Question 1

Vanna and many other consumers complain to the Federal Trade Commission (FTC)that a Whoopie Wonders Company ad is deceptive.The FTC's first step is to

Accepted Answer

The FTC's first step when receiving a complaint of a deceptive ad is to investigate whether the claims made in the ad are truthful and not misleading. Only after an investigation can the FTC take further action, such as drafting a formal complaint or issuing a cease-and-desist order. Therefore, option B is the best choice.

Question 2

Paychex Loan Company extends credit in the ordinary course of its business.Under the Truth-in-Lending Act,Paychex must inform potential borrowers of

Accepted Answer

Under the Truth-in-Lending Act, lenders like Paychex are required to disclose their own credit terms to potential borrowers to ensure transparency and allow consumers to compare terms with other lenders.

Question 3

Like other manufacturers and sellers,Happy Household Products Company packages its products with labels.Under federal law,such labels must be

Accepted Answer

Labels must provide accurate information to the consumer in easily understandable language, as required by federal law. While being visually appealing may be desirable, it is not a legal requirement.

Question 4

Creditworthy Loan Company extends credit in the ordinary course of its business.Under the Truth-in-Lending Act,which is the key federal statute regulating the credit and credit-card industries,Creditworthy must inform potential borrowers of

Accepted Answer

Under the Truth-in-Lending Act, Creditworthy Loan Company must disclose its own credit terms to potential borrowers, not those offered by other lenders or comparative prices for goods. The borrower's credit scores may also be considered in the lending process, but this is not required to be disclosed under the Act.

Question 5

Kristen receives unsolicited merchandise in the mail.Kristen

Accepted Answer

According to the Federal Trade Commission's rules on unsolicited merchandise, Kristen may keep the merchandise without any obligation to the sender. The sender cannot demand payment or ask for the merchandise to be returned.

Question 6

GR8 Fashion,Inc.,complains to the Federal Trade Commission (FTC)about an ad broadcast by Hott Clothes Company,GR8's competitor.The FTC investigates and concludes that the ad is deceptive.The FTC's next step is to

Accepted Answer

The FTC's next step after concluding that an ad is deceptive is to draft a formal complaint against the company responsible for the ad.

Question 7

Sweet Treats,Inc.,wants to market a new snack food.On the product's label,standard nutrition facts are

Accepted Answer

Standard nutrition facts are required on the label of any packaged food product.

Question 8

Upson Down Company sells its wares to consumers over the Internet.Upson's site includes an on-screen notice indicating its refund and return policies,where its business is physically located,its legal name,and other details.This is

Accepted Answer

California state law requires online businesses to disclose specific information, including refund and return policies, business location, and legal name, to protect consumers.

Question 9

Essential Foods Corporation makes and markets a variety of processed food products.The federal agency responsible for enforcing health regulations concerning food is

Accepted Answer

The Food and Drug Administration (FDA) is the federal agency responsible for enforcing health regulations concerning food.

Question 10

Tory borrows $10,000 from USA National Bank to remodel a room in her home.This transaction is subject to

Accepted Answer

The Truth-in-Lending Act requires lenders to disclose the terms and conditions of a loan, including the finance charge and annual percentage rate (APR). Since Tory is borrowing money from a bank, this law would apply to her loan.

Question 11

In the ordinary course of business,Xtra Charge Company sells goods to Yvon and other consumers on credit under installment sales contracts that typically require at least one year of monthly payments.Xtra does not disclose all of the credit terms to its customers.This practice is most likely to result in

Accepted Answer

The answer of In the ordinary course of business,Xtra Charge...

Question 12

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

Accepted Answer

The primary responsibility to ensure safe food and drugs lies with the Food and Drug Administration (FDA), which is a federal agency responsible for regulating and supervising the safety of food, drugs, and medical devices. While the businesses selling the products (Corner Market and Delite Food & Drug Store) are also responsible for ensuring they are selling safe products, the FDA has the ultimate responsibility to protect consumers from harm. Additionally, while consumers have some responsibility to ensure they are making informed choices, they should be able to trust that the food and drugs they purchase are safe and meet acceptable standards, which is why the FDA is tasked with regulating these products. The Federal Trade Commission has jurisdiction over making sure advertisements for these products are truthful and not misleading.

Question 13

Penny Stock Company faxes ads to Quality Personnel Corporation and other businesses without the recipients' permission.This is

Accepted Answer

Faxes sent without the recipients' permission are a violation of the Telephone Consumer Protection Act (TCPA) and are illegal. It can result in penalties for the sender.

Question 14

To generate sales,Yakkity-Yak,Inc.,uses phone solicitation.Under federal law and Federal Trade Commission regulations,in soliciting business,Yakkity-Yak's telemarketers must

Accepted Answer

The answer of To generate sales,Yakkity-Yak,Inc.,uses phone solicitation.Under federal law...

Question 15

Fun-E Products,Inc.,makes and sells toys.The government agency that has the authority to remove a potentially hazardous toy from the market is

Accepted Answer

The Consumer Product Safety Commission is responsible for protecting the public from unreasonable risks of injury or death associated with consumer products, including toys. If a potentially hazardous toy is found on the market, the CPSC has the authority to remove it from sale and issue a recall. The other government agencies listed do not have jurisdiction over toy safety.

Question 16

Ron signs a contract with Sam,a door-to-door salesperson for Tutors,Inc.,to buy a foreign-language course.To cancel the contract,Ron has up to

Accepted Answer

The Federal Trade Commission's Cooling-Off Rule provides a three-day cancellation period for door-to-door sales of more than $25. Since Ron signed a contract with a door-to-door salesperson, he has up to three days to cancel the contract without penalty.

Question 17

Brad borrows $20,000 from Citizens Bank to repair his home and to buy a car.Brad buys a stereo from Deep Discount Store in a transaction financed by Deep.If these parties are subject to the Truth-in-Lending Act,Regulation Z applies to

Accepted Answer

The Truth-in-Lending Act and Regulation Z apply to consumer loans and credit transactions, including retail installment sales. Therefore, in this scenario, Regulation Z applies to all three transactions: the car loan, the home repair loan, and the retail installment sale for the stereo.

Question 18

Special Roast Coffee,Inc.,processes and sells a variety of coffee products.Special Roast's product packages must include

Accepted Answer

The contents' net quantity is required by law to be included on food packaging for consumer information and safety. The other options are not necessary or relevant information for the packaging of Special Roast's coffee products.

Question 19

Steel Tool Company makes and sells tools.One of the tools is believed to be hazardous.The appropriate government agency may require Steel to

Accepted Answer

The appropriate government agency may require Steel to remove the hazardous tool from the market to ensure the safety of consumers. Exporting the tool or increasing the price to cover potential damages is not a solution to the problem, as it does not address the hazard itself. Reducing the price to indicate the hazard to consumers may not be effective in preventing injuries or damage, and could potentially lead to legal issues if the tool was sold without proper warning or labeling.

Question 20

Travel Tours Company faxes ads to Uri and other individual consumers without the recipients' permission.This is subject to

Accepted Answer

The answer of Travel Tours Company faxes ads to Uri...

Quiz 40: Consumer Law

Vanna and many other consumers complain to the Federal Trade Commission (FTC) that a Whoopie Wonders Company ad is deceptive.The FTC's first step is to