Deck 6: Legal and Ethical Behavior

Question 1

All of the pub owners in a small college town met and decided to charge $7.99 for a burger and beer during the school year.The pub owners may be in violation of the:

A) Wheeler-Lea Act.
B) Clayton Act.
C) Federal Trade Commission Act.
D) Sherman Antitrust Act.
E) Hart-Scott-Rodino Act.

Answer 1

D

Question 2

The _____ Act requires companies to notify the government of their intent to merge.

A) Sherman
B) Clayton
C) Federal Trade Commission
D) Robinson-Patman
E) Hart-Scott-Rodino

Answer 2

E

Question 3

Identify the correct statement about the changing market conditions defense which buyers and sellers use that enable some types of price discrimination to occur.

A) The burden of such a defense is with the buyer.
B) This defense would attempt to justify the price differential based on the danger of imminent deterioration of perishable goods.
C) The seller can attempt to show that its lower price to a purchaser was made in good faith in order to meet an equally low price of a competitor, provided that this "matched price" did actually exist and was lawful itself.
D) Such a defense would attempt to show that a differential in price could be accounted for on the basis of differences in cost to the seller in the manufacture, sale, or delivery arising from differences in the method or quantities involved.
E) This defense would attempt to justify the price differential based on the obsolescence of seasonal goods.

Answer 3

B

Question 4

The Clayton Act:

A) adds to the Sherman Act by prohibiting specific practices.
B) establishes the Federal Trade Commission.
C) amends the Robinson-Patman Act.
D) requires large companies to notify the government of their intent to merge.
E) amends Section 7 of the Celler-Kefauver Antimerger Act.

Question 5

Classic Jeans has informed its retailers that they must either sell its new line of jeans for $39.99 or no longer be supplied by Classic Jeans.The retailers agree to this.Classic Jeans and its retailers are involved in:

A) violation of the Wheeler-Lea Act.
B) horizontal price fixing.
C) violation of the Lanham Act.
D) vertical price fixing.
E) an attempt to maximize profits.

Question 6

A supplier sells two identical shipments of clothing to two different retailers at different prices.This is a clear violation of the _____ Act.

A) Sherman Antitrust
B) Robinson-Patman
C) Federal Trade Commission
D) Lanham
E) Truth in Lending

Question 7

The Equal Credit Opportunity Act:

A) regulates the reporting and use of credit information; limits consumer liability for stolen credit cards to $50.
B) prohibits discrimination in credit transactions because of gender, marital status, race, national origin, religion, age, or receipt of public assistance.
C) empowers the FTC to determine rules concerning consumer warranties and provides for consumer access to means of redress, such as the "class action" suit.
D) makes it a federal crime to defraud consumers through use of the mail.
E) requires lenders to state the true costs of a credit transaction; established a National Commission on Consumer Finance.

Question 8

The three most common defenses available to suppliers charged with price discrimination are:

A) changing market conditions, meeting competition, and good faith actions.
B) ignorance of law, unprofitability of the supplier, and cost justification.
C) cost justification, changing market conditions, and meeting competition.
D) unprofitability of supplier, cost justification, and meeting competition.
E) changing market conditions, meeting competition, and ignorance of law.

Question 9

The Celler-Kefauver Antimerger Act:

A) prohibits unfair and deceptive acts and practices regardless of whether competition is injured.
B) establishes protection for trademarks.
C) defines price discrimination as unlawful (subject to certain defenses) and provides the FTC with the right to establish limits on quantity discounts.
D) amends Section 7 of the Clayton Act by broadening the power to prevent corporate acquisitions where the acquisition may have a substantially adverse effect on competition.
E) requires large companies to notify the government of their intent to merge.

Question 10

Intel sold Pentium III computer processing chips to Gateway Computer for $12 per chip.Four days earlier,before the announcement of the new Pentium IV computer processor,Intel sold the Pentium III to Dell Computer for $22 per chip.Intel may attempt to justify its prices with a:

A) meeting competition defense.
B) cost justification defense.
C) preferable customer defense.
D) good faith defense.
E) changing market conditions defense.

Question 11

Deceptive pricing occurs when retailers:

A) state that their lower prices were made in good faith in order to meet an equally low price of a competitor.
B) ban "fair trade" items from their store.
C) advertise merchandise at an artificially low price and then try to add hidden, or extra, charges.
D) tell lies about a competitor's price in an attempt to make a sale.
E) sell merchandise above the manufacturer's cap.

Question 12

_____ price fixing occurs when a retailer collaborates with the manufacturer or wholesaler to resell an item at an agreed upon price.

A) Deceptive
B) Horizontal
C) Vertical
D) Negotiated
E) Coordinated

Question 13

_____ occurs when two retailers buy an identical amount of "like grade and quality" merchandise from the same supplier but pay different prices.

A) Horizontal price fixing
B) Vertical price fixing
C) Price discrimination
D) Deceptive pricing
E) Predatory pricing

Question 14

The _____ Act prevents the marketing and selling of harmful toys and dangerous products.

A) Sherman
B) Federal Trade Commission
C) Mail Fraud
D) Child Safety
E) Fair Packaging and Labeling

Question 15

In addition to the Robinson-Patman Act,the _____ Act addresses the legality of price discrimination.

A) Trade Discrimination
B) Clayton
C) Federal Trade Commission
D) Sherman Antitrust
E) Equal Rights

Question 16

The _____ Act establishes protection for trademarks.

A) Lanham
B) Hart-Scott-Rodino
C) Sherman
D) Clayton
E) Robinson-Patman

Question 17

Resale price maintenance is another word for:

A) horizontal price fixing.
B) deceitful diversion of patronage.
C) dual price setting.
D) fair trade.
E) predatory pricing.

Question 18

When all airlines agree to set fares at the same price,they are:

A) engaging in vertical price fixing.
B) violating fair trade laws.
C) engaging in horizontal price fixing.
D) violating the Federal Trade Commission Act.
E) engaging in price discrimination.

Question 19

The Sherman Antitrust Act sought to:

A) restrict the amount of imports into the United States.
B) eliminate price differences among competing suppliers.
C) prevent unfair or deceptive advertising and selling practices within a marketing channel.
D) prevent monopolies or conspiracies that are in restraint of trade.
E) establish the first Federal "Fair Trade" Agency.

Question 20

The _____ Act makes it a federal crime to defraud consumers through use of the mail.

A) Sherman
B) Federal Trace Commission
C) Mail Fraud
D) Automobile Information Disclosure
E) Fair Packaging and Labeling

Question 21

The Sports Barn sells football helmets for PeeWee football,and a customer buys one for his son.The helmet cracks in several places as the son makes a tackle during a game later that fall,leaving the boy seriously injured.The _____ makes the retailer potentially liable.

A) implied warranty of correctness
B) Clayton Act
C) expressed warranty of merchantability
D) Robinson-Patman Act
E) implied warranty of merchantability

Question 22

In order for a deceptive advertising charge to hold up,it must be shown that:

A) there was no intent to deceive.
B) the total damage exceeded $100.
C) the consumer was misled.
D) the advertisement was paid for by multiple members of the channel.
E) competition was heightened.

Question 23

A salesperson tells a customer,"Ninety percent of the people we've sold these tires to over the past five years have gotten at least 25,000 miles of use out of them without any problems.Therefore,I can assume that you should get no less than 30,000 miles with them given the way you drive." The salesperson:

A) may be creating an expressed warranty.
B) is engaging in false advertising.
C) could never be held responsible for the tire's longevity.
D) may be creating an implied warranty of merchantability.
E) is creating a warranty of title.

Question 24

Attempts by a manufacturer to limit the geographical area in which a retailer may resell its products are called _____ restrictions.

A) geographical
B) sales
C) territorial
D) tying
E) physical

Question 25

The Magnuson-Moss Warranty Act only applies to written warranties on:

A) all products.
B) all products costing more than $5.
C) all products costing more than $15.
D) all products costing more than $50.
E) all products costing more than $100.

Question 26

The courts have interpreted this doctrine to suggest that retailers must be careful in how they sell their products.

A) The substantial performance doctrine
B) The foreseeability doctrine
C) The doctrine of collective responsibility
D) The doctrine of reasonable expectations
E) The doctrine of approximation

Question 27

_____occurs when a retail chain charges different prices in different geographic areas in order to eliminate competition in those areas.

A) vertical price fixing
B) bait-and-switch pricing
C) palm-off pricing
D) horizontal price fixing
E) predatory pricing

Question 28

Which of the following statements about dual distribution is incorrect?

A) It may have an adverse effect on manufacturer-retailer relationships.
B) It can take place when a manufacturer opens it own retail store in a market area when it feels that the current retailers handling the product line are not doing an adequate job.
C) All dual distribution arrangements are illegal.
D) It is legal for a manufacturer to manage a corporately owned vertical marketing system that competes with independent retailers that the manufacturer also supplies.
E) It occurs when a manufacturer sells to independent retailers and also through its own retail outlets.

Question 29

When a retailer represents merchandise as being made by a firm other than the true manufacturer,it is said to be engaged in:

A) palming off.
B) product substitution.
C) gray marketing.
D) overt faking.
E) a bait-and-switch.

Question 30

The question of who makes the best pizza came to blows when Pizza Hut sued Papa John's over Papa John's slogan "Better ingredients,better pizza." This slogan is known as:

A) overstating.
B) guaranteeing.
C) deceptive advertising.
D) puffery.
E) understating.

Question 31

Identify the incorrect statement about expressed warranties.

A) They are the result of the interaction between the retailer and the customer.
B) They may be either written into the contract or verbalized.
C) They are based on custom, norms, or reasonable expectations.
D) They can cover all characteristics or attributes of the merchandise or only one attribute.
E) An expressed warranty can be created without the use of the words warranty or guarantee.

Question 32

Bait-and-switch advertising:

A) is illegal for all products retailing over $10. However, under the FTC Act, bait-and-switch is legal if puffery was also included in the advertisements and the product price is under $10.
B) does not apply to services.
C) is a form of deceitful diversion of patronage.
D) is permissible if interstate commerce is not involved.
E) occurs when a product is advertised at an unrealistically low price to serve as "bait" and then the salesperson tries to "switch" the customer to a higher-priced product.

Question 33

Three product constraints that influence a retailer's product decisions are:

A) product safety, express warranties, and implied warranties.
B) product safety, trademarks, and warranties.
C) product safety, product liability, and warranties.
D) product liabilities, warranties, and trademarks.
E) trademarks, product liabilities, product safety

Question 34

All of the following EXCEPT _____ are included in the top categories for counterfeit products sold in the United States.

A) video games
B) apparel
C) handbags
D) watches
E) golf clubs

Question 35

This new law was the aftermath of a public outcry over imports of tainted toothpaste and pet food,as well as the infamous importation of lead-laden toys from Asia,especially China.

A) The Consumer Protection from Unfair Trading Regulations Act
B) The ADA Amendments Act
C) The Emergency Economic Stabilization Act
D) The Consumer Product Safety Improvements Act
E) The Economic Cooperation Framework Agreement Act

Question 36

Identify the incorrect statement about an implied warranty of merchantability.

A) The notion of implied warranty applies only to new merchandise.
B) Every retailer selling goods makes an implied warranty of merchantability.
C) By offering the goods for sale, the retailer implies that they are fit for the ordinary purpose for which such goods are typically used.
D) Because of the potential legal liability that accompanies an implied warranty, many retailers will expressly disclaim at the time of sale any or all implied warranties and seek to mark a product "as is."
E) Some retailers will not be able to avoid implied warranties of merchantability.

Question 37

Nike engaged in dual distribution when it began:

A) to sell through its own retail outlets as well as independent retailers.
B) to sell to retailers competing with its existing retailers.
C) to encourage two different distributors to serve the same retailer.
D) to offer two different prices to retailers, based on volume purchased.
E) to produce private label brands for the retailers currently selling Nike shoes.

Question 38

Burger Blaster claims on its website that it uses only the best beef in making its burgers,unlike Burger Barn,its largest competitor.Actually,Burger Blaster and Burger Barn buy exactly the same type of beef from the same wholesaler,and Burger Blaster's management knows it.As a result of Burger Blaster's claims,Burger Barn's sales fall.Burger Blaster is probably guilty of:

A) deceitful diversion of patronage.
B) bait advertising.
C) deceptive advertising.
D) puffery.
E) deceptive sales practices.

Question 39

Entertainment City advertised,in its Christmas circular,a portable compact disc player on sale for $45.Sales clerks were informed that they were to attempt to persuade customers interested in the "on-sale" CD player to purchase the higher quality,$115 model.In addition,no commission will be paid on the lower priced CD player.Entertainment City is engaged in the practice of:

A) palming off.
B) legal advertising.
C) sale advertising.
D) puffery.
E) bait-and-switch advertising.

Question 40

When the customer relies on the retailer to make a selection of goods to serve a particular purpose,it is termed a(n):

A) implied warranty of fitness.
B) implied warranty of service.
C) implied warranty of quality.
D) implied warranty of merchantability.
E) implied warranty of sale.

Question 41

A _____ agreement exists when the supplier offers the retailer the exclusive distribution of a merchandise line or product,and in return the retailer agrees not to handle competing brands.

A) one-way exclusive
B) two-way exclusive
C) three-way exclusive
D) tying
E) full-line

Question 42

_____ restrict the sale of certain products on Sundays.

A) Blue laws
B) Unfair trade practices
C) Fair trade laws
D) Sabbath codes
E) Shut out laws

Question 43

When Taco Bell requires its franchisees to purchase all their raw materials and supplies from the franchisor in order for the franchisor to maintain quality control,it is:

A) engaging in an illegal exclusive distribution agreement.
B) enforcing an illegal tying agreement.
C) employing a dual distribution agreement.
D) violating the franchisee's right to fair trade.
E) enforcing a tying agreement, which courts generally consider legal as long as there is sufficient proof that these arrangements are necessary to maintain quality control.

Question 44

Which of the following statements is FALSE?

A) An implicit code of ethics is learned as employees become socialized into the organization and the corporate culture of the retailer
B) Ethics are a set of rules for moral human behavior
C) All retailers must have a written explicit code of ethics
D) When buying merchandise, the retailer can face at least four ethical dilemmas; these relate to product quality, sourcing, slotting fees, and bribery
E) Ethical standards can influence the retailer-employee relationship in three ways: misuse of company assets, job-switching, and employee theft

Question 45

When a group of competing retailers establishes a fixed price at which to sell their merchandise,they are engaging in horizontal price fixing.

Question 46

Most federal laws affecting retailing seek to "promote competition."

Question 47

As a rule,truly one-way exclusive dealing arrangements between vendors and retailers are:

A) legal.
B) illegal.
C) illegal only if they involve a chain store.
D) legal in every state but Minnesota.
E) illegal if they involve a weak manufacturer.

Question 48

Which of the following laws prohibit retailers from operating in certain locations and require building and sign specifications to be met?

A) Zoning laws
B) Franchise laws
C) Blue laws
D) Taxing laws
E) Canon laws

Question 49

The Supreme Court ruled that a "rule of reason" standard should apply to fair trade agreements,weighing their anticompetitive effects against their benefits.

Question 50

Which of the following statements about one-way exclusive-dealing arrangements is true?

A) Truly one-way arrangements are illegal.
B) They occur when a supplier offers a retailer unshared distribution of merchandise if the retailer agrees to do something in return for the manufacturer.
C) These agreements violate the Clayton Act if they substantially lessen competition.
D) The retailer does not agree to do anything in particular for the supplier.
E) They violate the Clayton Act if they tend to create a monopoly.

Question 51

The retailer needs to understand the potential legal and ethical constraints within each country in which it does business.

Question 52

The specific content of these laws varies,but usually they prohibit the retailer from seeking wrongful advantages from vendors or selling merchandise below cost with the intent of using profits from another geographic area or from cash reserves to destroy or hurt competition.

A) Taxing laws
B) Unfair trade practices laws
C) Zoning laws
D) Franchise laws
E) Blue laws

Question 53

Pricing laws influence retailers in determining what price they should pay for a product.

Question 54

_____ regulate the importing and exporting activities of American firms.

A) Tying agreements
B) Trade agreements
C) Zoning laws
D) Unfair trade practices
E) Blue laws

Question 55

_____ is an unwritten but well understood set of rules or standards of moral responsibility.

A) Ethical regulations
B) Explicit codes of ethics
C) Implicit codes of ethics
D) Moral laws
E) Ethical standards

Question 56

Which of the following is NOT an ethical dilemma that a retailer faces when buying merchandise?

A) The manufacturer's country of origin
B) Whether to accept a slotting fee
C) The issue of product quality
D) The source of the merchandise
E) Whether to use or accept a bribe

Question 57

Horizontal price fixing violates Section 1 of the Clayton Act.

Question 58

Green River Ordinances restrict selling:

A) via the Internet.
B) environmentally unsafe products.
C) door-to-door.
D) obscene material.
E) dangerous products.

Question 59

A tying agreement:

A) ties a retailer to multiple wholesalers.
B) is an agreement whereby a retailer forces a seller to offer only their strongest products or have all its products be excluded from the retailer's store.
C) ties one exclusive territory to the sale of one product.
D) requires that a retailer only buy merchandise from a certain group of suppliers.
E) exists when a seller with a strong product or service requires a buyer to purchase a weak product or service as a condition for buying the strong product or service.

Question 60

Vertical price fixing is also referred to as resale price maintenance or "fair trade."

Question 61

The Federal Trade Commission's main concern with deceptive advertising is not with the intent of the advertiser,but whether the consumer was misled by the advertising.

Question 62

All forms of price discrimination are illegal.

Question 63

In recent years,the practice of counterfeiting trademarked products has had very little impact on U.S.firms.

Question 64

Retailers are the only channel members responsible for insuring product safety and reporting unsafe products.

Question 65

Fair trade laws were considered violations of Section 1 of the Sherman Antitrust Act.

Question 66

The illegality of price discrimination is clear-cut and retailers no longer have to fear being discriminated against.

Question 67

In order for price discrimination to be considered illegal,it must involve a retailer and a manufacturer operating in the same state.

Question 68

Price discrimination occurs when two retailers buy identical amounts of "like grade and quality" merchandise from the same supplier but pay different prices.

Question 69

Omitting key facts during a sales presentation is considered a type of deceptive sales practice.

Question 70

Because retailers usually do not produce the goods they offer for sale,they are not responsible for the safety of these products.

Question 71

A retail chain's practice of charging different prices in different geographical areas in order to eliminate competition is known as predatory pricing.

Question 72

Some forms of deceptive advertising are considered legal.

Question 73

Generally,predatory pricing charges are difficult to prove in federal court.

Question 74

"Like grade and quality" has been interpreted by the courts to mean identical physical and chemical properties.

Question 75

To collect damages under charges of deceitful diversion of patronage,a retailer must demonstrate that actual damage to its business has occurred.

Question 76

Federal laws attempt to assure a meaningful disclosure of all credit terms,so that consumers will be able to compare various credit terms available.

Question 77

Price discrimination is often justifiable,if it can be shown that there was a significant change in market conditions.

Question 78

The term "palming off" refers to when a retailer sells "gray market" products.

Question 79

Bait-and-switch advertising is a form of a deceptive sales practice.

Question 80

The Consumer Product Safety Act specifies the retailer's responsibilities in monitoring the safety of consumer products.