Deck 7: Consumer Durables: the Personal Auto

Question 1

The Mail Order Merchandise Rule covers

A)all purchases by mail,voice phone,fax or the Internet.
B)only purchases by mail,voice phone and fax.
C)only purchases by mail and voice phone.
D)only purchases by mail.

Answer 1

all purchases by mail,voice phone,fax or the Internet.

Question 2

A warranty of merchantability means that

A)the buyer has the right to expect that the good is of the same quality as similar goods in its class.
B)the good should prove suitable for the purpose it was purchased.
C)the buyer should pay no more for the good than must be paid for similar goods in its class.
D)within a period of time immediately following the sale of the good there is a money-back guarantee if not fully satisfied.

Answer 2

the buyer has the right to expect that the good is of the same quality as similar goods in its class.

Question 3

According to Internet Fraud Watch,the most common form on Internet fraud involves

A)auto sales.
B)auctions.
C)Internet service providers.
D)credit card sales.

Answer 3

auctions.

Question 4

The statement,"This is the best buy in town," is an example of

A)a limited warranty.
B)a full warranty.
C)an express warranty.
D)puffery.

Question 5

Net replacement cost is equal to

A)actual market value.
B)trade-in value.
C)new market value
D)replacement cost less the market value of the trade-in.

Question 6

The primary difference between a "warranty" and a "guarantee" is that

A)a warranty is in writing;whereas,a guarantee is only a verbal agreement.
B)a warranty is a legal agreement;whereas,a guarantee is a non-enforceable understanding between a buyer and seller.
C)a warranty lasts longer than a guarantee.
D)there is no difference between a warranty and a guarantee.

Question 7

An "as is" sticker on a car indicates that

A)the car is in the condition one would expect it to be.
B)the mechanical condition of the auto has been accurately represented by the dealer.
C)you are completely responsible for any defects.
D)that the dealer has not made any repairs to the traded-in vehicle.

Question 8

Written warranties are regulated by Congress under the

A)Consumer Protection Act of 1970.
B)Magnuson-Moss Warranty Act of 1975.
C)Antitrust Improvements Act of 1978.
D)Robinson-Patman Act of 1936.

Question 9

A financial intermediary that functions as an escrow service

A)holds the buyers payment until the goods arrive and the buyer approves the payment.
B)holds the buyers payment until appropriate state taxes are paid.
C)holds the goods until it receives payment from the buyer.
D)holds the goods until appropriate state taxes are paid.

Question 10

A warranty of merchantability promises that

A)the good is of generally of the same quality as similar goods.
B)you can receive your money back if your are displeased with the good.
C)there warranty is limited.
D)the product carries a full warranty.

Question 11

Which of the following statements is false?

A)An express warranty may not limit the benefits of an implied warranty.
B)All products carry an implied warranty,unless they are sold "as is."
C)Puffery is illegal.
D)A full warranty provides lemon protection.

Question 12

An express warranty

A)must be oral in nature.
B)must be written in nature.
C)represents a contractual agreement between the buyer and seller.
D)expires after a short period of time.

Question 13

A "full warranty"

A)means that all of the component parts receive the same protection.
B)means those parts covered by the "full warranty" receive what is called "lemon protection."
C)means the warranty covers the product's full or complete service life.
D)can be defined in whatever way the manufacturer wishes.

Question 14

An "express" warranty

A)must be in writing.
B)will include only promises made by the manufacturer.
C)will include statements of fact and promises made by both the manufacturer and the retailer.
D)will include only oral promises made at the time of the sale by the retailer.

Question 15

A consumer durable is strictly defined as

A)any good that provides consumer benefits over a period of at least one year.
B)any good that provides consumer benefits over a period of at least five years.
C)any good that provides consumer benefits over the owner's lifetime regardless of the time period.
D)any good that can be used more than once.

Question 16

When you purchase a product that is sold "as is," the product is

A)subject to the guarantees as stated in a written document.
B)not covered by either an implied nor express warranty.
C)only covered by an implied warranty.
D)provided lemon protection.

Question 17

About what percentage of the household budget is spent on consumer durables and the operation of those consumer durables?

A)10%
B)25%
C)45%
D)65%

Question 18

If a product is sold "as is"

A)it is covered by neither express nor implied warranties.
B)it is not covered by an express warranty,but is covered by an implied warranty.
C)it is not covered by an implied warranty,but can still be covered by an express warranty.
D)it can still be covered by both express and implied warranties.

Question 19

According to the Mail Order Merchandise Rule the sender

A)may extend shipment beyond 30 days as long as you are notified.
B)may substitute similar or more expensive goods in place of the goods you have ordered.
C)may not extend shipment beyond 30 days,unless your consent is obtained.
D)must reduce the price of goods ordered by 10% if the shipment is extended beyond 30 days.

Question 20

An "implied" warranty will consist of

A)both a warranty of merchantability and a warranty of fitness for purpose.
B)only a warranty of merchantability.
C)only a warranty of fitness for purpose.
D)neither a warranty of merchantability nor a warranty of fitness for purpose.

Question 21

The price that the manufacturer charges the dealer for a new car is the

A)invoice price.
B)base price.
C)sticker price.
D)dealer price.

Question 22

Interest payments on an auto loan

A)are partially tax-deductible until year 2010.
B)are not tax-deductible.
C)are fully tax-deductible.
D)are only tax-deductible in the year the loan is repaid.

Question 23

The cost of operations includes

A)all variable costs.
B)all fixed costs.
C)all auto expenses.
D)the cost of finance.

Question 24

The invoice price of a new car is the

A)base price the dealer pays the manufacturer.
B)base price of the car without options.
C)retail price of the car before discounts.
D)retail rice after discounts.

Question 25

It is likely that the longer the time between trade-ins,

A)the higher is your average annual depreciation.
B)the higher is your average annual total cost of operations.
C)the lower is your average annual cost of operations.
D)the lower is your average annual cost of ownership.

Question 26

In most situations,it is inadvisable to purchase a service contract because

A)the product is already covered under an extended warranty.
B)of "lemon" protection guaranteed under state law.
C)serious problems will be covered under your homeowners' insurance protection.
D)the cost exceeds the expected benefits.

Question 27

"Lemon protection" implies that

A)if the consumer is dissatisfied with the product,the consumer may return the product for a full refund within a year of purchase.
B)if the product is defective,the consumer may return the product at any time for a full refund.
C)if the defective product cannot be repaired after a reasonable number of attempts,the consumer is entitled to either a replacement or refund.
D)producers are protected from the unwarranted return of merchandise by negligent consumers.

Question 28

The greatest annual depreciation in the market value of new cars occurs in the

A)first year of ownership.
B)third year of ownership.
C)sixth to seventh year of ownership.
D)tenth year of ownership when the market value drops to zero.

Question 29

Which of the following does the Do Not Call List not prohibit?

A)Calls from retailers you do not have a business relationship with
B)Calls from telemarketers
C)Telemarketers blocking caller Ids
D)Calls for charitable donations

Question 30

Auto ownership costs

A)are fixed costs.
B)are variable costs.
C)include all auto expenses.
D)include only those auto expenses directly related to usage.

Question 31

You can minimize the average annual depreciation on your car by

A)trading the old car each year for a new model.
B)trading in the old car every three years for a new model.
C)extending the holding period.
D)choosing the loan with the lowest APR.

Question 32

Interest payments on a home equity loan,the proceeds of which are used to finance the purchase of an automobile

A)are partially tax-deductible until year 2010.
B)are not tax-deductible.
C)are fully tax-deductible.
D)are only tax-deductible in the year the loan is repaid.

Question 33

Car dealers often suggest that you carry credit life insurance.Credit life insurance

A)is often a good buy,since lenders are willing to provide it at a small additional cost.
B)pays the survivors the cost of the car in the event of the borrowers death.
C)is unnecessary high-cost insurance.
D)can be required by lenders in all states.

Question 34

The sticker that is commonly found on the windows of new cars is known as the

A)Monterey sticker.
B)FTC sticker.
C)Monroney sticker.
D)NADA sticker.

Question 35

A "limited" warranty

A)does not cover all of the product's component parts.
B)must satisfy specific requirements set down by law.
C)is any warranty that is not a "full" warranty.
D)must last less than one year.

Question 36

The Federal Trade Commission has found that low-interest dealer financing

A)usually benefits the consumer.
B)violates federal credit laws.
C)has often been denied single females.
D)is often provided in place of the typical dealer discount.

Question 37

If a new car loan and a home equity loan carry identical interest rates and the borrower itemizes deductions,

A)the home equity loan is preferred because the interest payment is tax-deductible.
B)the auto loan is preferred because the interest payment is tax-deductible.
C)neither is preferred because the interest payments on both are tax-deductible.
D)neither is preferred because neither has deductible interest payments.

Question 38

Monroney sticker price indicates

A)the invoice price for the car.
B)the base price,manufacturers' installed options and the manufacturers' suggested retail price.
C)the wholesale price of a trade-in.
D)the N.A.D.A.recommended retail price on a used car.

Question 39

Which of the following is not a cost of ownership?

A)Insurance
B)Sales and titling
C)Maintenance
D)Finance charges

Question 40

Which one of the following auto expenses represents a cost of operations?

A)Loan payments
B)Gasoline
C)Depreciation
D)Sales tax and titling

Question 41

Which of the following statements concerning auto leasing is false?

A)Auto leasing for personal use provides significant tax benefits.
B)Auto leasing can hold down your up-front auto costs.
C)Auto leasing can hold down your monthly payments.
D)The cost of the lease will include financing costs and depreciations costs.

Question 42

You have been considering using the available mass transit to get to work.A bus ticket to travel the 10 miles from your home to your place of employment costs $2.You have calculated the cost of ownership of and the cost of operations for the auto you are presently using to commute.These are,respectively,45 cents per mile and 13 cents per mile.Accordingly,if you are interested in reducing your current expenses,you should consider

A)using mass transit,only if the auto is not needed for other purposes than commuting.
B)using mass transit under all circumstances,because the total cost of ownership and operations exceeds the cost of using mass transit.
C)using mass transit under all circumstances,because the cost of ownership exceeds the cost of using mass transit.
D)using mass transit under all circumstances,because the cost of operations exceeds the cost of using mass transit.

Question 43

After reviewing the household budget,you estimate the following auto costs
Ownership cost per mile $ .30
Operating cost per mile .15
Total cost per mile .45
The marginal cost of driving your car another mile is therefore

A)$ .30.
B).15.
C).45.
D).90.

Question 44

Car rental leases are either "open-end" or "closed-end." The basic difference between the two is that

A)monthly payments are variable under the closed-end lease,but fixed under the open-end lease.
B)monthly payments are variable under the open-end lease,but fixed under the closed-end lease.
C)with a closed-end lease you may be liable for additional payments if the resale price of the auto is less than estimated in the lease agreement.
D)with an open-end lease you may be liable for additional payments if the resale value of the auto is less than estimated in the lease agreement.

Question 45

Which of the following is not a relevant cost in the lease-buy decision?

A)Gasoline consumption
B)Excess mileage charge
C)Disposition charge
D)Capitalized cost reduction

Question 46

You have been considering using the available mass transit to get to work.A bus ticket to travel the 10 miles from your home to your place of employment costs $2.You have calculated the cost of ownership of and the cost of operations for the auto you are presently using to commute.These are,respectively,45 cents per mile and 23 cents per mile.Accordingly,if you are interested in reducing your current expenses,you should consider

A)using mass transit,only if the auto is not needed for other purposes than commuting.
B)using mass transit under all circumstances,because the total cost of ownership and operations exceeds the cost of using mass transit.
C)using mass transit under all circumstances,because the cost of ownership exceeds the cost of using mass transit.
D)using mass transit under all circumstances,because the cost of operations exceeds the cost of using mass transit.

Question 47

Which of the following statements concerning auto lemon laws is false?

A)Nearly all states have auto lemon laws.
B)The owner usually is entitled to protection under the lemon laws if the defects cannot be repaired after 30 days in the repair shop.
C)The owner usually is entitled to protection under the lemon laws if the defects cannot be repaired within 30 days of the initial complaint.
D)Possible remedies under lemon laws include a new car or a full refund.

Question 48

Which of the following is likely to have a higher implicit cost when purchasing instead of leasing?

A)Licensing costs
B)Annual depreciation
C)Lost interest on the up-front payments
D)Disposition charge

Question 49

One common characteristic of open-end leases is that

A)the length of the lease may be automatically extended by the lessee.
B)the total cost of the lease remains unknown until the end of the leasing period.
C)the monthly payments are variable and open-ended.
D)all of the above are common characteristics of open-end leases.

Question 50

Consumer durables give rise to multiple entries on the household budget.

Question 51

The cost of ownership

A)is a sunk cost.
B)is a fixed cost.
C)includes financial costs.
D)All of the above answers are correct.

Question 52

When a closed-end lease expires,

A)you simply walk away because there are never any additional charges.
B)you may have to pay an additional amount if the resale value of the car is less than anticipated.
C)you may have to pay additional charges for excess mileage and damage to the vehicle.
D)ownership of the car is transferred to the consumer.

Question 53

A seller of mail order merchandise must get your approval for delaying a shipment more than 30 days or refund you your money.

Question 54

A check is the most secure form of payment for purchases on the Internet

Question 55

In a mediation

A)the parties to the dispute attempt to their own agreement.
B)the decision of a third party such as a judge is binding.
C)the decision of a third party such as a judge is non-binding.
D)the decision of a third party such as a judge can be binding or non-binding.

Question 56

Under a "secret warranty" the owner receives reimbursement for defects only if he or she

A)promises not to tell other owners.
B)complains to the dealer or manufacturer.
C)enters arbitration over the defect.
D)brings the dealer or manufacturer to court.

Question 57

The "gross capitalized cost" is supposed to most closely represent

A)the sticker price on the leased car.
B)the trade-in value of the leased car.
C)the interest payments on the lease.
D)the negotiated price for the car.

Question 58

"Arbitration" is an industry term for

A)negotiations on the sale price of a car.
B)calculating finance charges on an auto lease.
C)calculating cost reductions on an auto lease.
D)settling disputes through the decision of an impartial third party.

Question 59

A "capitalized cost reduction" on an auto lease

A)is positively related to your monthly payments.An increase in the capitalized cost reduction will increase the size of your monthly lease payments.
B)may be no more than three times your monthly lease payment
C)is an advanced payment on the lease.
D)is equal to the difference between the actual resale value at the expiration of the lease and the estimated resale value.

Question 60

The Consumer Leasing Act of 1977

A)places a statutory limit on your monthly payments.
B)prohibits open-end leases.
C)requires the leasing company to disclose specific information about the lease in writing.
D)Does all of the above.

Question 61

A "full" warranty means you are entitled to full remedies.

Question 62

The term "lemon protection" means you can force the seller into binding arbitration.

Question 63

The "invoice price" is generally the price the auto manufacturer charges the dealer.

Question 64

A "limited" warranty means the warranty is for a limited period of time.

Question 65

Any warranty that does not meet the standards set down in law for a full warranty must be labeled a limited warranty.

Question 66

Service contracts generally represent a cost-saving method that reduces your cost of operations.

Question 67

An extended warranty is preferable to a service contract.

Question 68

A "full" warranty means the warranty covers the product for its full service life.

Question 69

Your best auto buy is typically a two- to three-year-old used car.

Question 70

If a buyer relies upon a seller to select a product for an intended purpose,there is an implied warranty that the seller's selection will prove suitable.

Question 71

The Magnuson-Moss Warranty Act of 1975 regulates express written warranties.

Question 72

When a good is sold "as is," it does not carry an implied warranty.

Question 73

Under an implied warranty,consumers have a right to demand their money back if they are dissatisfied with the product for any reason.

Question 74

Puffery such as,"This is a great product!" provides an implied warranty.

Question 75

Express warranties are not now regulated under federal law.

Question 76

A warranty of merchantability means that the buyer has a right to expect that the good performs as expected.

Question 77

An express warranty must be in writing.

Question 78

Under a full warranty,you may request a replacement or a refund after the dealer has had a reasonable number of attempts to fix the product and has failed to do so.

Question 79

"Lemon protection" means that under certain circumstances consumers may return a product and get their money back.

Question 80

A guarantee usually provides better consumer protection than a warranty.