Entrepreneurship and Business Law
Exam Answer Key
Course Introduction
Entrepreneurship and Business Law examines the legal environment and foundational legal principles critical to the creation, growth, and operation of new ventures. The course explores topics such as business formation, intellectual property, contracts, liability, regulatory compliance, and funding arrangements. Students will learn to identify legal challenges and opportunities faced by entrepreneurs and develop an understanding of how to mitigate risk, protect ideas, and make informed business decisions in a rapidly changing business landscape. With practical case studies and real-world applications, this course prepares students to navigate legal complexities and strategically leverage legal tools for business success.
Recommended Textbook
The Legal and Regulatory Environment of Business 17th Edition by Marisa Anne Pagnattaro
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22 Chapters
2527 Verified Questions
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Chapter 1: Law As a Foundation for Business
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Sample Questions
Q1) Rule-of-law nations adopt laws supporting the private market because it is in everyone's interest,including the lawmakers'.
A)True
B)False
Answer: True
Q2) Which of the following statements is true of tort law?
A) It involves the recognition of exclusive right in both tangible and intangible resources such as copyrights, patents, trademarks, etc.
B) It covers the rules of how owners transfer resources by exchanging them.
C) It specifies various offenses against the proper order of the state.
D) It covers the legal principles that apply to government agencies, bureaus, boards, or commissions.
E) It establishes rules for compensation when an owner's legal boundaries are wrongfully crossed by another.
Answer: E
Q3) Law is considered to be an informal social force.
A)True
B)False
Answer: False
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Page 3
Chapter 2: The Role of Ethics in Decision Making
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Sample Questions
Q1) For businesses,merely to observe the law is sufficient as legal regulations are flexible and adequately informed to be the only social guide for business decision making.
A)True
B)False
Answer: False
Q2) The legal requirement of honoring confidences contains both formalist and consequentialist ethical values.
A)True
B)False
Answer: True
Q3) _____ means "honesty in intent" and "honesty in fact."
A) Acting in good faith
B) Acting in due care
C) Acting in conflict of interest
D) Acting in confidentiality
E) Acting in liberty and rights of individuals
Answer: A
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Chapter 3: The Court System
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Sample Questions
Q1) Which of the following Amendments to the Constitution guarantee the right of trial by jury in both criminal and civil cases?
A) The Sixth and Seventh Amendments
B) The First and Twelfth Amendments
C) The First and Seventh Amendments
D) The Second and Fifth Amendments
E) The Ninth and Fourteenth Amendments
Answer: A
Q2) Judges who identify with _____ give great deference to the political process.
A) judicial restraint
B) judicial activists
C) judicial realists
D) judicial conservatives
E) strict activists
Answer: A
Q3) If there is no statute or case law,a court may decide a case and create law in the process.
A)True
B)False
Answer: True
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Chapter 4: Litigation
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Sample Questions
Q1) Standing to sue is determined __________.
A) by the filing of a motion in limine
B) at the discovery phase of the litigation
C) by the outcome of the litigation
D) at the outset of the litigation
E) using voir dire during jury selection
Q2) The process of requesting and transporting a prisoner from one state to another is called _____.
A) res judicata
B) garnishment
C) execution
D) ratio decidendi
E) extradition
Q3) Res judicata means that a case has been finally decided on appeal.
A)True
B)False
Q4) What is the meaning of res judicata,and what is its effect?
Q5) Why are class-action suits settled based on cost-benefit analysis?
Q6) What is a class-action suit?
Q7) Why are class-action suits popular?
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Chapter 5: Alternative Dispute Resolution
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Sample Questions
Q1) _____ occurs when a trial judge requires the disputing parties to submit to the mediation process before a complaint can be litigated formally.
A) Submission
B) Party-directed mediation
C) Evaluative mediation
D) Med-Arb
E) Court-annexed mediation
Q2) A court assumes arbitration was intended unless it can say with positive assurance that the arbitration clause was not intended to include the particular dispute.
A)True
B)False
Q3) Statutorily mandated arbitration requires a higher level of judicial review of an award than voluntary arbitration.
A)True
B)False
Q4) What are the four grounds that section 10 of the Federal Arbitration Act provides for vacating an arbitration award?
Q5) What are the advantages of using an expert rather than a judge as an arbitrator?
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Chapter 6: The Constitution
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Sample Questions
Q1) The concept of preemption applies only to federal statutes,not to the rules and regulations of federal administrative agencies.
A)True
B)False
Q2) The separation of powers between levels of government is known as ______.
A) feudalism
B) federalism
C) imperialism
D) monarchism
E) fascism
Q3) The due process clause prevents public utilities from acting in an unreasonable manner.
A)True
B)False
Q4) Briefly explain the strict scrutiny approach.
Q5) Under the minimum rationality approach,a classification must be wholly arbitrary.
A)True
B)False
Q6) What is libel?
Page 8
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Chapter 7: The Property System
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Sample Questions
Q1) What is attachment and perfection in secured transactions?
Q2) In many states,if foreclosure and auction does not produce enough money to satisfy the debt owed by the mortgagor,the creditor-mortgagee can still sue the debtor for the balance owed,called a remainder.
A)True
B)False
Q3) In the context of legal framework,which of the following statements is true about the property system?
A) The state takes ownership of resources directly as a result of legislation provided.
B) The citizens acquire resources primarily through taxation.
C) The state enforces rights when people legally have exclusive property rights in scarce resources.
D) The state primarily plans what people should do and allocates the resources.
E) The state limits and excludes any redistribution of resources through voluntary exchange.
Q4) Intangible personal property includes intellectual property.
A)True
B)False
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Chapter 8: Contract Formation
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Sample Questions
Q1) The remedy of quasi-contract generally applies only when A) there are more than three parties in a contractual agreement.
B) no actual contract exists to cover the dispute.
C) the contract is bilateral in nature.
D) no more than two parties expressly discuss the terms of their agreement.
E) implied warranties are included in a contract.
Q2) Tony's Carpets Inc.wants to charge $9.80 a yard for installing a carpet for Serenity Bookstore but accidentally states $8.90 a yard in the bid.Serenity Bookstore accepts Tony's Carpets' bid.Tony's Carpets made a ______.
A) bilateral mistake
B) unilateral mistake
C) mutual mistake
D) rescission mistake
E) contractual mistake
Q3) How are sales of interests in land covered by the statute of frauds?
Q4) A minor can disaffirm a contract and legally recover any consideration that has been given to an adult,even if the minor cannot return the adult's consideration.
A)True
B)False
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Chapter 9: Contractual Performance and Breach
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Sample Questions
Q1) Briefly explain the concepts of waiver and release.
Q2) When a party intentionally relinquishes a right to enforce a contract,it is called a(n)______.
A) agreement
B) waiver
C) breach
D) disclaimer
E) release
Q3) ______ is a level of performance below what is reasonably acceptable.
A) Substantial performance
B) Material breach
C) Complete substantial breach
D) Partial breach
E) Reasonable breach
Q4) What is a condition precedent? Briefly explain with examples.
Q5) What are the options available to nonbreaching parties to a contract when money damages are not satisfactory as a remedy?
Q6) What are consequential damages? When are they awarded by courts to nonbreaching parties?
Q7) Briefly explain impossibility of performance.
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Chapter 10: Torts Affecting Business
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Sample Questions
Q1) The purpose of compensatory damages is to
A) punish a defendant.
B) make a plaintiff whole again, at least financially.
C) punish a plaintiff for contributory negligence.
D) reward a plaintiff for voluntary assumption of risk.
E) make an example out of a defendant.
Q2) It is important to a successful assumption-of-the-risk defense that the assumption was voluntary.
A)True
B)False
Q3) How does injurious falsehood differ from defamation of character?
Q4) Many advertisers have been required to pay damages to individuals when pictures of them have been used without authorization to promote products.In such situations,which of the following torts has been committed by the advertisers?
A) assault
B) defamation
C) battery
D) invasion of privacy
E) malicious prosecution
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Chapter 11: Intellectual Property
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Sample Questions
Q1) Discuss distinctiveness as a function of a trademark.
Q2) A(n)______ is an order by a judge either to do something or to refrain from doing something.
A) penalty
B) injunction
C) actual damage
D) punitive damage
E) compensatory damage
Q3) In determining whether a particular use is a fair one,a court will consider ______.
A) the distinctiveness of the copyright
B) the amount of profit expected by the user claiming the fair use
C) the amount and substantiality of the portion used in relation to the copyrighted work as a whole
D) the royalties awarded to the inventor before using the copyright since copyright laws protect inventors
E) the degree of damage caused
Q4) Fair use of a registered trademark is allowed by the Economic Espionage Act.
A)True
B)False
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Chapter 12: International Law
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Sample Questions
Q1) GRM Fast Food Corp.,located in New York,grants Truffle Eateries,a chain of restaurants in Paris,permission to produce and sell GRM's famous pizzas.Truffle Eateries will launch GRM in Paris and sell its products.The international business arrangement of GRM Fast Food Corp.is an example of a ______.
A) foreign subsidiary
B) foreign direct investment
C) a turnkey project
D) franchise
E) direct export
Q2) By using a letter of credit,a buyer need not pay a seller for goods prior to shipment and the seller can obtain payment for the goods immediately upon shipment.
A)True
B)False
Q3) Parties involved in an international business can agree on a neutral third party to act as an arbitrator even before a dispute arises.
A)True
B)False
Q4) What are the criticisms faced by the Foreign Corrupt Practices Act?
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Chapter 13: Criminal Law and Business
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Sample Questions
Q1) How does the protection of the Fourth Amendment provide an expectation of privacy?
Q2) The jury's perspective on facts is used in preference to the professional,or perhaps biased,response of a judge.
A)True
B)False
Q3) Which of the following best defines phishing?
A) It is rummaging through the trash looking for personal information.
B) It is pretending to be financial institutions or companies in order to get individuals to reveal their personal information.
C) It is stealing credit or debit card numbers by using a special storage device when processing a card.
D) It is diverting billing statements to other locations.
E) It is stealing wallets, purses, mail, credit cards, checks, tax information, and so forth.
Q4) The grand jury attempts to determine if the accused is guilty of a crime.
A)True
B)False
Q5) What are kickbacks?
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Chapter 14: Business Organizations
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Sample Questions
Q1) How is a corporation form of organization identified depending on where it has been incorporated?
Q2) What are the drawbacks of the corporate form of organization?
Q3) Briefly explain sole proprietorship in terms of its continuity.
Q4) Which of the following is a significant trend in corporate organization and control?
A) the inclusion of personal privacy rights for corporations
B) the emergence of benefit corporations
C) a decline in the use of deferred prosecution agreements by the federal government
D) an increase in the restrictions on sole proprietorships
E) an increase in managerial control for limited partners
Q5) List the actions by a limited partner that are not considered participation in management.
Q6) Although expensive to create in comparison with other forms of businesses,the use of sole proprietorships is becoming all the more common.
A)True
B)False
Q7) Mention two advantages and two disadvantages of a partnership.
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Chapter 15: The Regulatory Process
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Sample Questions
Q1) Advisory councils consist of persons employed by an administrative agency just like the secretary and the executive director.
A)True
B)False
Q2) Which of the following is an order that an agency imposes on a violator to stop an objectionable activity and refrain the violator from any further violations?
A) consent order
B) cease and desist order
C) preliminary order
D) commission order
E) assignment order
Q3) If substantial evidence in support of a decision is present,the court will review an administrative agency's findings once again.
A)True
B)False
Q4) How do administrative agencies function to provide services?
Q5) How do administrative agencies function to provide protection to the public?
Q6) What are the criticisms of an administrative process relating to substance?
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Chapter 16: Regulating Competitionantitrust Laws
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Sample Questions
Q1) Section 2 of the Sherman Act does not regulate attempts to monopolize any part of interstate or foreign commerce.
A)True
B)False
Q2) Sherman Act cases need not satisfy an interstate commerce element to be constitutionally valid.
A)True
B)False
Q3) Some monopolies are lawful.
A)True
B)False
Q4) It now appears the Supreme Court is comfortable limiting the per se illegality analysis to vertical agreements among competitors.
A)True
B)False
Q5) The burden of proof to enjoin an activity is greater than the burden of proof to convict someone of a crime.
A)True
B)False
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Chapter 17: Financial and Securities Regulations
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Sample Questions
Q1) ______ of the Sarbanes-Oxley Act requires CEOs and CFOs to certify the accuracy of the quarterly and annual financial statements filed with the Securities Exchange Commission.
A) Section 906
B) Section 1107
C) Section 302
D) Section 802
E) Section 404
Q2) Who is a tippee?
Q3) A(n)______ is a person who learns of nonpublic information from an insider,and is generally viewed as a temporary insider.
A) underwriter
B) controlling person
C) issuer
D) tippee
E) dealer
Q4) What is the statute of limitations under Securities Act of 1934?
Q5) What are the four common exemptions from blue sky laws that have been identified?
Q6) Explain the term "waiting period" with regard to the registration of securities.
Page 19
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Chapter 18: Regulations Protecting Consumer Purchases, privacy,
and Financial Activities
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Q1) Which of the following statements is true of the limitation of the Fair Credit Reporting Act?
A) If a bank passes along any information it received from an outside source about its customer, then its credit report is not covered by the act.
B) If a bank reports only as to its own experiences, it would come under the act.
C) If a bank furnishes information about a customer related to its transactions, it would come under the act.
D) If a bank passes on information it collected from credit reporting agencies that used several sources, it would not come under the act.
E) If a bank gave its opinion as to the creditworthiness of a customer in question, it would come under the act.
Q2) What are the alternatives possible in a bankruptcy proceeding?
Q3) What is the legal recourse for a debtor in case of violations of the Fair Debt Collection Practices Act by a debt collector?
Q4) What are the Fair Debt Collection Practices Act's restrictions on collection methods of collection agencies?
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Page 20
Chapter 19: Environmental Regulation
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Sample Questions
Q1) Which of the following statements is true of the Clean Water Act?
A) It sets goals and timetables to eliminate water pollution.
B) It directs the Environmental Protection Agency to set maximum drinking water contaminant levels.
C) It mandates permits to discharge pollutants from non-point source.
D) It mandates permits for industrial, but exempts municipal, dischargers.
E) It regulates non-point source pollution.
Q2) Under the Resource Conservation and Recovery Act,a generator of wastes is obligated to
A) provide on-site disposal of the waste.
B) determine if a nonlisted waste is hazardous in terms of the chemical characteristics specified by the Solid Waste Disposal Act.
C) determine whether its wastes qualify as hazardous.
D) reduce production of new chemicals.
E) pay punitive and speculative damages to the aggrieved party.
Q3) The National Environmental Policy Act (NEPA)has made it mandatory for federal agencies to follow the conclusions of an environmental impact statement (EIS).
A)True
B)False
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Page 21
Chapter 20: Discrimination in Employment
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Sample Questions
Q1) The Health Insurance Portability and Accountability Act (HIPAA)forbids group plans and issuers from excluding an employee from insurance coverage or requiring different premiums based on the employee's health status,medical condition or history,genetic information,or disability.
A)True
B)False
Q2) What are some of the reasonable accommodations that employers can make for disabled employees?
Q3) Equal Employment Opportunity Commission guidelines allow employers to classify jobs as male or female as well as to have male and female seniority lists.
A)True
B)False
Q4) The 1991 amendments to the Civil Rights Act state that the showing of a statistically imbalanced workforce is enough in itself to establish a violation of Title VII of the Civil Rights Act.
A)True
B)False
Q5) To win a Title VII of the Civil Rights Act case,what must a plaintiff prove?
Q6) What are the advantages of suing under Section 1981 instead of Title VII?
Page 22
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Chapter 21: Employment Laws
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Q1) Clear identification of employer expectations and policies helps provide a defense against employee lawsuits if subsequent discipline or discharge of the employee becomes necessary.
A)True
B)False
Q2) In agency law,to accomplish the establishment of a new principal-third party relationship,agents
A) should keep the principal fully informed.
B) must guarantee profit from sale of goods to the principal.
C) should charge the lowest fees to the principal for the performance of the duty.
D) must avoid ratifying any contract entered by the principal.
E) must express apparent authority while entering into a contract with contractors.
Q3) A deep fryer used in a fast-food restaurant is operated by nine minors.The fryer is manually operated and the employees are required to immerse the food items in hot oil.This task was performed regularly based on the instructions provided by the store managers and senior staff members.Does the restaurant violate any rule?
Q4) Describe a trading partnership and a nontrading partnership.
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Chapter 22: Labormanagement Relationship
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Q1) What are the key provisions of the Wagner Act?
Q2) Once an employer recognizes a union-no matter how informally-the employer is bound by the recognition and loses the right to seek an election.
A)True
B)False
Q3) Which of the following statements is true of elections to certify unions?
A) They are public and open to any employee.
B) They are by secret ballot.
C) They are supervised by state-appointed labor representatives.
D) The employer decides what unit of employees is appropriate for the purposes of collective bargaining.
E) The employees decide who are entitled to vote in the elections.
Q4) The Clayton Act of 1914 was passed principally to
A) force employers to pay a minimum wage.
B) ensure shorter work weeks.
C) strengthen the antitrust laws.
D) establish the National Labor Relations Board.
E) enable management control over workers.
Q5) What are compulsory bargaining issues? How are such issues classified?
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