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Business Law Today, Standard Edition, 9th Edition Test Bank

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    1 © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 1 The Legal Environment N.B.: TYPE indicates that a question is new, modified, or unchanged, as follows. N A question new to this edition of the Test Bank. + A question modified from the previous edition of the Test Bank, = A question included in the previous edition of the Test Bank. TRUE/FALSE QUESTIONS 1. The law establishes rights, duties, and privileges that are consistent with the values of society. ANSWER: T PAGE: 2 TYPE: = NAT: AACSB Reflective AICPA Critical Thinking 2. Law includes enforceable rules governing relationships between individuals and their society. ANSWER: T PAGE: 2 TYPE: = NAT: AACSB Analytic AICPA Legal 3. A federal law that conflicts with the U.S. Constitution will be deemed unconstitutional. ANSWER: T PAGE: 5 TYPE: = NAT: AACSB Analytic AICPA Legal 4. Constitutional law includes only the U.S. Constitution.

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    2 UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ANSWER: F PAGE: 5 TYPE: = NAT: AACSB Analytic AICPA Legal

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    CHAPTER 1: THE LEGAL ENVIRONMENT 3 © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 5. A state law that conflicts with the U.S. Constitution will be deemed unconstitutional. ANSWER: T PAGE: 5 TYPE: = NAT: AACSB Analytic AICPA Legal 6. The U.S. Constitution is the supreme law of the United States. ANSWER: T PAGE: 5 TYPE: = NAT: AACSB Analytic AICPA Legal 7. Whether a law is constitutional depends on its source. ANSWER: F PAGE: 5 TYPE: = NAT: AACSB Analytic AICPA Legal 8. A state constitution is supreme within the state’s borders so long as it does not conflict with the U.S. Constitution or a federal law. ANSWER: T PAGE: 5 TYPE: = NAT: AACSB Analytic AICPA Legal 9. Uniform laws apply in all states, including those in which the laws have not been adopted. ANSWER: F PAGE: 6 TYPE: = NAT: AACSB Analytic AICPA Legal 10. Federal statutes apply to all states. ANSWER: T PAGE: 6 TYPE: = NAT: AACSB Analytic AICPA Legal 11. No state has adopted the Uniform Commercial Code in its entirety. ANSWER: F PAGE: 6 TYPE: + NAT: AACSB Reflective AICPA Legal 12. Federal administrative agencies specify the powers of Congress.

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    4 UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ANSWER: F PAGE: 7 TYPE: = NAT: AACSB Analytic AICPA Legal 13. State agency regulations take precedence over conflicting federal agency regulations. ANSWER: F PAGE: 7 TYPE: = NAT: AACSB Analytic AICPA Legal 14. The basis for the U.S. legal system is the natural law school. ANSWER: T PAGE: 9 TYPE: N NAT: AACSB Ethics AICPA Critical Thinking 15. Courts can rely on the common law as a guide to interpreting legislation. ANSWER: T PAGE: 9 TYPE: N NAT: AACSB Analytic AICPA Legal 16. Common law is a term for the law that is known to most of us. ANSWER: F PAGE: 9 TYPE: = NAT: AACSB Analytic AICPA Critical Thinking 17. A decision on a given issue by a court is not binding on an inferior court. ANSWER: F PAGE: 10 TYPE: = NAT: AACSB Analytic AICPA Legal 18. Judges use precedent when deciding a case in a common law legal system. ANSWER: T PAGE: 10 TYPE: = NAT: AACSB Analytic AICPA Legal 19. Stare decisis is a doctrine obligating judges to help persons who have failed to protect their own rights. ANSWER: F PAGE: 10 TYPE: N

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    CHAPTER 1: THE LEGAL ENVIRONMENT 5 © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. NAT: AACSB Analytic AICPA Legal 20. Courts do not depart from precedents. ANSWER: F PAGE: 10 TYPE: = NAT: AACSB Reflective AICPA Critical Thinking 21. A court may depart from a precedent if the court decides that the precedent should no longer be followed. ANSWER: T PAGE: 10 TYPE: = NAT: AACSB Reflective AICPA Critical Thinking 22. Equity is a branch of unwritten law that seeks to supply remedies of equal measure to the parties in a legal dispute. ANSWER: F PAGE: 11 TYPE: N NAT: AACSB Analytic AICPA Legal 23. A defendant is a person against whom a lawsuit is brought. ANSWER: T PAGE: 11 TYPE: = NAT: AACSB Analytic AICPA Legal 24. A plaintiff is a person against whom a lawsuit is brought. ANSWER: F PAGE: 11 TYPE: = NAT: AACSB Analytic AICPA Legal 25. Monetary damages is a remedy at law. ANSWER: T PAGE: 11 TYPE: = NAT: AACSB Analytic AICPA Legal 26. In most states, the courts no longer grant “equitable” remedies . ANSWER: F PAGE: 11 TYPE: N NAT: AACSB Analytic AICPA Legal

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    6 UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 27. A court’s direction to a party to do or to refrain from doing a particular act is a rescission. ANSWER: F PAGE: 11 TYPE: = NAT: AACSB Analytic AICPA Legal 28. Equitable remedies include injunctions. ANSWER: T PAGE: 11 TYPE: = NAT: AACSB Analytic AICPA Legal 29. How judges apply the law to specific disputes may depend in part on their personal philosophical views. ANSWER: T PAGE: 13 TYPE: = NAT: AACSB Reflective AICPA Critical Thinking 30. A substantive law creates or defines legal rights and obligations. ANSWER: T PAGE: 14 TYPE: = NAT: AACSB Analytic AICPA Legal 31 . Criminal law focuses on duties that exist between persons. ANSWER: F PAGE: 15 TYPE: = NAT: AACSB Analytic AICPA Legal 32. International law is the law of a foreign nation and varies from country to country. ANSWER: F PAGE: 17 TYPE: = NAT: AACSB Analytic AICPA Legal 33. A reference to “28 U.S.C. Section 1332” means that a federal court’s decision can be found on page 28 of section 1332 of the United States Cases . ANSWER: F PAGE: 22 TYPE: = NAT: AACSB Analytic AICPA Research

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    CHAPTER 1: THE LEGAL ENVIRONMENT 7 © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 34. Rules and regulations adopted by federal administrative agencies are compiled in the Code of Federal Regulations . ANSWER: T PAGE: 23 TYPE: = NAT: AACSB Analytic AICPA Research 35. Most state trial court decisions are not published. ANSWER: T PAGE: 23 TYPE: = NAT: AACSB Analytic AICPA Research

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    8 UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. MULTIPLE - CHOICE QUESTIONS 1. Krystal is a federal judge. Krystal’s judicial decisions are part of case law. This law includes interpretations of primary sources of law. These sources include a. administrative regulations . b. articles in law reviews and other legal journals . c. compilations summarizing court decisions on particular topics . d. legal encyclopedias . ANSWER: A PAGE: 4 TYPE: N NAT: AACSB Reflective AICPA Legal 2. Lewis is a state court judge. Like other judges, Lewis often refers to secondary sources of law for guidance. These sources include a. official comments to statutes. b. other states’ statutes. c. state constitutions. d. the U.S. Constitution. ANSWER: A PAGE: 4 TYPE: N NAT: AACSB Reflective AICPA Legal 3. 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. ANSWER: B PAGE: 4 TYPE: N NAT: AACSB Reflective AICPA Legal

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    CHAPTER 1: THE LEGAL ENVIRONMENT 9 © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 4. In Nebraska, the highest - ranking (superior) law is a. a case decided by the Nebraska Supreme Court. b. a provision in the Nebraska constitution. c. a rule created by a Nebraska state administrative agency. d. a statute enacted by the Nebraska legislature. ANSWER: B PAGE: 5 TYPE: = NAT: AACSB Reflective AICPA Legal 5. Hawaii 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 Hawaii only. d. the United States Supreme Court only. ANSWER: A PAGE: 5 TYPE: = NAT: AACSB Reflective AICPA Legal 6. The legislature of the state of Missouri enacts a new statute that sets stan dards for the liability of businesses selling defective products. This statute applies a. only in Missouri. b. only in Missouri and its border states. c. in all states. d. in all states but only to matters not covered by other states’ laws. ANSWER: A PAGE: 6 TYPE: N NAT: AACSB Reflective AICPA Legal 7. The River City Council, the Santa Clara County Board, the Texas state legislature, and the U.S. Congress enact laws. These laws constitute a. administrative law. b. case law. c. stare decisis .

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    10 UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. d. statutory law. ANSWER: D PAGE: 6 TYPE: = NAT: AACSB Reflective AICPA Critical Thinking

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    CHAPTER 1: THE LEGAL ENVIRONMENT 11 © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 8. The U.S. Congress enacts a new federal statute that imposes liability on businesses emitting significant amounts of a certain pollutant into the environment. This statute applies a. only to matters not covered by state law. b. only to those states that adopt the statute. c. to all of the states. d. to none of the states. ANSWER: C PAGE: 6 TYPE: = NAT: AACSB Reflective AICPA Legal 9. The Federal Trade Commission (FTC) is a government agency that issues rules, orders, and decisions. The Georgia state legislature enacts statutes. The Jackson County Board and the Peach City Council enacts or di nances. Administrative law includes a. all law that affects a business’s operation. b. the rules, orders, and decisions of the Federal Trade Commission. c. statutes enacted by the Georgia state legislature. d. ordinances created by the Jackson County Board and the city coun cil of Peach City, Georgia. ANSWER: B PAGE: 7 TYPE: = NAT: AACSB Reflective AICPA Legal 10. Crater Tools Company 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. c. the president, through an executive order. d. the U.S. Department of Labor, through a final order. ANSWER: A PAGE: 7 TYPE: N NAT: AACSB Reflective AICPA Legal

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    12 UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 11. The Securities Exchange Commission is an administrative agency. The chief purpose of such agencies is to a. act as liaisons between federal and state governments. b. impose uniform laws on the states. c. perform specific government functions. d. standardize laws for the executive and judicial branches. ANSWER: C PAGE: 7 TYPE: N NAT: AACSB Reflective AICPA Legal 12. The federal government and the state governments constitute the U.S. le gal system. This system is based on the legal system of a. Ancient Greece. b. England. c. France. d. the natural law school. ANSWER: B PAGE: 9 TYPE: + NAT: AACSB Reflective AICPA Legal 13. As a judge, Potter 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 PAGE: 9 TYPE: = NAT: AACSB Reflective AICPA Legal 14. Jill is an appellate court judge. In this capacity, Jill establishes a rule of law. Under the doctrine of stare decisis, the principle must be adhered to by a. all courts. b. courts of lower rank only. c. that court and courts of lower rank.

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    CHAPTER 1: THE LEGAL ENVIRONMENT 13 © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. d. that court only. ANSWER: C PAGE: 10 TYPE: = NAT: AACSB Reflective AICPA Legal 15. In Ben 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 decid ing Daphne v. Even Steven Auto Deals, Inc., , a case with similar facts. Under the doctrine of stare d e - cisis , the trial court is likely to a. allow the minor the Daphne case to cancel the contract. b. disregard the Ben case. c. order the minor in the Daphne case to cancel the contract. d. require the minor in the Daphne case to fulfill the contract. ANSWER: A PAGE: 10 TYPE: = NAT: AACSB Reflective AICPA Critical Thinking 16. Sam is a judge hearing the case of Local Co. v. National Corp. Applying the relevant rule of law to the facts of the case requires Sam to find previ ously decided cases that, in relation to the case under co n sidera tion, are a. as different as possible. b. as similar as possible. c. at odds. d. exactly identical. ANSWER: B PAGE: 10 TYPE: = NAT: AACSB Reflective AICPA Critical Thinking 17. In Sales Distribution Corp. v. Consumer Products Co. , the court decides that a precedent is incorrect or i n ap plicable. The court a. may rule contrary to the precedent. b. must apply the precedent. c. must ask a higher court to rule on the case. d. must refuse to decide the case.

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    14 UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ANSWER: A PAGE: 10 TYPE: + NAT: AACSB Reflective AICPA Legal

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    CHAPTER 1: THE LEGAL ENVIRONMENT 15 © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 18. Network Corporation files a suit against Omega, Inc., alleging that Omega breached a contract to sell Network a computer system. Network is a. the appellant. b. the appellee. c. the defendant. d. the plaintiff. ANSWER: D PAGE: 11 TYPE: = NAT: AACSB Reflective AICPA Legal 19. A state trial court has before it Eagle Manufacturing Co. v. Four Feathers Products Corp. , a case with no binding authority. The court can a. not refuse to decide the Eagle case . b. postpone deciding Eagle indefinitely. c. postpone deciding Eagle until there is binding authority. d. refuse to decide Eagle . ANSWER: A PAGE: 11 TYPE: = NAT: AACSB Reflective AICPA Legal 20. In an action against Elin, Frank obtains a remedy . This is a. an administrative agency’s enforcement of its rule. b. a principle of the law derived from earlier court cases. c. a statute enacted by a state legislature or Congress. d. the legal means to recover a right or to redress a wrong. ANSWER: D PAGE: 11 TYPE: N NAT: AACSB Reflective AICPA Legal 21. In Export Co. v. Imports, Inc., there is no precedent on which the court can base a dec i sion. The court can consider a. neither public policy nor social customs and values. b. public policy only. c. public policy or social customs and values.

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