Question 1

All of the following are TRUE about the role of federal regulatory agencies in business EXCEPT they

Accepted Answer

Federal regulatory agencies influence many business activities and cover product liability, safety, and the regulation or deregulation of public utilities. Usually, they have the power to enforce specific laws and have some discretion in establishing operating rules and regulations to guide certain types of industry practices. Because of this discretion and overlapping areas of responsibility, confusion or conflict regarding which agencies have jurisdiction over which activities is common.

Question 2

Weight Science Inc. advertises a miracle pill that can help people lose weight. However, many customers have complained that they actually gained weight when they took this pill as directed. Even though the Federal Trade Commission (FTC) issues a complaint about this issue, Weight Science Inc. continues to sell the weight loss pill. Based on the customer complaints and Weight Science's reaction, what will the FTC most likely do?

Accepted Answer

In this scenario, the FTC is most likely to issue a cease-and-desist order, which is an order for the business to stop doing whatever has caused the complaint. In such cases, the charged firm can appeal to the federal courts to have the order rescinded. However, the FTC can seek civil penalties in court, up to a maximum penalty of $10,000 a day for each infraction, if a cease-and-desist order is violated.

Question 3

Ricardo manages a team that completes road construction projects for his state. What agency would Ricardo most likely work with to ensure the safety of his workers and investigate any infractions?

Accepted Answer

In this scenario, Ricardo would most likely work with the Occupational Safety and Health Administration (OSHA), which develops policy to promote worker safety and health and investigates infractions.

Question 4

Ben owns a bus line that regularly makes trips between San Francisco and Los Angeles. What agency would most likely regulate Ben's bus company rates and finances?

Accepted Answer

In this scenario, the Interstate Commerce Commission (ICC) would regulate Ben's bus company. The ICC regulates franchises, rates, and finances of interstate rail, bus, truck, and water carriers.

Question 5

What is something the Federal Trade Commission might do to assist businesses in complying with laws?

Accepted Answer

The Federal Trade Commission assists businesses in complying with laws. New marketing methods are evaluated every year. When general sets of guidelines are needed to improve business practices in a particular industry, the FTC sometimes encourages firms within that industry to establish a set of trade practices voluntarily. The FTC may even sponsor a conference bringing together industry leaders and consumers to establish acceptable trade practices.

Question 6

All of the following are TRUE regarding the Consumer Product Safety Commission EXCEPT it

Accepted Answer

The Consumer Product Safety Commission recalls about 300 products a year, ranging from small, inexpensive toys to major appliances. Its website provides details regarding current recalls. This commission has fallen under scrutiny in the wake of a number of product safety scandals involving children's toys. Some items are not even targeted to children but can be dangerous because children think they are food.

Question 7

To simplify commerce, every state except ________ has enacted all parts of the Uniform Commercial Code (UCC).

Accepted Answer

At one time, states had their own specific laws governing various business practices, and transacting business across state lines was difficult because of the variation in the laws from state to state. To simplify commerce, every state except Louisiana has enacted the Uniform Commercial Code (UCC), a set of statutory laws covering several business law topics. Louisiana has enacted portions of the code. Article II of this code has a significant impact on business.

Question 8

All of the following are true of Article II of the Uniform Commercial Code EXCEPT it

Accepted Answer

Article II of the Uniform Commercial Code covers sales agreements for goods and services such as installation but does not cover the sale of stocks and bonds, personal services, or real estate. It stipulates that a sales agreement can be enforced even though it does not specify the selling price or the time or place of delivery. It also requires that a buyer pay a reasonable price for goods at the time of delivery if the buyer and seller have not reached an agreement on price. Article II addresses the rights of buyers and sellers, transfers of ownership, warranties, and the legal placement of risk during manufacture and delivery.

Question 9

Philip owns a used car dealership. For every car he sells, he offers a three-year or 36,000-mile warranty. During this period, he promises to fix any and all defects specified in the warranty. Which type of warranty does this describe?

Accepted Answer

This scenario describes an express warranty, which stipulates the specific terms the seller will honor. For example, many automobile manufacturers provide three-year or 36,000-mile warranties on their vehicles, during which period they will fix any and all defects specified in the warranty.

Question 10

When Laura buys a new computer, she assumes that it was not stolen, that it will serve her personal computing purposes, and that it will function efficiently as advertised. These expectations describe what is included in a(n) ________ warranty.

Accepted Answer

In this scenario, Laura's expectations describe an implied warranty. This type of warranty is imposed on the producer or seller by law, although it may not be a written document provided at the time of sale. Under Article II, a consumer may assume that the product for sale has a clear title (in other words, that it is not stolen) and that the product will serve the purpose for which it was made and sold as well as function as advertised.

Question 11

Ishmael is a taxi driver. One day, he is driving a customer to the airport and he rear-ends the car in front of him, injuring his customer. The injured customer might sue the driver and the taxi company for damages resulting from the accident. This scenario is an example of

Accepted Answer

This scenario is an example of a tort, which is a private or civil wrong other than a breach of contract. For example, a tort can result if a driver of a Domino's Pizza delivery car loses control of the vehicle and damages property or injures a person. In this case, the injured persons might sue the driver or the owner of the company for damages resulting from the accident. The same would hold true in this case regarding the driver and owner of the taxi company.

Question 12

________ is a purposefully unlawful act to deceive or manipulate in order to damage others.

Accepted Answer

Fraud is a purposefully unlawful act to deceive or manipulate in order to damage others.

Question 13

Fizzle, a soda and sparkling water company, released a new drink with more caffeine and sugar than any other drink on the market. The company has marketed this new drink as the perfect pick-me-up to start the work day and stay alert throughout the day. Several customers who tried the drink experienced shaking hands, which caused several car accidents and work machine operation accidents. When these customers filed lawsuits against Fizzle, the court found in favor of the customers. Which reason explains the court's decision?

Accepted Answer

This scenario describes product liability, or the company's legal responsibility for any negligence in the design, production, sale, and consumption of its products. Some states have expanded the concept of product liability to include injuries by products whether or not the producer is proven negligent. Under this strict product liability, a consumer who files a suit because of an injury has to prove only that the product was defective, that the defect caused the injury, and that the defect made the product unreasonably dangerous.

Question 14

Virtually every business transaction is carried out by means of a(n) ________, a mutual agreement between two or more parties that can be enforced in a court.

Accepted Answer

Virtually every business transaction is carried out by means of a contract, a mutual agreement between two or more parties that can be enforced in a court if one party chooses not to comply with the terms of the contract. For example, if you rent an apartment or house, your lease is a contract.

Question 15

Rico's Construction Company and Andrew's Hardware Store entered into a contract to build and sell houses together. Andrew's Hardware Store will supply the materials, Rico's Construction Company will build the houses, and the two companies will share the profits based on their contributions. The contract stipulates that they will build five houses in three years. What statement is TRUE regarding this contract?

Accepted Answer

This contract must be in writing to be enforceable because it is a three-year contract. Most states require that the following types of contracts be in writing: contracts involving the sale of or interest in land, contracts to pay somebody else's debt, contracts that cannot be fulfilled within one year, and contracts for sale of goods that cost more than $500.

Question 16

Mac and Cathy are buying their first home together. They find a house that they really like, so they make an offer at full list price, and the sellers accept their offer. In order for the purchase and sale agreement they sign to be enforceable, all persons involved must agree to be bound by the terms of the contract, which is referred to as

Accepted Answer

In this scenario, the purchase and sale agreement, which is a contract, is enforceable because all persons involved agree to be bound by the terms of the contract. Voluntary agreement typically comes about when one party makes an offer and the other accepts. If both the offer and the acceptance are freely, voluntarily, and knowingly made, the acceptance forms the basis for the contract.

Question 17

In terms of requirements for enforcement of a contract, what does consideration mean?

Accepted Answer

In terms of the requirements for enforcement of a contract, consideration means that money or something of value must be given in return for fulfilling the contract. As a general rule, a person cannot be forced to abide by the terms of a promise unless that person receives a consideration, which can be money, goods, services, or even a promise to do or not to do something.

Question 18

Dylan wants to get a tattoo, but he is only 16 years old. The tattoo parlor requires that Dylan bring one of his parents to sign its client agreement before it will tattoo an underage client. Which requirement for enforcement of a contract does this scenario best exemplify?

Accepted Answer

This scenario exemplifies contractual capacity, which is the legal ability to enter into a contract. As a general rule, a court cannot enforce a contract if either party in the agreement lacks contractual capacity. A person's contractual capacity may be limited or nonexistent if he or she is a minor (under the age of 18), mentally unstable, intellectually disabled, insane, or intoxicated.

Question 19

Which of the following is an example of an illegal contract?

Accepted Answer

For an otherwise binding contract to be enforceable, both the purpose of and the consideration for the contract must be legal. The contract in which Central Bank loans money at an interest rate that is prohibited by law, a practice known as usury, would be an illegal contract. The fact that one of the parties may commit an illegal act while performing a contract does not render the contract itself illegal.

Question 20

Kevin signed a work-for-hire agreement to develop a mobile application for an investment company. However, he failed to deliver the application that he promised. This is an example of

Accepted Answer

This scenario is an example of breach of contract, which is the failure or refusal of a party to a contract to live up to his or her promises. The breaching party, the one who fails to comply-in this case Kevin, may be liable for monetary damages that he causes the other person.

Quiz 17: Personal Financial Planning and Legal and Regulatory Environment