. the agency’s authority. c. procedural requirements. d. the Constitution.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging REFERENCES: Judicial Deference to Agency Decisions LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 67. Beck seeks information about Donatello and other well-known businesspersons under the Freedom of Information Act. To obtain the informa-tion, Beck must a. agree not to reveal any trade secrets. b. reasonably describe the information. c. get a court order. d. have the businesspersons’ permission.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Public Accountability LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 68. A failure of the Federal Bureau of Investigation to comply with a request under the Freedom of Information Act (FOIA) may be challenged in a. a federal district court. b. a hearing before the U.S. Freedom of Information Agency. c. a meeting with Congress’s FOIA subcommittee. d. a special conference with the president of the United States.

ANSWER: a POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Challenging REFERENCES: Public Accountability LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 69. With some exceptions, every portion of every meeting of the Federal Reserve System Board of Governors and other federal administrative agencies must be open to public observation under a. no federal or state law. b. the Freedom of Information Act. c. the Government in the Sunshine Act. d. the Public Accountability Act. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Public Accountability LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Application 70. The Regulatory Flexibility Act has helped reduce record-keeping bur-dens for Hometown Gas Company and other small business firms in the area of a. accounting practices. b. asset acquisition. c. hazardous waste management. d. tax reporting.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Public Accountability LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application Essay 71. Administrative agencies—like the Securities and Exchange Commission, the Federal Trade Commission, and the Food and Drug Administration—make rules. What are the two basic types of rules called, and how bind-ing are they?

What must an administrative rule NOT do?

ANSWER: The rules that are made according to the notice-and-comment rulemaking procedures are sometimes referred to as “legislative rules,” and they are as binding as the laws that Congress makes. Such rules, like laws, must not violate the Constitution. Unlike laws, however, such Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© rules must not exceed the power that Congress conferred on the agency in its enabling legislation.

Agencies can adopt rules through less formal actions. These rules may be referred to as “interpretive rules.” Interpretative rules declare an agency’s interpretation of its enabling statute’s meaning, without imposing direct, legally binding obligations or establishing legal rights. They may have practical significance, however, because they provide enforcement guidelines for agency officials and may indicate that more formal rulemaking will occur if these less formal positions are ignored

POINTS: 1 DIFFICULTY: Challenging REFERENCES: Agency Creation and Powers LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Decision Modeling KEYWORDS: Bloom's: Comprehension 72. Grapple Market Share Corporation would like to know what information federal agencies have about Grapple’s operations, so that the firm will know what its competitors may be able to learn about it. Can Grapple require the agencies to dis-close whatever informa-tion they may have concerning it? If so, how should the firm make its request? What federal law applies? Is any information exempt?

ANSWER: The Freedom of Information Act (FOIA) of 1966 requires the federal gov-ernment to re-veal certain “records” to “any person” on request. The re-quest may be made via e-mail or fax, or more traditional print methods, and needs to contain only a reasonable description of the information sought. An agency has twenty working days to respond to a request. There are exemptions, but the agency must notify the party seeking the information what is being withheld and which exemptions—national security, or the confidential or personal nature of the information, for example—are being asserted. An agency’s refusal to comply with the FOIA can be challenged in court. Generally, all records must be made available electronically on the Internet, on CD-ROMs, and in other electronic formats, and clearly indexed. Documents must be made computer accessible within a year of their creation.

POINTS: 1 DIFFICULTY: Challenging REFERENCES: Public Accountability LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Decision Modeling KEYWORDS: Bloom's: Application

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© True / False 1. Federal laws often provide more sweeping and significant protections for the consumer than state laws. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Introduction LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 2. State consumer protection agencies are charged by Congress with the broadly stated goal of preventing unfair and deceptive trade practices. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Deceptive Advertising LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG:Analytic KEYWORDS: Bloom's: Comprehension 3. Deceptive advertising occurs if a reasonable consumer would be misled by the advertising claim. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Deceptive Advertising LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: bloom's: Knowledge 4. Advertising that appears to be based on factual evidence will not be deemed deceptive even if it is not reasonably supported by evidence. a. True b. False ANSWER: True POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Easy REFERENCES: Deceptive Advertising LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG:Analytic KEYWORDS: Bloom's: Knowledge 5. Vague generalities and obvious exaggerations are permissible in advertising. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Deceptive Advertising LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 6. A sanction known as counteradvertising requires a company to advertise anew to inform the public about earlier misinformation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Deceptive Advertising LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG:Analytic KEYWORDS: Bloom's: Knowledge 7. Advertising that contains an endorsement by a celebrity will not be deemed deceptive. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Deceptive Advertising LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG:Analytic KEYWORDS: Bloom's: Knowledge 8. A sanction known as bait-and-switch advertising requires a company to advertise the products of its competitor to Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© counter its own false claims. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Deceptive Advertising LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 9. Counteradvertising occurs when a salesperson lures a consumer into a store by advertising a low-priced item in order to switch the consumer to a more expensive item. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Deceptive Advertising LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 10. Deceptive advertising does not occur in the online environment. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Deceptive Advertising LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Technology United States - BUSPROG:Analytic KEYWORDS: Bloom's: Knowledge 11. Puffery constitutes deceptive advertising. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Deceptive Advertising Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG:Analytic KEYWORDS: Bloom's: Comprehension 12. The Consumer Product Safety Commission is the primary agency that issues regulations on food labeling. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Labeling and Packaging LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG:Analytic KEYWORDS: Bloom's: Comprehension 13. Labels on fresh meats are not required to indicate where the food originated. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Labeling and Packaging LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG:Analytic KEYWORDS: Bloom's: Knowledge 14. Labels on fresh vegetables must indicate where the food originated. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Labeling and Packaging LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 15. Restaurants must post guidelines on the number of calories that an average person requires daily. a. True b. False ANSWER: True Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© POINTS: 1 DIFFICULTY: Easy REFERENCES: Labeling and Packaging LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG:Analytic KEYWORDS: Bloom's: Knowledge 16. An information label must be attached to every new car to include the fuel economy estimate for the vehicle. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Labeling and Packaging LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 17. Food products are required to bear labels detailing the nutritional content. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Labeling and Packaging LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 18. The Federal Reserve Board of Governors has issued a regulation that governs credit provisions associated with sales contracts—Regulation Z. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Sales LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG:Analytic KEYWORDS: Bloom's: Knowledge Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 19. Merchants must issue a refund within a specified period of time when a consumer cancels an order. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Sales LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG:Analytic KEYWORDS: Bloom's: Knowledge 20. A consumer who receives unsolicited merchandise sent by U.S. mail can keep it without obligation to the sender. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Sales LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 21. The Food and Drug Administration must ensure the safety of new medications. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Protection of Health and Safety LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG:Analytic KEYWORDS: Bloom's: Knowledge 22. The Consumer Product Safety Commission conducts research on the safety of individual consumer products and maintains a clearinghouse on the risks associated with various products. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Protection of Health and Safety Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG:Analytic KEYWORDS: Bloom's: Knowledge 23. The Food and Drug Administration does not have the authority to directly recall any food products that it suspects are tainted but must rely on the producers to recall items. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Protection of Health and Safety LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG:Analytic KEYWORDS: Bloom's: Knowledge 24. Insurance companies must spend at least 85 percent of all premium dollars from large employers on benefits and quality improvements. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Protection of Health and Safety LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG:Analytic KEYWORDS: Bloom's: Knowledge 25. Manufacturers are required to report on any products intended for sale if the products have proved to be hazardous. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Protection of Health and Safety LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS:

Bloom's: Knowledge

26. Drugs can be test-marketed to the public before they are ensured to be safe and effective. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Protection of Health and Safety LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 27. Credit can be denied solely on the basis of race. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Credit Protection LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG:Analytic KEYWORDS: Bloom's: Comprehension 28. A credit-card company must send monthly bills to cardholders twenty-one days before the due date. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: Credit Protection LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG:Analytic KEYWORDS: Bloom's: Comprehension 29. Major credit reporting agencies must provide consumers with free copies of their own credit reports every six months. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: Credit Protection LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG:Analytic KEYWORDS: Bloom's: Knowledge 30. A credit-cardholder is liable for all unauthorized charges made before the creditor is notified that the card has been lost. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Credit Protection LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 31. Any time a consumer is denied credit or insurance on the basis of his or her credit report, the consumer must be notified of that fact. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Credit Protection LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 32. The Fair Debt Collection Practices Act generally applies only to debt-collection agencies that regularly attempt to collect debts on someone else’s behalf. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Credit Protection LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 33. Credit can be denied solely on the basis of marital status. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Credit Protection LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 34. A collection agency must include a validation notice whenever a debtor pays a debt. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Credit Protection LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 35. A collection agency has the right to contact a debtor at the debtor’s place of employment whether or not the debtor’s employer objects. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Credit Protection LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge Multiple Choice 36. Slow-Brew Coffee Company sells coffee and related beverages. The company’s ad contends that ambitious businesspersons “Drink Us & Rise Up in the World!’ ” The Federal Trade Commission would consider this ad to be a. false and misleading. b. impermissibly vague and general. c. a deceptive half-truth. d. none of the choices.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: d POINTS: 1 DIFFICULTY: Challenging REFERENCES: Deceptive Advertising LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 37. SmartPhone Company’s ad states that its product is “The Best that Money Can Buy.” Because of this ad, the Federal Trade Commission is most likely to issue a. a cease-and-desist order. b. a counteradvertising order. c. a multiple product order. d. none of the choices.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging REFERENCES: Deceptive Advertising LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 38. Mouth & Gums, Inc. (CSI), engages in deceptive advertising when it markets its product Oral Rinse as able to kill germs over long periods of time. In an action against Mouth & Gums, the firm is ordered to stop its false advertising of Oral Rinse and other products. This is a. a counteradvertising order. b. a multiple product order. c. a “cooling-off” law. d. a validation notice.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Deceptive Advertising LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 39. Spicy Salsa, Inc., complains to the Federal Trade Commission (FTC) about an ad broadcast by Tangy Taco Sauce Company, Spicy Salsa’s competitor. The FTC investigates and concludes that the ad is deceptive. The FTC’s next step is to a. conduct negotiations between the competitors. b. draft a formal complaint.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© c. issue a cease-and-desist order. d. permit Spicy Salsa to broadcast similarly deceptive counteradvertising.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Deceptive Advertising LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 40. Medi-Insurance Company faxes ads to Nancy and other individual consumers without the recipients’ permission. This is subject to a. a cease-and-desist order by the Federal Trade Commission. b. no sanctions. c. possible fines by the Federal Communications Commission. d. rescission on the order of the Federal Reserve Board.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging REFERENCES: Deceptive Advertising LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 41. Soundbites Corporation makes and markets cellphones. Soundbites’s ad states that on its phones voices and text come through as “clear as the sky on a cloudless day.” The Federal Trade Com-mission would consider this claim a. false and misleading. b. impermissibly vague and general. c. a deceptive half-truth. d. none of the choices.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Deceptive Advertising LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 42. In its ads, Crunchy Inc. makes various claims about its snack products. Crunchy’s advertising claims would most likely be deemed deceptive if the claims a. mislead a reasonable consumer. b. contain vague generalities.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© c. consist of what is known as puffery. d. include obvious exaggerations.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Deceptive Advertising LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom;s" Application 43. Hearth & Home Furniture store advertises bedroom suites at a “Special Low Price of $599.” When Ilene tries to buy one of the suites, Jill, the salesperson, tells her that they are all sold and no more are obtainable. Jill adds that Hearth & Home has other bedroom suites available for as low as $2,599. This is a. a multiple product order b. bait-and-switch advertising. c. counteradvertising. d. puffery.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Deceptive Advertising LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 44. Precise GPS Company’s ad states that its product is “the finest that money can buy.” Because of this ad, the Federal Trade Commission is most likely to issue a. a cease-and-desist order. b. a counteradvertising order. c. a multiple product order. d. none of the choices.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Deceptive Advertising LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 45. Cleaners & Solvents, Inc. (CSI), engages in de-ceptive advertising when it markets its product Dirt Remover as able to kill germs over long periods of time. In an action against CSI regarding Dirt Remover, the firm is ordered to stop its false advertising of Dirt Remover and other products. This is Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© a. a counteradvertising order. b. a multiple product order. c. a "cooling-off" law. d. a validation notice.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Deceptive Advertising LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 46. Elise and many other consumers complain to the Federal Trade Commission (FTC) that a Faux Diamonds Company ad is deceptive. The FTC’s first step is to a. draft a formal complaint. b. investigate. c. issue a cease-and-desist order. d. order restitution.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Deceptive Advertising LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 47. Sweet Treats, Inc., wants to market a new snack food. On the product’s label, standard nutrition facts are a. prohibited. b. required. c. strictly voluntary. d. warranted by the nature of the food.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Labeling and Packaging LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 48. Under federal law, the calorie content of the food on a menu must be posted by Organic Mix, LLC, if Organic Mix is a. a restaurant chain with twenty or more locations.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. a food distributor with twenty or more customers. c. a food processor with twenty or more products. d. a food producer with twenty or more acres.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging REFERENCES: Labeling and Packaging LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 49. Gear Motor Company makes cars. Federal law requires Gear to attach an information label that includes the Environmental Protection Agency’s fuel economy estimate for a vehicle to a. every new car. b. no car—compliance with the law is voluntary. c. select old and new cars. d. whichever vehicles Gear chooses.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Labeling and Packaging LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 50. Bagels n’ Pastries, Inc., makes and sells a variety of bread products. Bagels n’ Pastries’s product packages must include a. the company owner's identity. b. the contents' net quantity. c. the restaurants and stores in which the product is sold. d. the type of consumer most likely interested in the product.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Labeling and Packaging LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 51. Nature’s Food Market sells groceries. Metro Snacks & Drug Store sells groceries and fills prescriptions. The party with the chief responsibility to prevent unsafe food and drugs from being sold is a. Nature’s Food Market and Metro Snacks & Drug Store.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. Metro Snacks & Drug Store only. c. the Federal Trade Commission. d. the Food and Drug Administration.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Protection of Health and Safety LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 52. Grid Tool Company makes and sells tools. One of the tools is believed to be hazardous. The appropriate government agency may require Grid to a. export the tool and sell it only abroad. b. increase the price to cover the cost of any injuries or damage. c. reduce the price to indicate the hazard to consumers. d. remove the tool from the market.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Protection of Health and Safety LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 53. Corner Market sells groceries. Delite Food & Drug Store sells groceries and fills prescriptions. The chief responsibility to prevent unsafe food and drugs from being sold rests with a. the Consumer Product Safety Commission. b. no single federal agency. c. the Federal Trade Commission. d. the Food and Drug Administration.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Protection of Health and Safety LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 54. Cutting Tools Company makes and sells tools. One of Cutting’s products is believed to be hazardous. The appropriate government agency may require Cutting to a. export the tool and sell it only abroad. b. increase the price to cover the cost of any injuries or damage. c. reduce the price to indicate the hazard to consumers. d. remove the tool from the market.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Protection of Health and Safety LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 55. Wellness Insurance Company offers health and medical insurance to consumers. Under current federal health-care laws, Wellness is prohibited from a. denying coverage for preexisting conditions. b. enabling more children to obtain health-insurance coverage. c. allowing adults under age twenty-six to remain on their parents' health insurance. d. ending lifetime and most annual limits on care.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Protection of Health and Safety LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 56. Grover signs an installment contract with Home Appliance Store to finance the purchase of new kitchen appliances— stove, refrigerator, dishwasher, microwave, and toasteroven—for $3,999. This transaction is subject to a. no federal law. b. the Fair Credit Reporting Act. c. the Telecommunications Act. d. the Truth-in-Lending Act. ANSWER: d POINTS: 1 DIFFICULTY: Challenging REFERENCES: Credit Protection LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS:

Bloom's: Application

57. Tory borrows $10,000 from USA National Bank to remodel a room in her home. This transaction is subject to a. no federal law. b. the Consumer Leasing Act. c. the Consumer Product Safety Act. d. the Truth-in-Lending Act. ANSWER: d POINTS: 1 DIFFICULTY: Challenging REFERENCES: Credit Protection LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 58. Cecilia borrows $20,000 from Debit & Credit Union to repair her home and to buy a car. She buys a laptop from eStuf Store in a transaction financed by the seller. If these parties are subject to the Truth-in-Lending Act, Regulation Z applies to a. the car loan only. b. the home repair loan only. c. the retail installment sale only. d. the car loan, the home repair loan, and the retail installment sale.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging REFERENCES: Credit Protection LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 59. QuikPay Inc. extends credit to consumers. QuikPay is subject to the Equal Credit Opportunity Act, which prohibits credit discrimination based on a. intelligence. b. education. c. income. d. race.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Credit Protection LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS:

Bloom's: Application

60. Jasmine receives an unsolicited credit card in the mail and tosses it on her desk. Without Jasmine’s permission, her roommate Ilene uses the card to buy a new tablet for $500. Jasmine is a. liable for $500. b. liable for $250. c. liable for $50. d. not liable for any amount.

ANSWER: d POINTS: 1 DIFFICULTY: Challenging REFERENCES: Credit Protection NATIONAL STANDARDS: United States - AICPA: BB-Technology United States - BUSPROG: Risk Analysis KEYWORDS: Bloom's: Application 61. In the ordinary course of business, Loan2Buy Corporation offers credit to Mai and other consumers and reports on the loans to credit agencies. To save time and money, Loan2Buy generally does not correct or update its reported information.

This is most likely to result in a. a levy of a nominal fine. b. an assessment of damages. c. an order of rescission of the loan contracts. d. no sanctions.

ANSWER: b POINTS: 1 DIFFICULTY: Challenging REFERENCES: Credit Protection LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 62. Debt & Loan Collection Agency calls Ethel several times a day, and sometimes in the middle of the night, about an overdue bill that a Furniture4U store turned over to Debt & Loan for collection. This is a violation of a. no federal law. b. the Fair and Accurate Credit Transactions Act. c. the Fair Debt Collection Practices Act. d. the Truth-in-Lending Act. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Credit Protection LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS:

Bloom's: Application

63. Lucy takes out a student loan from Midtown Bank. When she fails to make the scheduled payments for six months, Midtown advises her of further action that it will take. This violates a. no federal law. b. the Fair and Accurate Credit Transactions Act. c. the Fair Debt Collection Practices Act. d. the Truth-in-Lending Act. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Credit Protection LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 64. Kip opens an account at a Lotsa Goodies Store, and buys a digital music player and other items, but makes no payments on the account. To collect the debt, Mako, the manager, contacts Kip’s parents. This violates a. no federal law. b. the Fair and Accurate Credit Transactions Act. c. the Fair Debt Collection Practices Act. d. the Truth-in-Lending Act. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Credit Protection LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 65. Teri borrows $10,000 from USA National Bank to remodel a room in her home. This transaction is subject to a. no federal law. b. the Consumer Leasing Act. c. the Consumer Product Safety Act. d. the Truth-in-Lending Act. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Credit Protection LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS:

Bloom's: Application

66. Creditworthy Loan Company extends credit in the ordinary course of its business. Under the Truth-in-Lending Act, Creditworthy must inform potential borrowers of a. credit terms offered by other lenders. b. comparative prices for goods to be bought with the borrowed funds. c. Creditworthy's credit terms. d. the borrower's credit scores.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Credit Protection LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 67. Consumer Finance Corporation (CFC) extends credit to consumers. CFC is subject to the Equal Credit Opportunity Act, which prohibits credit dis-crimination based on a. intelligence. b. education. c. income. d. race.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Credit Protection LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 68. Kirk receives an unsolicited credit card in the mail and tosses it on his desk. Without Kirk’s permission, his roommate Leif uses the card to buy a new laptop for $1,800. Kirk is a. liable for $1,000. b. liable for $500. c. liable for $50. d. not liable for any amount.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Credit Protection LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS:

Bloom's: Application

69. Logan’s application to Metro Bank for a credit card is denied. Logan can obtain information on his credit history in a credit agency’s files under a. no federal law. b. the Equal Credit Opportunity Act. c. the Fair Credit Reporting Act. d. the Fair Debt Collection Practices Act. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Credit Protection LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 70. Quik Collection Agency calls Pat several times a day, and some-times in the middle of the night, about an overdue bill that Regal Sporting Goods turned over to Quik for collection. This is a violation of a. no federal law. b. the Fair and Accurate Credit Transactions Act. c. the Fair Debt Collection Practices Act. d. the Truth-in-Lending Act. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Credit Protection LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application Essay 71. Robyn wants to go into the business of direct merchandise sales. What are the legal problems that Robyn might encounter in telemarketing? In sell-ing door-to-door? In marketing over the Internet? In soliciting sales through the mail?

ANSWER:

Telemarketers are the target of many consumer complaints, and must reveal extensive information to comply with state and federal laws. Telemarketers must tell customers that they are receiving a sales call, name the business and products to be sold, state the total cost of the products, and make other disclosures.

Door-to-door salespersons make contracts that buyers may rescind within three days of signing. This federally-mandated “cooling-off” period has an impact on sales.

The Internet is a rapidly growing tool for sales, but Robyn should be aware that it is not unregulated. All laws that apply to more traditional forms of commerce, such as deceptive practice laws, generally apply to Internet commerce.

Finally, direct mail is appropriate for advertisements, but Robyn should know that unso-

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© licited products sent through the mail can be kept by their recipients without ten-dering payment.

In general, Robyn should know that legitimate businesses can and do make proper and profitable use of all these sales methods, but state and federal laws police all of them for fraudulent operators POINTS: 1 DIFFICULTY: Challenging REFERENCES: Sales LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Decision Modeling United States - BUSPROG: Reflective KEYWORDS: Bloom's: Analysis 72. Owen buys a restored 1969 Dodge Charger from Prime Restorations, Inc., on credit but makes no payments on the account. Quentin, the owner of Prime Restorations, calls Owen at home on a Monday morning at three A.M. Quentin represents himself as RiteNow Collection Agency and demands payment “or else.” The next day, Quentin sends Owen notice that he has thirty days to request verification of the debt, during which its payment will be suspended, but that if he does not pay the full amount due within five business days, Quentin will arrange for the “destruction of Owen’s good credit rating.” Which laws has Quentin violated, if any, and in what ways?

ANSWER: Quentin, the owner of Prime Restorations, is in violation of the Fair Debt Collection Practices Act (FDCPA).

Quentin can attempt to collect the debt to Prime Restorations without being subject to the provisions of the FDCPA, which applies only to debt-collection agencies that regularly attempt to collect debts on someone else’s behalf. But by misrepresenting that he is acting on behalf of a collection agency, Quentin has fallen under an exception in the FDCPA. Causing Owen, or any other consumer, to believe that Quentin is a representative of a collection agency subjects Quentin to the law.

The FDCPA prohibits contacting a debtor during an inconvenient or unusual time, which Quentin has done in this problem with the early morning call. If the “or else” phrase is construed as harassment or intimidation—as a threat of potential violence, for example— Quentin will be in further violation of the FDCPA. Also, the statement in the notice that Owen has thirty days to request verification of the debt but only five business days to pay it violates the FDCPA. The five-day demand is misleading and nullifies the thirty-day suspension POINTS: 1 DIFFICULTY: Challenging REFERENCES: Credit Protection LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Decision Modeling United States - BUSPROG: Reflective KEYWORDS: Bloom's: Analysis

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© True / False 1. Injured individuals can rely on the common law to obtain damages and injunctions against business polluters. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Common Law Actions LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 2. A public authority, such as a state’s attorney general, can sue to stop a “public” nuisance. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Common Law Actions LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 3. Businesses that engage in ultrahazardous activities are not liable for any injuries the activities cause. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Common Law Actions LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 4. Only the federal government may restrict emissions from motor vehicles. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: Government Regulation LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 5. An environmental impact statement is required for every major federal action that significantly affects the quality of the environment. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Government Regulation LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 6. State laws may regulate a business’s disposal of toxic wastes. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Government Regulation LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 7. The Environmental Protection Agency periodically updates the air pollution standards. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Air Pollution LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 8. There are no plans to develop national standards regulating the fuel economy and emissions for medium- and heavyduty trucks.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Air Pollution LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 9. The Environmental Protection Agency has concluded that greenhouse gases, including carbon dioxide emissions, do not constitute a public danger. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Air Pollution LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 10. The primary responsibility for preventing and controlling air pollution rests with the federal government. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Air Pollution LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 11. Different standards for air quality apply to existing sources of pollution and major new sources. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: Air Pollution LEARNING OBJECTIVES: LO - 3 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 12. The Environmental Protection lists all hazardous air pollutants (HAPs) on a prioritized schedule. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Air Pollution LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 13. Performance standards for major sources of air pollution require the use of the any available technology, or AAT. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Air Pollution LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 14. Those who knowingly violate the Clean Air Act are exempt from criminal penalties. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Air Pollution LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 15. Federal law provides the basis for issuing regulations to control multistate air pollution. a. True b. False ANSWER: True Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© POINTS: 1 DIFFICULTY: Easy REFERENCES: Air Pollution LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 16. Those who knowingly violate the Clean Air Act may be subject to criminal liability. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Air Pollution LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 17. National Pollutant Discharge Elimination System permits can be issued even if a discharge will violate water-quality standards. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Water Pollution LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 18. The National Pollutant Discharge Elimination System focuses on industrial wastewater and storm water discharges. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: Water Pollution LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS:

Bloom's: Knowledge

19. National effluent (pollution) standards are set by the Environmental Protection Agency for each industry. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Water Pollution LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 20. The Clean Water Act permits the filling or dredging of wetlands without a permit. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Water Pollution LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 21. Under the Clean Water Act, criminal penalties apply whether a violation was intentional or unintentional. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Water Pollution LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 22. Any oil facility that discharges oil into navigable waters or onto an adjoining shore may be liable for cleanup costs, as well as damages. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: Water Pollution LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 23. Any point source emitting pollutants into water must have a permit. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: Water Pollution LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 24. Special requirements must be met to discharge toxic chemicals into surface waters. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: Water Pollution LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 25. The courts have considerably scaled back the Clean Water Act’s protection of wetlands. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: Water Pollution LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 26. Public water system operators must meet the Environmental Protection Agency’s standards regardless of the economic and technological feasibility.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Water Pollution LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 27. The Environmental Protection Agency sets minimum levels for pollutants in public water systems. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Water Pollution LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 28. New sources of water pollutants must install pollution-control equipment before beginning operations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Water Pollution LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 29. It is a violation of federal law to sell a pesticide or herbicide that has a chemical strength different from the concentration declared on the label. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Toxic Chemicals LEARNING OBJECTIVES: LO-4 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 30. It is a violation of federal law to destroy or deface any labeling required on a pesticide or herbicide. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: Toxic Chemicals LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 31. The Environmental Protection Agency can regulate a toxic substance that poses an imminent hazard but cannot prohibit its use altogether. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Toxic Chemicals LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 32. It is a violation of federal law to sell a pesticide or herbicide that has a chemical strength different from the concentration declared on the label. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Toxic Chemicals LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 33. There are no defenses to liability under the Comprehensive Environmental Response, Compensation, and Liability Act. a. True Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Hazardous Waste LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 34. When a release of hazardous chemicals from a site occurs, potentially responsible parties can avoid liability through transfer of ownership. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Hazardous Waste LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 35. When a release of hazardous chemicals from a site occurs, potentially responsible parties can avoid liability through transfer of ownership. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Hazardous Waste LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge Multiple Choice 36. Ultrahazard Removal & Disposal Corporation transports radioactive materials. Vincent, an Ultrahazard employee, is diagnosed with radiation sickness after exposure to the materials. Vincent’s suit against Ultrahazard to recover for the injury is known as a. an environmental impact statement. b. a nuisance. c. a toxic tort. d. a hazardous substance response.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: c POINTS: 1 DIFFICULTY: Challenging REFERENCES: Common Law Actions LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 37. Verna makes a living by commercial fishing in a river allegedly polluted by Wall Paint Company. To bring a suit against Wall Paint on the ground of private nuisance, Verna must allege that she suffers from a. a distinct harm separate from that affecting the general public. b. a lesser harm than an injunction would impose on Wall Paint. c. Wall Paint’s failure to use reasonable care to avert herm to Verna. d. the same harm as that affecting the general public.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Common Law Actions LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 38. Rock Mining Company operates a gravel pit next to Siera’s residence. Siera files a suit against Rock, alleging that the pit is a source of pollution and unreasonably interferes with the enjoyment of her property The court is most likely to award Siera an injunction a. if letting the pollution continue is equally as harmful as stopping it. b. if letting the pollution continue is less harmful than stopping it. c. if letting the pollution continue is more harmful than stopping it. d. under no circumstances.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging REFERENCES: Common Law Actions LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 39. Oscar begins to operate a hog farm next to Robyn’s vineyard and winery. Robyn files a suit against Oscar, alleging that the hog farm is a nuisance and unreasonably interferes with Robyn’s enjoyment of her property. The court is most likely to award Robyn damages a. if letting the pollution continue is equally as harmful as stopping it. b. if letting the pollution continue is less harmful than stopping it.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© c. if letting the pollution continue is more harmful than stopping it. d. under no circumstances.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Common Law Actions LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 40. Refuse Reuse & Disposal Center operates a recycling plant. Stan and other Refuse Reuse neighbors file a suit, alleging injuries from the plant. To succeed, they must show that the defendant failed to use reasonable care if the suit is based on a. a negligence theory. b. a nuisance theory. c. any theory. d. a strict liability theory.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Common Law Actions LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 41. Nashville, Tennessee, passes an ordinance to regulate waste disposal. The disposal of waste may also be regulated by a. all other levels of government. b. no other levels of government. c. the federal government only. d. the Tennessee state government only.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Government Regulation LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 42. Clean n’ Green, Inc., operates a chain of car washes throughout the United States. The government entity that is most likely to be involved in regulating the chain’s environmental impact is a. Congress. b. federal and state regulatory agencies.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© c. local chambers of commerce. d. local police departments.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Government Regulation LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 43. Energy Market Corporation wants to build a wind power plant on private land, for which a federal permit is required.

For this action, an environmental impact statement is a. prohibited. b. required. c. unnecessary. d. voluntary.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Government Regulation LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 44. Ski Resorts, Inc., wants to add a new run to its facility in a national park on federal land. For this action, an environmental impact statement is a. prohibited. b. required. c. unnecessary. d. voluntary.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Government Regulation LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 45. The National Park Service hires Outdoor Play, Inc., to replace outdated playground equipment in a handful of national parks. For this action, an environmental impact statement is most likely a. prohibited because the action does not affect the environment. b. required because the action is “federal.”

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© c. unnecessary because the action is not “major.” d. voluntary because the action does not affect the environment.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging REFERENCES: Government Regulation LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 46. Rural Electric Company submits a bid to build a dam on federal land as part of a federal project. For this action, an environmental impact statement is most likely a. prohibited. b. required. c. unnecessary. d. voluntary.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Government Regulation LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 47. New Town Construction, Inc., wants to build a parking ramp to connect to its New Town Mall, both of which are on private land. For this action, an environmental impact statement is a. prohibited. b. required. c. unnecessary. d. voluntary.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging REFERENCES: Government Regulation LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 48. Ski Resorts, Inc., wants to add a new run to its facility in a national park on federal land. For this action, an environmental impact statement is a. prohibited.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. required. c. unnecessary. d. voluntary.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Government Regulation LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 49. Congress enacts a new air quality statute that applies to businesses. To enforce federal environmental legislation, the federal government relies on a. all levels of government and private citizens. b. federal agencies only. c. local sheriffs and police departments. d. businesses’ voluntary compliance.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Government Regulation LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 50. The operations of Metal Refining Industries, Inc., are major sources of air pollution. These operations must use a. the absolutely cleanest air technology. b. the best available filter technology. c. the maximum achievable control technology. d. the most affordable scrubbing technology.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Air Pollution LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 51. Metal Smelting, Inc., operates a plant—a “major source”—that emits hazardous air pollutants for which the Environmental Protection Agency has set maximum levels of emission. The plant does not use any equipment to reduce its emissions. Under the Clean Air Act, this is most likely Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© a. a violation. b. not a violation because a “major source” is exempt. c. not a violation because the plant does not use any equipment. d. not a violation because the plant is not a mobile source.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Air Pollution LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 52. Industrial Solvents, Inc., averages $15,000 profit per day before deciding to ignore air pollution standards, after which the average is $30,000. Industrial Solvents is subject to a fine of a. $0. b. $15,000 per day. c. $30,000 per day. d. $30,000 total.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging REFERENCES: Air Pollution LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 53. Fried Food, Inc., operates a commercial frying plant, discharging pol-lut-ants into the air. Greg reports the violations to the Environmental Protection Agency. Greg a. is not entitled to a payment. b. may be paid up to any amount. c. may be paid up to $1,000. d. may be paid up to $10,000.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Air Pollution LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 54. Regulations governing air pollution cover mobile and stationary sources. Those who may be subject to penalties for Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© violations of the Clean Air Act include a. corporate officers who knowingly violate the act. b. persons who provide information about violators but otherwise fail to act. c. private citizens who fail to sue violators. d. none of the choices.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Air Pollution LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 55. Energy Resources, Inc., operates an oil refinery near Forest River, which flows into Grove Lake. Discharging oil from the refinery into the river can result in a. penalties and damages. b. penalties only. c. damages only. d. none of the choices.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging REFERENCES: Water Pollution LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 56. Grease & Lubricants Inc. makes its products without required pollution control technology, causing a discharge of oily waste into the nearby Holly Lake. This activity can result in a. a criminal fine or imprisonment only. b. a criminal fine, imprisonment, or an injunction only. c. a criminal fine, imprisonment, an injunction, or damages. d. an injunction only.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging REFERENCES: Water Pollution LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 57. County Water & Sewer operates a public water supply system. County Water must send to every household that it supplies with water an annual statement describing a. County Water’s financial situation and material facts that might affect it. b. other operations, such as irrigation and water conservation, in which County Water is involved and to what extent. c. parties who might be held liable if pollution problems arise. d. the source of the water, and any contaminants and health concerns.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Water Pollution LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 58. Without a permit, Timberline Plywood Company discharges its untreated wastewater into Urban City’s storm drainage pipes, which empty into Valley Creek. Under the Clean Water Act, this discharge is most likely a. a violation. b. not a violation because the company does not have a permit. c. not a violation because water is not a stationary source. d. not a violation because a storm drainage pipe is not a point source.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Water Pollution LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 59. Green River Energy Corporation wants to begin operations that include the discharge of waste into navigable waters.

Under the Clean Water Act, Green River must install certain equipment a. after beginning operations. b. before beginning operations. c. during operations. d. only if a regulatory agency challenges the discharge.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Water Pollution LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS:

Bloom's: Application

60. Vending Products Company operates a vending machine manufacturing plant on Wandering River. Discharging pollutants from the plant into the river can result in a. civil penalties and criminal penalties. b. civil penalties only. c. criminal penalties only. d. no penalties.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Water Pollution LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 61. Without a permit from the U.S. Army Corps of Engineers, Holiday Timeshares, Inc., fills a wetlands area that it owns before constructing a residential resort. Under the Clean Water Act, this is most likely a. a violation. b. not a violation because a permit is not needed to fill wetlands. c. not a violation because the area was filled before construction. d. not a violation because there was no discharge of pollution.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Water Pollution LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 62. Metro City operates its own municipal public drinking water system for which the Environmental Protection Agency has set maximum levels of pollutants. Metro does not use any equipment to meet these standards. With regard to any contamination of the water, under the Safe Drinking Water Act, this is most likely a. a violation. b. not a violation because Metro does not set the standards. c. not a violation because water is not a stationary source. d. not a violation because Metro does not use any equipment.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Water Pollution LEARNING OBJECTIVES: LO - 4 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 63. A barge owned by Oceanic Shipping Company discharges some of the oil contained in its hold into the sea and onto the shore. Under the Oil Pollution Act, this is most likely a. a violation. b. not a violation because an oil discharge is not pollution. c. not a violation because a floating barge is not a stationary source. d. not a violation because a ship’s hold is not a point source.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Water Pollution LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 64. Hi-Yield Agriculture, Inc., makes a pesticide with a one-in-a-million risk to people of developing cancer from exposure. This substance must be a. disposed of before anyone develops cancer. b. registered before it is sold. c. taken off the market and placed in temporary storage. d. used only in a way that avoids exposure to people.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Toxic Chemicals LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 65. Under the Marine Protection, Research, and Sanctuaries Act (the Ocean Dumping Act), Coastline Chemicals, Inc., may dump its chemical waste into the ocean a. after obtaining a permit. b. before obtaining a permit. c. without a permit d. not at all.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Toxic Chemicals Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 66. Noxious, Inc., makes and sells pesticides. If a substance is identified as harmful and the harm is imminent, the Environmental Protection Agency can a. conduct an inspection of Noxious’s plant. b. declare the substance to be unregulated and allow its production. c. ignore the risk if the benefit outweighs the harm. d. order the substance to be sold in an adulterated form.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Toxic Chemicals LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 67. BioChemical Disposal Corporation operates a hazardous waste storage facility. ChemCo Inc. buys BioChemical before it is discovered that the firm’s disposal practices violated CERCLA. With respect to these violations, Superfund imposes on ChemCo a. strict liability. b. liability under the nuisance doctrine. c. liability on a negligence theory. d. no liability.

ANSWER: a POINTS: 1 DIFFICULTY: Challenging REFERENCES: Hazardous Waste LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 68. Remote Disposal Company operates a hazardous waste storage facility. Concerned that there may be a release of chemicals from the site, Remote sells the property to Serene Developers, Inc. If there is a release, Remote is most likely a. liable. b. not liable because the site was sold before the release. c. not liable because Remote was concerned about the release. d. not liable because Remote no longer operates the facility.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: Hazardous Waste LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 69. Smelting & Refining Company generates solid waste considered haz-ardous. The company labels and packages properly all waste to be trans-ported to a disposal site. Under the Resource Conservation and Recovery Act, this is most likely a. not a violation. b. a violation because Smelting & Refining generates solid waste. c. a violation because the waste is transported off-site. d. a violation because the waste is considered hazardous.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Hazardous Waste LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 70. Before being transported, hazardous waste generated by Perilous Fabrication, Inc., must be properly labeled and packaged under the Resource Conservation and Recovery Act by a. the federal Environmental Protection Agency. b. the local Resource Conservation and Recovery Committee. c. the state Environmental Regulatory Commission. d. Perilous Fabrication, Inc. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Hazardous Waste LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application Essay 71. Metal Smelting & Foundry Inc.’s complex spews smoke and odors. The site features its own rail system, and trucks enter and exit the com-plex night and day. Neal and other residents of an adjacent neighbor-hood can feel the vibrations of the trains and trucks, and suffer other ef-fects from the operations. Neal and others file a suit against Metal Smelting. Why might the court rule in favor of the defendant?

ANSWER: The court might rule in favor of Metal Smelting, or at least decline to enjoin its operations, on the ground that the hard-ships to be imposed on Metal Smelting and on the community are Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© greater than the hardships suffered by Neal and the other residents of the nearby neighborhood, despite the pol-lution and noise. The court might deny an injunction if the Metal Smelting plant is the heart of the local economy, for example, and award the resi-dents only damages ..

POINTS: 1 DIFFICULTY: Challenging REFERENCES: Common Law Actions LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - BB_17.3 - BB-Decision Modeling United States - BUSPROG: Reflective KEYWORDS: Bloom's: Analysis 72. Bertha owns land located outside Centre City. Bertha sells the land to Disposal & Recycling, Inc., which establishes a hazardous waste disposal facility at the site. Disposal & Recycling accepts only waste transported by Eco Trucking Inc. exclusively from Federated Industries, Inc. Several years later, Disposal & Recycling closes its facility and sells the land to Garden Variety Retail Corporation, which builds a Home & Yard store on the site. Meanwhile, some of Centre City’s citizens complain to the Environmental Protection Agency (EPA) that the city’s municipal water supply is pol-luted. The EPA investigates and discovers that the sources of the pollu-tion are leaks of hazardous waste from what is now the Home & Yard site. The EPA cleans up the site. Who can be held liable for the cost of cleaning up the site? What standards must Centre City meet regarding the water?

ANSWER: Disposal & Recycling, Eco Trucking, Federated Industries, or Home & Yard may be held liable for the cost of cleaning up the site.

Under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), or Superfund, the EPA can recover the cost of cleaning up a leaking hazardous waste disposal site from the party who generated the waste disposed of at the site, the party who trans-ported the waste to the site, the party who owned or operated the site at the time of the disposal, or the current owner of the site. These poten-tially responsi-ble parties are jointly and severally liable: a party who generates only a fraction of the waste, for example, can be held liable for the entire cleanup cost. Of course, whoever is held liable for the cost can bring a contribu-tion action against any other person who is, or who may be, liable for a percentage of the expense.

Under the Safe Drinking Water Act, Centre City, as an operator of a municipal water supply system, is re-quired to meet the EPA’s standards for the levels of pollutants in public water systems. Centre City must use the best available technology that is economically and technologically feasible to meet these standards. .

POINTS: DIFFICULTY: REFERENCES:

1 Challenging Hazardous Waste Water Pollution LEARNING OBJECTIVES: LO-4 LO-5 NATIONAL STANDARDS: United States - BB_17.3 - BB-Decision Modeling United States - BUSPROG: Reflective KEYWORDS: Bloom's: Analysis Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning©

Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© True / False 1. The exterior boundaries of land extend down to the depth of the deepest hole and up to the height of the tallest structure and no further. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Nature of Real Property LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Comprehension 2. Plant life is considered to be real property. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: The Nature of Real Property LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 3. The surface of a piece of land and the subsurface may not have different owners. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Nature of Real Property LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Comprehension 4. A fixture is an item of personal property attached to real property in a permanent way. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© REFERENCES: The Nature of Real Property LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 5. Persons cannot share ownership rights simultaneously in particular property (including real property and personal property)—one person’s interest is always superior. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Ownership Interests and Leases LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Comprehension 6. A joint tenant cannot transfer his or her rights by sale or gift without the consent of the other joint tenants. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Ownership Interests and Leases LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 7. It is presumed that a co-tenancy is a tenancy in common unless there is specific language indicating the intent to establish a joint tenancy. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: Ownership Interests and Leases LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Comprehension 8. Community property it is created when a real property owner or lessor agrees to convey the right to possess and use the Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© property to a lessee (tenant) for a certain period of time. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Ownership Interests and Leases LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Comprehension 9. The mere possession of land without right is called a tenancy at will. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Ownership Interests and Leases LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 10. A tenancy by the entirety is created by a conveyance of all of a parcel of real property to a single tenant a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Ownership Interests and Leases LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 11. If property is owned as community property, the members of the community hold interest in it in common. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Ownership Interests and Leases LEARNING OBJECTIVES: LO-2 - LO - 2 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 12. A fixed-term tenancy is created when property is leased for a specified period of time. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Ownership Interests and Leases LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 13. An easement is the right to make limited use of another person’s real property without taking anything from the property. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Ownership Interests and Leases LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 14. A easement is the revocable right of a person to come onto another person’s land. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Ownership Interests and Leases LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 15. A license is a right to go onto land owned by another and take away some part of the land itself or some product of the land. a. True b. False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Ownership Interests and Leases LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 16. A sale of real estate is a complicated transaction that involves certain formalities that are not required in a sale of goods. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Transfer of Ownership LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 17. The sale of real estate involves a transfer of ownership with no specific warranties—if there are warranties, the transfer is not a sale. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Transfer of Ownership LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 18. Most states recognize a warranty—the implied warranty of habitability—in the sale of new homes. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Transfer of Ownership LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 19. In most jurisdictions, a seller has a duty to disclose any known defect that materially affects the value of the

property and that a buyer could not reasonably discover. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Transfer of Ownership LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 20. A special warranty deed warrants that there were no defects of title when the property was held by the previous owners. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Transfer of Ownership LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 21. A quitclaim deed offers the most protection against defects in the title. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Transfer of Ownership LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning©

22. Like a contract, a deed must be supported by legally sufficient consideration. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Transfer of Ownership LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 23. A recording statute allows deeds to be recorded to give notice to the public. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Transfer of Ownership LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 24. One of the public-policy reasons for the adverse possession doctrine is ensuring that real property remains in the stream of commerce. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Transfer of Ownership LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 25. For a party to take by adverse possession, the party’s possession must be peaceable, and not hostile or adverse. a. True b. False ANSWER: False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© POINTS: 1 DIFFICULTY: Easy REFERENCES: Transfer of Ownership LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 26. Eminent domain is the condemnation power of government to take land for public use. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Limitations on Property Rights LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 27. Taking private property for public use requires the payment of “just compensation.” a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Limitations on Property Rights LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 28. Inverse condemnation occurs when an owner simply gives private property to the government without accepting any compensation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Limitations on Property Rights LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Comprehension Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning©

29. Most states allow the use of the power of eminent domain for urban redevelopment projects that benefit private developers. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Limitations on Property Rights LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 30. The U.S. government has an ultimate ownership right in all of the land within its borders. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Limitations on Property Rights LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 31. Zoning laws consist of the rules and regulations that collectively manage the development and use of land. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Land-Use Control and Zoning LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 32. One of the basic elements of zoning is the classification of land by permissible use as part of a comprehensive municipal plan. a. True b. False ANSWER: True POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Easy REFERENCES: Land-Use Control and Zoning LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG - Analytic - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 33. Municipalities generally divide their land into districts according to the land's present and potential future uses. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Land-Use Control and Zoning LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 34. Zoning restrictions are absolute. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Land-Use Control and Zoning LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Knowledge 35. When a property owner wants to use his or her land in a manner not permitted by zoning rules, he or she should request a special-use permit. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Land-Use Control and Zoning LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective Thinking - BUSPROG: Analytic KEYWORDS: Bloom's: Comprehension Multiple Choice Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning©

36. Buck owns five acres of land in California. On the land Buck has a house and a toolshed. There are ten large maple trees around the house. The real property includes a. the land only. b. the land and the house only. c. the land, the house, and the toolshed, but not the trees. d. the land, the house, the toolshed, and the trees.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Nature of Real Property LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 37. Huong owns a farm in Idaha, with a farmhouse, barn, and other structures permanently attached. Huong grows corn on the property. Land includes a. the corn, the soil, and the structures. b. the corn and the soil only. c. the soil only. d. the structures and the soil only.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Nature of Real Property LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's : Application 38. Lucas owns Muddy Flats Ranch in New Mexico. The exterior boundaries of the land extend a. 100 feet into the earth and 100 feet into the atmosphere. b. one mile into the earth and one mile into the atmosphere. c. to infinity and beyond. d. to the center of the earth and up to the farthest reaches of the atmosphere.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Nature of Real Property LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 39. Barlow owns the surface rights for Canyon Ranch, but does not own the subsurface rights. Dusty owns the subsurface rights. Canyon Ranch includes a house, a bunkhouse, and two barns, which are damaged when Dusty is excavating for minerals under the surface. Most likely responsible for the damage is a. Dusty. b. Barlow. c. Dusty and Barlow. d. no one.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Nature of Real Property LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Risk Analysis KEYWORDS: Bloom's: Application 40. Jessie owns a single-family home. With respect to this structure, most likely to meet the definition of a fixture is a. the furniture in the bedrooms, dining room, and great room. b. the SUV parked in front of the house. c. the RV parked on a concrete pad next to the driveway. d. the plumbing in the kitchen and bathrooms.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Nature of Real Property LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 41. Heavy Equipment Inc. stores its tractors, graders, trucks, and dozers in buildings surrounded by a fence on land that the company owns. The fence and the wall of one of the buildings leans onto adjacent land that Indigo County Airport owns. Most likely, this violates the airspace rights of a. Heavy Equipment. b. Indigo County. c. individuals who seed clouds and produce rain aritficially. d. commercial and private planes that fly over the property.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Nature of Real Prroperty LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning©

Fact Pattern 22-1 Virgil owns a ranch in Wyoming. His ownership rights include the right to sell or give away the property without restriction, and the right to commit waste, if he chooses.

42. Refer to Fact Pattern 22-1. Virgil’s ownership interest is a. a free simple absolute. b. a leasehold estate. c. a life estate. d. a profit.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Ownership of Interests and Leases LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Applilcation 43. Refer to Fact Pattern 22-1. Virgil conveys some of his land to Tomas with the right to possess and use the property for a certain period of time. Virgil has given Tomas a. a fee simple absolute. b. a leasehold estate. c. a life estate. d. a profit.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Ownership of Interests and Leases LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 44. Roderick possesses five hundred acres of forested property. Roderick has the right to use the land, including cutting its timber, for life. Roderick also has the right to lease the land for a period not to exceed his life. This ownership interest is a. a fee simple absolute. b. a leasehold estate. c. a life estate. d. an easement.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Ownership Interests and Leases LEARNING OBJECTIVES: LO-2 - LO - 2 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 45. Dian and Elton buy a duplex in Fargo, North Dakota. On the death of either owner, that owner’s interest in the duplex passes to his or her heirs. This is a. a joint tenancy. b. a life estate. c. a tenancy in common. d. ownership in fee simple absolute.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Ownership Interests and Leases LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 46. Becca and Candy own 1,000 shares of stock in Dockside Dining Restaurant Corporation. On the death of ether owner, that owner’s interest in the stock passes to the surviving owner. This is a. a joint tenancy. b. a tenancy by the entirety. c. a tenancy in common. d. community property.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Ownership of Interests and Leases LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 47. Aron and Breezy own a house in Chicago as joint tenants. Aron sells his ownership rights in the house to Dillon.

Breezy and Dillon own the condo as a. community property owners. b. joint tenants. c. owners in fee simple absolute. d. tenants in common.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Ownership of Interests and Leases LEARNING OBJECTIVES: LO-2 - LO - 2 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 48. Uri and Veda each own one-half of Wind Power, an alternative energy products company, as a tenant in common. Uri sells his interest to Xavier, who now owns a. no interest in the firm. b. the firm in fee simple. c. the firm with Veda as joint tenants. d. the firm with Veda as tenants in common.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Ownership Interests and Leases LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 49. Alf rents an apartment. The lease does not specify how long it will last, but it does specify that Alf must pay rent every month. Alf’s tenancy is a. a fixed-term tenancy. b. a periodic tenancy. c. a tenancy at will. d. not a tenancy.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Ownership Interests and Leases LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Comprehension 50. LaDonna signs a one-year lease with Mae to occupy an apartment near the University of Iowa. LaDonna needs the apartment for two semesters only and may have to sublet it for the rest of the term. LaDonna’s tenancy is a. a periodic tenancy. b. a tenancy at will. c. a tenancy at sufferance. d. a fixed-term tenancy.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Ownership Interests and Leases LEARNING OBJECTIVES: LO-2 - LO - 2 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 51. Kenneth has a periodic tenancy that requires him to pay rent weekly. Kenneth wishes to terminate his tenancy. Under the common law, he must give his landlord notice of at least a. one week. b. two weeks. c. thirty days. d. sixty days.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Ownership Interests and Leases LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Risk Analysis KEYWORDS: Bloom's: Comprehension 52. Region Construction Company has a right to drive its trucks across Staple Business, Inc.’s property, which is adjacent to Region’s office. This right is a. a license. b. an easement. c. a profit. d. the power of eminent domain.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Ownership Interests and Leases LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Comprehension 53. With respect to Italo’s bottomland, Jacob has an easement, Kristin has a profit, and Leopold has a license. A right to possess the bottomland is owned by a. Italo. b. Jacob. c. Kristin. d. Leopold.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Ownership Interests and Leases LEARNING OBJECTIVES: LO-2 - LO - 2 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 54. Mix-It Concrete Company has the right to enter Nim’s land and remove the rock from Nim’s quarry. This is a. the power of eminent domain. b. a license. c. an easement. d. a profit.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Ownership Interests and Leases LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Comprehension 55. Lloyd and Merilyn are married and own a farm in Nebraska in such a way that neither may transfer separately his or her interest during his or her lifetime. Lloyd and Merilyn own the farm as a. community property owners. b. joint tenants. c. tenants by the entirety. d. tenants in common.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Ownership of Interests and Leases LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 56. Kristen signs a one-year lease with Lamont to occupy an apartment in Minneapolis near the University of Minnesota.

Kristen’s tenancy is a. a periodic tenancy. b. a tenancy at will. c. a tenancy by the entirety. d. a fixed-terms tenancy.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Ownership of Interests and Leases LEARNING OBJECTIVES: LO-2 - LO - 2 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 57. Sterling, the owner of Timberline Mountain, and Uma, the tenant of the sole cabin on the property, may create a fixedterm tenancy by a. deed. b. express contract. c. implication. d. sufferance.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Ownership Interests and Leases LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Appllication 58. Alexis sells half of her Triple A Ranch land to the Big B Ranch. On the land is a reservoir. In the deed, Alexis retains the right to remove a lim-ited amount of water per day from the res-ervoir. This right is a. a tenancy at sufferance. b. a license. c. an easement. d. a profit.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Ownership Interests and Leases LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 59. Car Wash Company has a right to direct its customers to drive their vehicles across Don’s Gas n’ Shop property, which is adjacent to Car Wash’s facility. This right is a. a tenancy at will. b. a license. c. an easement. d. a profit.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Ownership Interests and Leases LEARNING OBJECTIVES: LO-2 - LO - 2 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 60. Rosalie leases from Sports Arena Corporation a venue in which to stage a series of concerts. Tammy buys a ticket to the series. What distin-guishes Rosalie, a tenant, from Tammy, a licensee, is a. the exclusivity of possession. b. nothing—a tenant and a licensee are indistinguishable. c. the temporary nature of possession. d. the title to the property.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Ownership Interests and Leases LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Appllication 61. Emmett, the owner of Fallow Fields Farm, sells Greta a right to camp on Fallow land overnight. Greta's right is a. a fixed-term tenancy. b. a license. c. an easement. d. a profit.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Ownership Interests and Leases LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 62. Marco conveys three acres of wetlands to Nature Preserves, Inc., with a deed that warrants only that Marco held good title during his ownership of the property. This deed is a. a grant deed. b. a quitclaim deed. c. a special warranty deed. d. a warranty deed.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Transfer of Ownership LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Comprehension 63. Geof sells his Hawt Dawgs Lunch Counter Cafe to Ilene. The title is transferred by deed. Ilene is the a. co-owner in fee simple. b. grantee. c. grantor. d. licensee.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Transfer of Ownership LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 64. To acquire the ownership of Bart’s mountain cabin by adverse possession, Cody must occupy the cabin exclusively, continuously, and peaceably for a specified period of time a. in an, open, hostile, and adverse manner. b. until Bart files a suit. c. without Bart’s knowledge. d. with the state’s permission.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Transfer of Ownership LEARNING OBJECTIVES: LO-3 - explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation.

NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 65. Bay City wants to acquire undeveloped land within the city limits to convert into a public park. Bay City brings a judicial proceeding to obtain title to the land and pay the owner just compensation. This is an exercise of a. eminent domain. b. constructive eviction. c. inverse condemnation. d. zoning power.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Limitations on Property Rights Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Comprehension 66. Quik Development Corporation wants to convert farmland on the out-skirts of River City into residential and commercial property. The state restricts the conversion of farmland by subjecting development plans to the approval of State Development Agency. This is an exercise of the state’s a. police power. b. power of eminent domain. c. restrictive covenant. d. zoning power.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Limitations on Property Rights LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 67. Bucolic Homes, Inc., develops a thirty-lot suburban subdivision. Bucolic wants to restrict construction on each parcel to a single-family home. Bucolic includes a declaration of this restriction on the development's map. which is filed in the appropriate public office. There is a reference to the map on each deed. This is a. a restrictive covenant. b. eminent domain. c. a taking. d. a zoning variance.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Limitations of Property Rights LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 68. The zoning board of Urban City issues a permit that allows an exemption to zoning regulations for property that Nature's Plenty Food Company owns as long as Nature's Plenty complies with specific requirements to ensure that the use does not affect the characteristics of the area. This is a. a zoning variance. b. a special-use permit. c. a restrictive covenant. d. a taking.

ANSWER: b Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© POINTS: 1 DIFFICULTY: Moderate REFERENCES: Land-Use Control and Zoning LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application 69. Valley View Construction Corporation wants to obtain a zoning variance for a part of its property. The variance must not a. compromise the campaign promises of the zoning board members. b. include a burden that has a connection to the property. c. result in a profit for its proponent. d. alter the essential character of the property.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Land-Use Control and Zoning LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Risk Analysis KEYWORDS: Bloom's: Comprehension 70. Bliss County Zoning Commission demands that Commercial Development, Inc., the private developer of Discount Stores, allocate space for parking and take other measures to manage traffic. This is a. a restrictive covenant. b. inverse condemnation. c. a zoning restriction. d. a zoning variance.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Land-Use Control and Zoning LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States - AICPA: BB-Legal United States - BUSPROG: Reflective KEYWORDS: Bloom's: Application Essay 71. Lamar owns a field behind Megan’s house and property. The only access to the field is Megan’s driveway, which Lamar uses to get to his field. If Lamar sells the field, can the buyer use the right-of-way across Megan’s property?

ANSWER: Yes. The right-of-way in this problem is an easement appurtenant.

An easement appurtenant arises when the owner of one piece of land has the right to go onto an adjacent piece of land owned by another. Because an easement appurtenant is intended to Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© benefit the land, it runs with the land when the land is conveyed (transferred) to another. In other words, when a parcel of land that is benefited by an easement appurtenant (the dominant estate) is sold, the property carries the easement with it. The new owner can use the easement over the burdened property (the servient estate) just as the old owner did.

That is what occurred in this problem.

POINTS: 1 DIFFICULTY: Challenging REFERENCES: Ownership Interests and Leases LEARNING OBJECTIVES: LO-2 - LO - 2 NATIONAL STANDARDS: United States - BB_17.3 - BB-Decision Modeling United States - BUSPROG: Reflective KEYWORDS: Bloom's: Analysis 72. Metro City exercises its power of eminent domain to acquire land for a public project, including part of a public transit rail system and a traffic bypass. Metro City relocates more than 10,000 residents from the land and destroys their homes to begin the project. Nathan’s Deli is adjacent to the project. Nathan’s loses most of its business when the residents are moved. Nathan’s files a suit against Metro City, alleging that its acquisition of the land resulted in a taking of the deli’s property interest, entitling it to compensation. What is a taking? What might Nathan’s claim is its “property interest” to support this allegation? What is the court likely to rule? Why? ANSWER: A taking occurs when government action permanently deprives a property owner of possession or use of property.

Nathan’s could claim that its “property interest’’ is an expectation that the area would remain residential. If it had, Nathan’s might have continued to operate profitably. In other words, Nathan’s might argue that it had assumed its customer base would remain constant because of its expectation that the area would be used in the future as it had in the past.

The court is most likely to hold that Metro City’s acquisition of the land near Nathan’s did not cause a taking of the deli’s property interest so as to require the payment of compensation. Metro City did not take Nathan’s right to possess its property nor its right to use its property as it wanted. An expectation that a nearby area would remain residential is not a right. The right to control the use of the land in that area be¬longs to its owners. When Metro City acquired the land through its power of eminent domain, it acquired the right to control the use of the land.

POINTS: 1 DIFFICULTY: Challenging REFERENCES: Limitations on Property Rights LEARNING OBJECTIVES: LO-4 NATIONAL STANDARDS: United States - BB_17.3 - BB-Decision Modeling United States - BUSPROG: Risk Analysis KEYWORDS: Bloom's: Analysis

Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© True / False 1. Antitrust legislation was created because of the belief that competition leads to lower prices. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Introduction LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Bloom's: Knowledge 2. The Sherman Act, the Clayton Act and the Federal Trade Commission Act are all examples of legislation designed to curb anticompetitive business practices. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: The Sherman Antitrust Act LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 3. A restraint of trade is an agreement between firms that has the effect of reducing competition in the marketplace. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: The Sherman Antitrust Act LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 4. The basic purpose of antitrust law is to regulate economic competition. a. True b. False ANSWER: True POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Easy REFERENCES: The Sherman Antitrust Act LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 5. An act must substantially affect interstate commerce to violate antitrust law. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: The Sherman Antitrust Act LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 6. An agreement that is deemed a per se violation will be examined by a court to determine whether the agreement’s benefits outweigh its anticompetitive effects. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Section 1 of the Sherman Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 7. A price-fixing agreement is an agreement by two or more sellers to boycott a particular person or firm. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Section 1 of the Sherman Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 8. A price-fixing agreement that is reasonable does not violate antitrust law. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Section 1 of the Sherman Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 9. A group boycott is not a per se violation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Section 1 of the Sherman Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 10. A market division by class of customer between rival firms violates antitrust law. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: Section 1 of the Sherman Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 11. Territorial and consumer restrictions are per se violations. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Section 1 of the Sherman Act LEARNING OBJECTIVES: LO - 2 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 12. Resale price maintenance agreements are subject to analysis under the rule of reason. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Section 1 of the Sherman Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 13. A trade association practice or agreement that restrains trade is analyzed under the rule of reason. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Section 1 of the Sherman Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 14. Section 1 of the Sherman Act condemns monopolization. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Section 1 of the Sherman Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 15. Predatory pricing involves selling a product at prices substantially above the fair market value. a. True b. False ANSWER: False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© POINTS: 1 DIFFICULTY: Easy REFERENCES: Section 2 of the Sherman Act LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 16. Monopoly power may be proved by evidence that a firm used its power to control prices. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Section 2 of the Sherman Act LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 17. The primary measure of monopoly power is a competitor’s assessment of the acts of a firm under review. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Section 2 of the Sherman Act LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 18. Monopoly power is a minor amount of market power. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Section 2 of the Sherman Act LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 19. Size alone does not determine whether a firm is a monopoly. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Section 2 of the Sherman Act LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking: Re - BUSPROG: Reflective Thinking LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 20. For products that are sold nationwide, the relevant geographic market encompasses the entire United States. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Section 2 of the Sherman Act LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 21. The possession of monopoly power alone does not constitute the offense of monopolization. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Section 2 of the Sherman Act LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 22. The Internet is changing the notion of the size and limits of a relevant geographic market. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Section 2 of the Sherman Act LEARNING OBJECTIVES: LO - 3 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 23. The offense of monopolization does not require the intent to monopolize. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Section 2 of the Sherman Act LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 24. A single seller acting unilaterally is free to deal, or not to deal, with anyone it chooses. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Section 2 of the Sherman Act LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 25. The Clayton Act prohibits certain classes of price discrimination. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: The Clayton Act LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 26. Charging different prices to different buyers for identical goods is price discrimination. a. True b. False ANSWER: True Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© POINTS: 1 DIFFICULTY: Easy REFERENCES: The Clayton Act LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 27. Under an exclusive-dealing contract, a seller promises a buyer a certain territory in which the buyer will have no direct competition. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: The Clayton Act LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 28. Conditioning the sale of one product on the purchase of another is an exclusive-dealing contract. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: The Clayton Act LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 29. In determining the legality of a merger, a crucial consideration is market concentration. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: The Clayton Act LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning©

30. Market concentration refers to the number of firms in the market. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: The Clayton Act LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 31. No person may be a director for two competing corporations at the same time. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: The Clayton Act LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 32. A divestiture is an order to a company to cease, or divest itself of, its anticompetitive conduct. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Enforcements and Exemptions LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 33. Labor unions can organize and bargain without violating antitrust law. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Enforcements and Exemptions Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 34. Insurance companies are exempt from antitrust laws whenever state regulation exists. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Enforcements and Exemptions LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge 35. Cooperative research by small-business firms is exempt from antitrust law. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Enforcements and Exemptions LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Knowledge Multiple Choice 36. Congress enacts a statute to outlaw a specific type of anticompetitive business agreement. Like other laws that regulate economic competition, this law is referred to as a. a federal trade commission act. b. an antitrust law. c. an interstate commerce act. d. a suppressive restraint on trade.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Introduction LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS:

Bloom's: Comprehension

37. North Mining Company and South Excavation Company agree to abide by the decisions of East Coast Financial Corporation as to their respective levels of production, markets, and prices, effectively reducing competition and increasing profits. This is most likely a. a common, legal, time-honored type of business arrangement. b. an illegal restraint on trade. c. an innovative, legally efficient approach to doing business. d. an outdated, but legal business trust.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Sherman Antitrust Act LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 38. To fall under the Sherman Act, an activity must a. substantially affect interstate commerce. b. involve monopolization. c. promote competition. d. involve international trade.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Sherman Antitrust Act LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 39. Thermo Gas, Inc., and Uno Oil Corporation refine and sell gasoline and other petroleum products. To limit the supply of gas on the market and thereby raise prices, Thermo Gas and Uno Oil agree to buy “excess” supplies from dealers and “dispose” of it. This is a. a deal that neither restrains trade or harms competition. b. a legal restraint of trade. c. a per se violation of the Sherman Act. d. subject to analysis under the rule of reason.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Section 1 of the Sherman Act LEARNING OBJECTIVES: LO - 2 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 40. When applying the rule of reason to determine whether an agreement violates Section 1 of the Sherman Act, a court will not consider a. the purpose of the agreement. b. the parties’ market ability to implement the agreement. c. the effect of the agreement on international trade. d. the potential effect of the agreement on competition.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Section 1 of the Sherman Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 41. A court deems an agreement between Silver Saddles Saddlery and Time Tested Tack, Inc. to be a per se violation of the Sherman Act. The court is a. prevented from determining whether the agreement’s benefits outweigh its anticompetitive effects. b. required to unanimously decide whether the agreement’s benefits outweigh its anticompetitive effects. c. required to apply the rule of reason. d. required to issue a formal complaint against Silver Saddles and Time Tested Tack.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Section 1 of the Sherman Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application Fact Pattern 39-1 Cardio, Inc., makes and sells Drawdown, the most prescribed name-brand heart medication. Emitate Corporation has the potential to make a generic version of the same drug.

42. Refer to Fact Pattern 39-1. Cardio pays Emitate not to sell its product. This is a. a customer restriction. b. a joint venture. c. an exclusive-dealing contract. d. a price-fixing agreement.

ANSWER: d POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Moderate REFERENCES: Section 1 of the Sherman Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 43. Refer to Fact Pattern 39-1. A court would most likely rule that the agreement between Cardio and Emitate is a. a deal that neither restrains trade or harms competition. b. a legal restraint of trade. c. a per se violation of the Sherman Act. d. subject to analysis under the rule of reason.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Section 1 of the Sherman Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 44. Gulf Air, Inc., is the major wholesale distributor of software in the state of Florida. Its closest competitor is Fluid Systems Company, another Florida firm. The two firms agree that Gulf Air will operate in south Florida and Fluid Systems will operate in north Florida. This is a. a group boycott. b. a market division. c. a joint venture. d. an exclusive-dealing contract.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Section 1 of the Sherman Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 45. Edgy Engine Components, Inc., a maker of vehicle parts, refuses to sell to Fidgety Fix-It, Inc., a national vehicle service firm. Edgy Engine convinces Greasy Motor Parts Company, a competitor, to do the same. This is a. a group boycott. b. a market division. c. a joint venture. d. an exclusive-dealing contract.

ANSWER: a Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© POINTS: 1 DIFFICULTY: Moderate REFERENCES: Section 1 of the Sherman Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 46. Some agreements are so blatantly and substantially anticompetitive that they are deemed illegal per se under Section 1 of the Sherman Act. Which of the following is not a per se violation? a. A price-fixing agreement. b. A group boycott. c. A trade association. d. A market division.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Section 1 of the Sherman Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 47. Lightning Cycles, Inc., makes Lightning-brand motorcycles and accessories, which are distributed to authorized dealers, including Macho Motors, Inc. Macho operates dealerships in several locations. Lightning imposes restrictions on Macho to limit the areas in which they sell the bikes and insulate other dealers from direct competition. This is a. a territorial restriction. b. a resale price maintenance agreement. c. a refusal to deal. d. a price-fixing agreement.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Section 1 of the Sherman Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 48. Organic Cheeses, Inc., Fine & Fresh Foods Company, and Healthy Whole Foods, Inc. organize together to exchange information and share advertising. This is an example of a a. trade association. b. resale price maintenance agreement. c. monopoly.

Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© d. territorial restriction.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Section 1 of the Sherman Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 49. A trade association a. is always a per se violation of Section 1 of the Sherman Act. b. may be legal if it is sufficiently beneficial to both the association and the public. c. is an innovative, legally efficient approach to doing business. d. always creates illegal territorial or customer restrictions.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Section 1 of the Sherman Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension 50. Spa Selectiva Company makes and sells beauty salon supplies. By selling its product at prices substantially below the normal cost of production, Spa Selectiva hopes to drive its competitors from the market. This is a. market power. b. predatory pricing. c. price discrimination. d. price-fixing.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Section 2 of the Sherman Act LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 51. Gourmet Foods, Inc., requires all distributors of its products to sell them at a specified minimum price. Under the Sherman Act, this is a violation a. if the anticompetitive effects outweigh the competitive benefits. b. if the competitive benefits outweigh the anticompetitive effects. c. under any circumstances.

Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© d. under no circumstances.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Section 1 of the Sherman Act LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 52. Marvin starts Marvin’s Bike Company in Wheatland, South Dakota. There is one other bike store in Wheatland.

Through good business management, Marvin’s Bike Company obtains a great deal of market power in Wheatland. This acquisition of monopoly power is a. a per se violation of Section 1 of the Sherman Act. b. an illegal restraint on trade. c. not an antitrust violation. d. a per se violation of Section 2 of the Sherman Act. ANSWER: c POINTS: 1 DIFFICULTY: Challenging REFERENCES: Section 2 of the Sherman Act LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 53. Imperio Caffeine Corporation makes and sells coffee under a variety of brand names. Imperio wants to merge with Java Company, its main competitor. In weighing a challenge to the deal, a court looks at the relevant product market. This most likely includes coffee and a. no other products. b. products that are not identical but are related, such as spin-offs. c. products that are sometimes substituted for coffee. d. products with identical attributes only.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Section 2 of the Sherman Act LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 54. A suit is filed against Adroit Drilling Tools Corporation, alleging that the firm committed the offense of monopolization. To determine whether Adroit has monopoly power requires looking at Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© a. the definition of monopoly in the Sherman Act. b. Adroit’s size alone. c. Adroit’s production methods and marketing techniques. d. the relevant market.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Section 2 of the Sherman Act LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 55. Listen Up! Corporation books and promotes concerts and other entertainment events, for which Listen Up! also sells tickets. In weighing a challenge to Listen Up!’s “monopolistic” ticket prices, a court looks at the relevant geographic market. This encompasses a. only areas in which Listen Up! does not have monopoly power. b. only areas in which Listen Up! has monopoly power. c. the area in which Listen Up! and its competitors sell, and their customers buy, the tickets. d. the entire United States in all cases.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Section 2 of the Sherman Act LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 56. A suit is filed against Dormroom Furniture Unlimited, Inc., alleging that the firm has committed the offense of monopolization. To determine whether Dormroom has committed this offense, the court will consider the extent of Dormroom’s market power and a. how Dormroom acquired its power. b. how Dormroom makes its products. c. Dormroom’s customers. d. Dormroom’s suppliers.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Section 2 of the Sherman Act LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning©

57. Master Manufacturing Corporation has exclusive control over the market for its product. Under the Sherman Act, this is a. a per se violation. b. a violation if it acquired this power through “business acumen.” c. a violation if it acquired this power through “anticompetitive means.” d. not a violation.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Section 2 of the Sherman Act LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 58. To acquire monopoly power in its market, Perfect Plastics, Inc., sets its prices lower than its competitors. Under the Sherman Act, this is a. a per se violation. b. a violation if its competitors make similar deals. c. a violation if it thereby acquires monopoly power. d. not a violation.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Section 2 of the Sherman Act LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 59. Rally Speedboat Corporation refuses to sell its products to Super Weekends, Inc., a recreational water products dealership. This is a. an exclusive-dealing contract. b. a horizontal market division. c. attempted monopolization. d. a unilateral refusal to deal.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Section 2 of the Sherman Act LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS:

Bloom's: Application

60. An antitrust action is brought against Tri-State Transport Company, alleging the offense of attempted monopolization.

To be guilty of this offense, Tri-State’s attempt must have a. a dangerous probability of success. b. a deadly guaranty of success. c. a distant possibility of success. d. a distinct improbability of success.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Section 2 of the Sherman Act LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 61. Fresh Vegetables, Inc., a wholesaler, refuses to sell its produce to Good Mart Stores, Inc., a retailer. This is a. “an unfair or deceptive act or practice.” b. a per se violation. c. not a violation. d. subject to analysis under the rule of reason.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Section 2 of the Sherman Act LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 62. A unilateral refusal to deal can violate antitrust laws if the refusal a. is likely to have an anticompetitive effect on a particular market. b. results in lower prices for consumers. c. provides no economic benefits for consumers. d. is likely to increase competition.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Section 2 of the Sherman Act LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Comprehension Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning©

63. Precious Metals Corporation, a raw materials vendor, sells its commodities in certain quantities to Quarry Refining Company for a certain price but charges Rich Assets, Inc., a Quarry competitor, a higher price. This is most likely a violation of a. the Clayton Act. b. the Federal Trade Commission Act. c. the Sherman Act. d. no antitrust law.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Clayton Act LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 64. HVAC Parts Company charges different buyers different prices for identical goods. HVAC’s prices are subject to evaluation under a. the Clayton Act. b. the Federal Trade Commission Act. c. the Sherman Act. d. no antitrust law.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Clayton Act LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 65. To drive its competitors out of a certain geographic segment of its market, Fryin’ Potatoes, Inc., sets the prices of its products below cost for the buyers in that area. This is a. a refusal to deal. b. business acumen. c. predatory bidding. d. price discrimination.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Clayton Act LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LOCAL STANDARDS: KEYWORDS:

United States - OH - Default City - AICPA Legal Bloom's: Application

66. City Manufacturing Corporation conditions shipments of its products to Exurb Stores, Inc., on Exurb’s agreement not to buy products from Regional Works Company, City’s competitor. This is a. an exclusive-dealing contract. b. a tying arrangement. c. price discrimination. d. a unilateral refusal to deal.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Clayton Act LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 67. Luminescent Silicon Corporation, which controls 40 percent of the computer-chip market in the United States, merges with Micro Processors, Inc., which controls 15 per-cent of the same market. This merger is a violation a. only if the result more clearly concentrates the market. b. only if the result makes it more difficult for potential competitors to enter the market. c. if the result more clearly concentrates the market and makes it more difficult for potential competitors to enter the market. d. under no circumstances.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging REFERENCES: The Clayton Act LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 68. Global Services Corporation engages in trade practices that may violate antitrust law. The Federal Trade Commission has the power to act against unfair trade practices under a. the Clayton Act. b. the Federal Trade Commission Act. c. the Sherman Act. d. no law.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Enforcement and Exemptions Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 69. Mango Corporation believes that Melon Corporation engages in anticompetitive behavior in an attempt to drive Mango and its other competitors out of the market. Antitrust laws can be enforced against Melon by a. Mango and its competitors only. b. Mango, its competitors, and the Federal Trade Commission only. c. Mango, its competitors, the Federal Trade Commission, and the U.S. Department of Justice. d. the Federal Trade Commission and U.S. Department of Justice only.

ANSWER: c POINTS: 1 DIFFICULTY: Challenging REFERENCES: Enforcement and Exemptions LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Bloom's: Application 70. Big U.S. Oil Company joins with a foreign cartel to control the price of oil. If the cartel has a substantial effect on U.S. commerce a. both Big U.S. Oil and the foreign cartel can be sued for violation of U.S. antitrust laws. b. neither Big U.S. Oil nor the foreign cartel can be sued for violation of U.S. antitrust laws. c. only Big U.S. Oil can be sued for violation of U.S. antitrust laws. d. only the foreign cartel can be sued for violation of U.S. antitrust laws .

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: U.S. Antitrust Laws in the Global Context LEARNING OBJECTIVES: LO - 5 KEYWORDS: Bloom's: Application Essay 71. Java Bean Company imports coffee beans and sells them under two-year contracts to Mellow Roast, Inc., and other coffeemakers. The contracts require that during the two-year term a coffeemaker not buy beans from Java Bean’s competitors. The contracts do not limit the coffeemakers’ purchase of tea or other beverage ingredients from other suppliers, however. In the second year of the contract, Mellow Roast protests that this arrangement violates antitrust law.

Is Mellow Roast correct? If not, why not? If so, under which antitrust statute, or statutes, could these contracts be held illegal?

ANSWER: Java Bean’s contracts are exclusive-dealing contracts. These contracts may be held illegal under the Sherman Act or the Clayton Act. Section 1 of the Sherman Act prohibits any agreement that is an unreasonable restraint of trade. Under this prohibition, a contract is subject to the rule of reason. A court would consider the purpose of the arrangement, the powers of the parties, and the effect of their actions in restraining trade. If the anticompetitive Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© effects outweigh the competitive benefits, the contracts would be held unlawful. Section 3 of the Clayton Act specifically prohibits exclusive-dealing contracts when their effect is to substantially lessen competition or tend to create a monopoly. If these contracts are held to be otherwise illegal under one of these statutes, that the contracts are limited to two-year terms and do not proscribe the coffeemakers’ purchase of tea and other beverage ingredients from other suppliers are not factors that would make them legal.

POINTS: 1 DIFFICULTY: Challenging REFERENCES: Section 1 of the Sherman Act The Clayton Act LEARNING OBJECTIVES: LO - 2 LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Decision Modeling KEYWORDS: Bloom's: Application 72. Bubbly Bottling Company is engaged in the soft-drink bottling and distribution industry in the states of New York and New Jersey. The firm currently has about 40 percent of the market for these products and related services. Carbonate Distribution Corporation competes with Bubbly in the same states. Carbonate has about 35 percent of the market. If Bubbly were to acquire the stock and assets of Carbonate, would Bubbly be in violation of any of the antitrust laws? If so, which one? Discuss fully.

ANSWER: The Clayton Act prohibits the type of action by Bubbly suggested in this question—a merger that would increase market concentration. Other factors include the overall concentration of the relevant market, that market’s history of tending toward concentration, and whether the merger is apparently designed to establish market power or restrict competition. Based on the facts stated in the question, most of these factors are present. Thus, the major antitrust law being violated is the Clayton Act. The law prohibits any person or business organization from acquiring the stock or assets in another business where the result would be a significantly increased market share and the effect would most likely be to substantially lessen competition. The removal of a competitor who controls 35 percent of the market (Carbonate) combined with the 40 percent held by the acquiring company (Bubbly) definitely could drive out the remaining small competitors and be a barrier to future entrants into this market. Either the U.S. Department of Justice or the Federal Trade Commission could file for divestiture of the resulting firm if these parties were to merge.

POINTS: 1 DIFFICULTY: Challenging REFERENCES: The Clayton Act Enforcement and Exemptions LEARNING OBJECTIVES: LO - 4 LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Decision Modeling KEYWORDS: Bloom's: Application

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© True / False 1. One of the most common forms of securities are bonds issued by corporations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Securities Act of 1933 LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Knowledge 2. A free-writing prospectus may be used before the Securities and Exchange Commission completes its review of a related registration statement. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Securities Act of 1933 LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Knowledge 3. A registration statement must include a financial statement certified by an independent public accounting firm. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Securities Act of 1933 LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Knowledge 4. A registration statement must state how a corporation plans to use the proceeds from the sale of the securities. a. True b. False ANSWER: True POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Easy REFERENCES: Securities Act of 1933 LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Knowledge 5. Sales of securities must occur within five days of registration. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Securities Act of 1933 LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Knowledge 6. Before filing a registration statement, an issuer must offer to sell securities. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Securities Act of 1933 LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Comprehension 7. Generally, stock offerings that are made in a limited manner during any twelve-month period are exempt from the registration requirement. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Securities Act of 1933 LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Knowledge Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© 8. A corporation whose security does not qualify for an exemption can avoid the cost and complexity associated with registration. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Securities Act of 1933 LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Comprehension 9. Generally, stock offerings that involve a small dollar amount are exempt from the registration requirement. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Securities Act of 1933 LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Knowledge 10. Securities of nonprofit, educational, and charitable organizations are not exempt from the registration requirement of the 1933 Securities Act. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Securities Act of 1933 LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Knowledge 11. Private offerings of securities in unlimited amounts can be exempt from the registration requirement of the Securities Act of 1933. a. True b. False ANSWER: True POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© DIFFICULTY: Easy REFERENCES: Securities Act of 1933 LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Knowledge 12. Few securities can be resold without registration. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Securities Act of 1933 LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Knowledge 13. Securities that are exempt from the registration requirement can generally be sold and resold without being registered. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Securities Act of 1933 LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Knowledge 14. Willful violations of the Securities Act of 1933 may be subject to civil liability, but not criminal prosecution. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Securities Act of 1933 LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Comprehension 15. Against a charge of a violation of the Securities Act of 1933, only an issuer of stock can assert the due diligence Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© defense. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Securities Act of 1933 LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Knowledge 16. Private parties can sue violators of the Securities Act of 1933. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Securities Act of 1933 LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Knowledge 17. Any corporation with less than $10 million in assets and fewer than five hundred shareholders must register their securities with the Securities and Exchange Commission. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Securities Exchange Act of 1934 LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Knowledge 18. The Securities Exchange Act of 1934 provides for continuous, periodic disclosures by publicly held corporations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Securities Exchange Act of 1934 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Knowledge 19. SEC Rule 10b-5 prohibits the commission of fraud in connection with the purchase or sale of any security. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Securities Exchange Act of 1934 LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Knowledge 20. Section 10(b) of the Securities Exchange Act of 1934 covers only corporate officers and directors. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Securities Exchange Act of 1934 LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Comprehension 21. SEC Rule 10b-5 applies to almost all cases involving the trading of securities. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Securities Exchange Act of 1934 LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Knowledge 22. The key to liability under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 is whether undisclosed inside information is material. a. True Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Securities Exchange Act of 1934 LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Knowledge 23. Buying or selling securities on the basis of nonpublic information is illegal only if the profit from the transaction is unreasonable. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: Securities Exchange Act of 1934 LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Comprehension 24. Only outsiders who would ordinarily be deemed fiduciaries of the corporations in whose stock they trade can be liable for insider trading. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Securities Exchange Act of 1934 LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Knowledge 25. A corporation can recapture any profits realized by an insider on any purchase or sale of the firm’s stock within any six-month period. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Securities Exchange Act of 1934 Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Knowledge 26. “Forward-looking” financial forecasts are prohibited under SEC Rule 10b-5. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Securities Exchange Act of 1934 LEARNING OBJECTIVES: LO - 3 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Comprehension 27. Violations of the Securities Exchange Act of 1934 may be subject to criminal prosecution, but not civil liability. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Securities Exchange Act of 1934 LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Knowledge 28. Private parties cannot sue violators of Section 10(b) and Rule 10b-5. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Securities Exchange Act of 1934 LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Knowledge 29. State securities laws apply mainly to intrastate transactions. a. True b. False Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: State Securities Laws LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Knowledge 30. “Blue sky laws” regulate securities data stored in cloud computing servers. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: State Securities Laws LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Knowledge 31. Generally, federal seurities law are patterned after states’ antifraud laws. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: State Securities Laws LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Comprehension 32. Corporate governance can be defined as the relationship between a corporation and its directors. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: Corporate Governance LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS:

Knowledge

33. Willful violations of the Sarbanes-Oxley Act of 2002 may be subject to harsh penalties. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Corporate Governance LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Knowledge 34. Corporations' chief executive officers are directly accountable for the accuracy of financial statements filed with the Securities and Exchange Commission. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Corporate Governance LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG - Analytic - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Knowledge 35. A major problem facing the Securities and Exchange Commission is how to enforce the antifraud provisions of the securities laws in the online environment. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: Online Securities Fraud LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Critical Thinking KEYWORDS: Knowledge Multiple Choice 36. Frothy Beverage Corporation is a public company whose shares are traded in the public securities markets. Under the Securities Act of 1933, Frothy is required to a. contribute to the operations of national stock exchanges.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© b. disclose financial and other information about its securities. c. engage in market surveillance to deter undesirable practices. d. solicit proxies for voting.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Securities Act of 1933 LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Application 37. Cotton Products Corporation is a public company whose shares are traded in the public securities markets. The Securities Act of 1933 requires Cotton to disclose financial and other significant information concerning its securities in order to a. increase corporate accountability by imposing responsibility on chief corporate executives. b. prevent insiders from trading among themselves. c. protect investors. d. provide a “safe harbor” for companies that make forward-looking statements.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Securities Act of 1933 LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Application 38. RingTone Corporation is a public company whose securities are traded among investors. Under the Securities Act of 1933, a security is a. almost any stake in the ownership or debt of a company. b. an investment that is guaranteed to make a profit. c. only such common forms of debt and equity as bonds and stocks. d. whatever a company represents to the public as a security.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Securities Act of 1933 LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Application 39. Olive Grove Enterprises, Inc., completes its registration process and issues a free-writing prospectus. This tells Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© prospective investors a. about investing freely. b. how to write their own prospectus. c. that they can “freely write their own ticket” to buy Olive’s securities. d. that they may obtain the prospectus at the SEC’s Web site.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Securities Act of 1933 LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Application 40. Readmore Bookstore Corporation files a registration statement with the Securities and Exchange Commission and provides a prospectus describing the securities to investors. These items are intended to provide sufficient information so that the financial risks involved can be evaluated by a. market professionals to explain to all investors. b. government regulators to disclose to the general public. c. sophisticated investors only. d. unsophisticated investors.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Securities Act of 1933 LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Application 41. Bild-It-Rite Corporation is a public company that is preparing to issue securities that do not qualify for an exemption from registration. This means that Bild-It-Rite must a. file a registration statement with the SEC. b. issue the securities through an online registration site. c. refrain from issuing the securities to unregistered investors. d. register the securities with a national stock exchange.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Securities Act of 1933 LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Application Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning©

42. Squeaky Clean Corporation wants to make an offering of securities to the public. This offering is not exempt from registration under the Securities Act of 1933. Before Squeaky sells its securities, it must provide investors with a. a forward-looking financial forecast. b. an investment contract. c. a prospectus. d. samples of its products.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Securities Act of 1933 LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Application 43. Celfone Corporation is required to file a registration statement with the Securities and Exchange Commission. This statement must contain a. a copy of prospectuses to be provided to investors. b. a description of securities being offered for sale. c. a record of pre-registration sales in securities. d. a sample of advertising to be used to attract investments in Celfone.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Securities Act of 1933 LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Application 44. Flo-Thru Corporation is poised to issue securities that, under the Securities Act of 1933, are "exempt." This means that the securities can be sold a. on the basis of a material omission or misrepresentation. b. on the basis of nonpublic information. c. within any six-month period by certain insiders. d. without being registered.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Securities Act of 1933 LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS:

Application

45. Kitsch Niche Corporation is a noninvestment company that wants to issue $3 million of stock in a twelve-month period. Kitsch Niche, with less than $20 million in annual sales, qualifies as a small business issuer. Before Kitsch Niche sells the stock, it must provide investors with a. an offering circular. b. a notice of the issue. c. a red herring prospectus. d. a tombstone ad.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Securities Act of 1933 LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Application Fact Pattern 37-1 Fresh Cream, Inc., wants to make an initial public offering of securities. Fresh believes that it qualifies for an exemption under Regulation A from the full registration requirement of the federal Securities Act of 1933.

46. Refer to Fact Pattern 37-1. Fresh decides to sell its new securities via the Internet. This offering a. will avoid the payment of commissions to brokers or underwriters. b. is an investment scam. c. is a Ponzi scheme. d. constitutes insider trading.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Securities Act of 1933 LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Application 47. Refer to Fact Pattern 37-1. If Fresh is exempt from the federal registration requirement, Fresh is a. automatically exempt from any state registration requirement. b. not subject to any state securities laws. c. not necessarily exempt under a state registration requirement. d. automatically subject to all state registration requirements.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: State Securities Laws Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LEARNING OBJECTIVES: LO - 4 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Application 48. To raise $12 million to expand operations, Star Corporation makes a stock offering directly to sixty accredited investors and twenty sophisticated, but unaccredited investors. Star plans to notify the SEC of sales. Under the Securities Act of 1933, this issue may qualify as an "exempt" transaction a. as is. b. if all of the investors are also given certain material information. c. if the offering is also made available to the general public. d. under no circumstances.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Securities Act of 1933 LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Application 49. Players Video Game Centers, Inc., wants to issue stock of $1 million in a single offer-ing. Players must provide all investors with material in-forma-tion about itself, its business, and its securities if a. all investors are accredited. b. under any circumstances. c. any investors are accredited. d. any investors are unaccredited.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Securities Act of 1933 LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Application 50. GR8 Stuf Company files a registration statement with the SEC before making an offering to the general public. The registration contains false, immaterial statements of which the investors are unaware. GR8 Stuf is charged with violating the Securities Act of 1933. GR8 Stuf's best defense is a. the investors were not aware of the misrepresentations. b. the issuer reasonably believed the misstatements were true. c. the offering was made available to the general public. d. the untrue statements were not material.

ANSWER: d Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© POINTS: 1 DIFFICULTY: Moderate REFERENCES: Securities Act of 1933 LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Application 51. Fresh Seasonal Fruit Company has assets of less than $10 million and fewer than fifty shareholders. Gourmand Pastries, Inc., has assets of more than $50 mil-lion and more than five hundred shareholders. The Securities Exchange Act of 1934 applies to a. Fresh Seasonal Fruit and Gourmand Pastries. b. Fresh Seasonal Fruit only. c. Gourmand Pastries only. d. neither Fresh Seasonal Fruit nor Gourmand Pastries.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Securities Exchange Act of 1934 LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Application 52. Global Investments Corporation buys and sells securities. Section 10(b) of the Securities Ex-change Act of 1934 applies to a. only the purchase or sale of a security involving an insider. b. only the purchase or sale of a security involving short-swing profits. c. only the purchase or sale of a security involving a tipper and tippee. d. the purchase or sale of any security.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Securities Exchange Act of 1934 LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Application 53. Nouveau Riche Corporation’s officers, directors, and shareholders buy and sell securities. SEC Rule 10b-5 applies to a. only the purchase or sale of a security by a financial corporation. b. only the purchase or sale of a security involving an officer or director. c. only the purchase or sale of a security involving a shareholder. d. the purchase or sale of any security.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Securities Exchange Act of 1934 LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG:Analytic:Ref: - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Application 54. To raise capital to form Plasticity Corporation with Quinn, Rona sells bonds and stock in other companies, and plans to register an initial public offering under the Securities Act of 1933. SEC Rule l0b-5 covers a. most forms of securities. b. only bonds. c. only securities registered under the Securities Act of 1933. d. only stock.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Securities Exchange Act of 1934 LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Application Fact Pattern 37-2 Sid, a director of Tech Software Company, learns that a Tech engineer has developed a new, exciting video game. Sid buys Tech stock and tells his friend Uri, who also buys Tech stock. When the new game is released three weeks later, Sid and Uri sell their stock for a big profit.

55. Refer to Fact Pattern 37-2. Under SEC Rule l0b-5, Sid would not be liable if he had waited to buy Tech stock until a. after Sid told Uri of the new game. b. after Uri bought Tech stock. c. after the public release of the game. d. just before the game was released.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Securities Exchange Act of 1934 LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Application 56. Refer to Fact Pattern 37-2. Regarding Sid's profits on the purchase and sale of Tech stock, under Section 16(b) of the Securities Exchange Act of 1934 Tech may recapture Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© a. all of Sid's profits. b. half of Sid's profits. c. 10 percent of Sid's profits. d. none of Sid's profits.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Securities Exchange Act of 1934 LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Application 57. Lexy, a salesperson for My-T-Fine Corporation, learns that My-T-Fine will in-crease the dividend it pays to shareholders. Lexy buys 10,000 shares of My-T-Fine stock. When the price increases, Lexy sells the shares for a profit.

Lexy would not be liable for insider trading if the information about the dividend was a. material when she sold the stock. b. public after she bought the stock. c. public before she bought the stock. d. speculative when she bought the stock.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Securities Exchange Act of 1934 LEARNING OBJECTIVES: LO - 2 KEYWORDS: Application Fact Pattern 37-3 Dhani, an accountant for Eureka, Inc., learns of undisclosed company plans to market a new laptop. Dhani buys 1,000 shares of Eureka stock. He reveals the company plans to Fay, who buys 500 shares. Fay tells Geoff, who tells Hu. Both Geoff and Hu buy 100 shares. They know that Fay got her information from Dhani. When Eureka publicly announces its new laptop, Dhani, Fay, Geoff, and Hu sell their stock for a profit.

58. Refer to Fact Pattern 37-3. If Dhani is liable under the Securities Exchange Act of 1934, it will be because the information on which he based his purchase of Eureka stock was a. a forward-looking forecast. b. not material. c. not yet public. d. not yet true.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Securities Exchange Act of 1934 LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© LOCAL STANDARDS: KEYWORDS:

United States - OH - Default City - AICPA Legal Application

59. Refer to Fact Pattern 37-3. Under the Securities Exchange Act of 1934, Fay is most likely a. liable for insider trading. b. not liable because Fay did not prevent others from profiting. c. not liable because Fay did not solicit information from Dhani. d. not liable because Fay does not work for Eureka.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Securities Exchange Act of 1934 LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Application 60. Refer to Fact Pattern 37-3. Under the Securities Exchange Act of 1934, Geoff is most likely a. liable for insider trading. b. not liable because Geoff did not prevent others from profiting. c. not liable because Geoff did not solicit information from Dhani. d. not liable because Geoff does not work for Eureka.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Securities Exchange Act of 1934 LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Application 61. Refer to Fact Pattern 37-3. Under the Securities Exchange Act of 1934, Hu is most likely a. liable for insider trading. b. not liable because Hu is only a tippee, not a tipper. c. not liable because Hu is too far down the chain of disclosure. d. not liable because Hu traded on the basis of a true fact.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Securities Exchange Act of 1934 LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© KEYWORDS:

Application

62. Riley, an engineer for Shur-2-Gro Seed Corporation, learns that Shur-2-Gro has developed a corn hybrid to triple the output of any farm. Riley buys 20,000 shares of Shur-2-Gro stock. He tells Tess, who buys 15,000 shares. After the new hybrid is announced publicly, the price of Shur-2-Gro stock increases. Riley and Tess sell their shares for a profit. Under the Securities Exchange Act of 1934, liability may be imposed on a. none of these parties. b. Riley and Tess only. c. Riley only. d. Riley, Shur-2-Gro, and Tess.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Securities Exchange Act of 1934 LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Application 63. Dee, an accountant, does not work for Emergent Company, but wrongfully obtains inside information concerning Emergent. Based on the information, Dee buys and sells Emergent stock for personal gain. The Securities and Exchange Commission prosecutes Dee, arguing that she is liable because she stole information rightfully belonging to another. This argument is a. the blue-sky theory. b. the misappropriation theory. c. the red-herring theory. d. the tipper/tippee theory.

ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Securities Exchange Act of 1934 LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Application 64. Della, an officer for Energy Petrol Corporation (EPC), buys 100 shares of EPC stock. One week later, EPC announces that it will merge with a competitor, Fuel Oil Company, and the price of EPC stock increases. One month later, Della sells her shares for a profit. Under Section 16(b) of the Securities Exchange Act of 1934, Della would not be liable if, after buying the stock, she had waited a. less than fourteen days to sell it. b. more than six months to sell it. c. ninety days to sell it. d. two months to sell it.

ANSWER: b Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© POINTS: 1 DIFFICULTY: Moderate REFERENCES: Securities Exchange Act of 1934 LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Application 65. North American Properties, Inc., and its officers, directors, and shareholders, buy and sell securities. Section 16(b) of the Securities Exchange Act of 1934 covers a. all purchases and sales of securities. b. only purchases and sales of securities involving misappropriation. c. only purchases and sales of securities involving short-swing profits. d. only purchases and sales of securities involving tippers and tippees.

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Securities Exchange Act of 1934 LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Application 66. Hi-Five Aero Corporation is required to register its securities under Section 12 of the Securities Exchange Act of 1934. Section 14(a) of the act regulates a. the declaration of dividends by Hi-Five's board of directors. b. the later re-registration of Hi-Five's securities. c. the short-swing activities of Hi-Five's insiders. d. the solicitation of proxies from Hi-Five's shareholders.

ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Securities Exchange Act of 1934 LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Application 67. Maple Products Corporation is a public company, which New Hampshire regulates and in which Orin invests. The Sarbanes-Oxley Act of 2002 introduced direct federal corporate governance requirements to a. public companies. b. private investors. c. state regulators. d. none of these choices.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Corporate Governance LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Application 68. Heavy Hauling, Inc., is a public company whose shares are traded in the public securities markets. Under the Sarbanes-Oxley Act of 2002, to ensure that Heavy Hauling's financial results are accurate and timely, the firm's senior officers must set up and maintain a. internal "disclosure controls and procedures." b. external "release and reveal timetables." c. personal "peruse and review liability policies." d. public "information and discussion forums."

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Corporate Governance LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Application 69. Madison is the chief executive officer of Nitro Medico, Inc., which is required to file certain financial reports with the Securities and Exchange Commission (SEC). Under the Sarbanes-Oxley Act of 2002, Madison must a. certify that the reports are complete and accurate. b. designate a corporate official to assume liability for inaccuracies. c. do nothing. d. read the reports and be prepared to answer questions about them.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Corporate Governance LEARNING OBJECTIVES: LO - 5 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Legal KEYWORDS: Application 70. Catalina promises high returns to Darby and other investors, who then agree to trust their funds to Catalina. She uses these funds to pay previous investors. This is a. a Ponzi scheme. b. a stock option.

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© c. an accredited investor. d. a shortswing profit.

ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Corporate Governance LEARNING OBJECTIVES: LO - 5 KEYWORDS: Application Essay 71. In May 2013, National Biotech Corporation generally advertises that it will make a $4 million offering of stock in June. National makes the offering as advertised and, ten days after the first sale, notifies the Securities and Exchange Commission (SEC). All buyers of the stock are given material information about the company, its business, and the stock.

Before the end of the year, the offering is completely sold out. The buyers include forty unaccredited investors and fifty accredited investors. National does not register the offering. The SEC files a suit against National, seeking civil sanctions on the ground that this offering was not exempt from registration. National argues that the applicable exemption is Rule 505 of Regulation D of the Securities Act of 1933 and that because of this exemption, any resale of the stock is also exempt. Who is correct?

ANSWER: The SEC is correct on both points. To be exempt under Rule 505 of Regulation D of the Securities Act of 1933, a private, noninvestment company offering for less than $5 million in any twelve-month period may be sold to any number of accredited investors but no more than thirty-five unaccredited investors, an offering must not be generally advertised or solicited, and the SEC must be notified of the sales. If a sale involves any unaccredited investor, all investors must be given material information about the offering company before the sale.

Precautions must be taken against nonexempt, unregistered resales. In this problem, National’s offering complies with all of the requirements except the following: the offering is generally advertised, and the stock is sold to forty unaccredited investors. This is enough to remove National’s offering from the exemption. Even if the offering were exempt from registration, however, resales might not be exempt. Securities initially exempt under Rule 505 are restricted securities. This means that they must be registered before resale unless they qualify under a Rule 144 or Rule 144A exemption.

POINTS: 1 DIFFICULTY: Challenging REFERENCES: Securities Act of 1933 LEARNING OBJECTIVES: LO - 1 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Decision Modeling KEYWORDS: Analysis 72. When Looking Glass Corporation wishes to issue certain securities, it must provide sufficient information for Alice, and other unsophisticated investors, to evaluate the financial risk involved. Specifically, the law imposes liability for making a false statement or omission that is “material.” What sort of information would Alice consider material?

ANSWER: Most likely, Alice, and any other average unsophisticated investor, is not concerned with minor inaccuracies but with facts that if disclosed would tend to deter her from buying the securities. This would include facts that have an important bearing on the condition of the issuer and its business—fraud, a dividend change, a significant change in the firm’s financial condition, and a new discovery, process, or product, as well as its liability, loans to officers Cengage Learning Testing, Powered by Cognero

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Legal Environment Today, 8th Edition - Miller/Cross All Rights Reserved - Cengage Learning© and directors, customer delinquencies, and pending lawsuits. Making false statements or omissions with respect to this type of information could subject a corporation to liability under the securities laws.

POINTS: 1 DIFFICULTY: Challenging REFERENCES: Securities Exchange Act of 1934 LEARNING OBJECTIVES: LO - 2 NATIONAL STANDARDS: United States - BUSPROG: ReflectiveReflective - BUSPROG: Reflective LOCAL STANDARDS: United States - OH - Default City - AICPA Decision Modeling KEYWORDS: Analysis

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