BLaw Final Answer Key PDF

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Business Law Final Answer Key PART 1: Multiple Choice and T/F Questions 1. Louann pushes Molly, who falls and breaks her wrist. Louann is liable for the injury a. if Louann intended to push Moly. b. only if Louann did not intend to break Moly’s wrist. c. only if Louann had a bad motive for pushing Moly. d. only if Louann intended to break Moly’s wrist. ANSWER: a 2. Power Trucking Company operates a fleet of fuel trucks. When one of the trucks is positioned to receive a load, it strikes a storage tank owned by Quality Fuel, Inc. For the cost of repairing the damage to the tank, Quality Fuel is most likely to be awarded a. compensatory damages. b. punitive damages. c. contingency fees. d. general damages. ANSWER: a 3. Oxley throws a rock intending to hit Pieter but misses and hits Ricardo who sustains an injury. Ricardo can most likely recover the cost of his injury from Oxley in a suit based on the tort theory of a. battery. b. conversion. c. invasion of privacy. d. trespass. ANSWER: a 4. After a dinner at Rosario’s Italian Café, Susie believes that she was overcharged and shoves Theo, the waiter. Theo sues Susie, alleging that the shove was a battery. Susis is liable a. if Rosario’s did not actually overcharge Susis. b. if the shove was offensive. c. if Susis acted out of malice. d. under no circumstances—there was no physical injury. ANSWER: b 5. Jon wants to buy Kim’s land, but she refuses to sell. Jon begins using subpoenas, court orders, and other formal legal procedures in an unrelenting effort to force Kim to sell. This is a. abuse of process. b. appropriation. c. wrongful interference with a contractual relationship. d. not a tort.

ANSWER: a 6. Diego is arrested for a theft committed by someone who stole his identity. A court orders his release, but due to a police error in Diego’s paperwork, he is held in jail for a month. The police are most likely liable for a. abuse of process. b. false imprisonment. c. malicious prosecution. d. none of the choices. ANSWER: b 7. In studying the business law, students also review ethics in a business context. Ethics includes the study of what constitutes a. right or wrong behavior. b. financially rewarding behavior. c. legal behavior. d. religious behavior. ANSWER: a 8. According to the view that Applied Engineering Corporation is a “citizen,” the firm is expected to a. participate in bettering communities and society. b. primarily generate revenue for its owners. c. have no responsibility other than profit maximization. d. efficiently allocate scarce resources. ANSWER: a 9. Daisy works for eMarketing, Inc. Her job includes putting “spin” on the firm’s successes and failures. In this context, ethics has to do with how businesspersons, in making their decisions, apply a. legal doctrine. b. moral and ethical principles. c. corporate guidelines. d. financial priorities. ANSWER: b 10. In studying the business law, students also review ethics in a business context. Ethics includes the study of what constitutes a. right or wrong behavior. b. financially rewarding behavior. c. legal behavior. d. religious behavior.

ANSWER: a 11. According to the view that Applied Engineering Corporation is a “citizen,” the firm is expected to a. participate in bettering communities and society. b. primarily generate revenue for its owners. c. have no responsibility other than profit maximization. d. efficiently allocate scarce resources. ANSWER: a 12. Daisy works for eMarketing, Inc. Her job includes putting “spin” on the firm’s successes and failures. In this context, ethics has to do with how businesspersons, in making their decisions, apply a. legal doctrine. b. moral and ethical principles. c. corporate guidelines. d. financial priorities. ANSWER: b 13. In his recording “Nothing Nu 4U,” O’Reilly uses the melody of a song written by Pete. O’Reilly did not obtain Pete’s permission. This is a. copyright infringement. b. patent infringement. c. trademark infringement. d. none of the choices. ANSWER: a 14. Trade Publishing Inc. owns the rights to the Aura series of paranormal-themed novels, and publishes and sells copies in bookstores and online. Sydney buys and reads a copy of each book in the series. With regard to these copies, Sydney can a. sell them to someone else. b. only sell them back to the publisher. c. only return them to the place of purchase for a refund. d. not sell or return them. ANSWER: a 15. Garrett makes and distributes copies of Here We Go Again, a movie copyrighted by Indie Motion Pictures, Inc. Garrett does this without Indie’s permission. He may be liable for a. damages, fines, or imprisonment. b. damages only. c. fines or imprisonment only. d. nothing. ANSWER: a

16. Ryan is accused of auto theft. Ryan refuses to give information related to his alleged criminal activities because he suspects it will be used to prosecute him. This is a. duress. b. entrapment. c. the privilege against selfincrimination. d. necessity. ANSWER: c 17. Gilda is accused of conspiracy to defraud. She is given an opportunity to object to the charge before a judge. She is also given the opportunity to confront and cross-examine witnesses and to present her own witnesses. These procedures represent a. a reasonable expectation of privacy. b. the prohibition against double jeopardy. c. due process of law. d. the privilege against self-incrimination. ANSWER: c 18. Erica, a police officer, wants to search the offices of Debit & Credit, Accountants. She asks Judge Bernie to issue a warrant. Under the Fourth Amendment, no warrant for a search can be issued without a. double jeopardy. b. probable cause. c. reasonable doubt. d. immunity. ANSWER: b 19. Kelly is accused of receiving stolen property. She can refuse to provide information about her allegedly criminal activities a. if she suspects the information will be used to prosecute her. b. if the police do not promise to keep the information confidential. c. if the information is “fruit of the poisonous tree.” d. under no circumstances. ANSWER: c 20. Gayla tells Franco that she will pay him $50 to haul the trimmed tree limbs and other lawn debris from her property. Franco’s acceptance is complete a. as soon as he says he will do the job. b. once he starts to work. c. only after he hauls away the debris. d. when he hears the offer. ANSWER: c

21. Shelby offers to make digital copies of Relay Company’s business conference videotapes, CDs, DVDs, and other media for $500. Under the mailbox rule, Relay’s acceptance by e-mail will be considered effective when a. received. b. sent. c. followed up by a confirmation letter sent by regular mail. d. composed on a Relay computer. ANSWER: b 22. Pacific Charter Company offers to provide an air-conditioned bus to Quincy’s tour group for $1,500 plus the cost of the fuel. The mailbox rule applies if Quincy accepts the offer by a. e-mail. b. phone. c. regular mail. d. any of the choices. ANSWER: c 23. Green River Gas Company offers to sell Far East Energy, Ltd., a certain quantity of liquefied natural gas. If Far East sends an acceptance via Green River’s authorized mode of communication, it will be effective when it is a. in transit. b. received. c. sent. d. written. ANSWER: c 24. Safe4U Lenses, Inc., assures ThruVu Optical Company that Safe4U’s lenses will not crack within a certain range of pressure. ThruVu buys the lenses to prescribe to its customers. When cracks develop within the stated range, ThruVu files a suit against Safe4U. The court is most likely to rule in favor of a. Safe4U, because its statement was an expression of opinion. b. Safe4U, because ThruVu chose Safe4U’s products voluntarily. c. ThruVu, because Safe4U’s statement was an express warranty. d. ThruVu, because Safe4U’s statement constituted puffery. ANSWER: c 25. Aerospace, Inc., makes and sells flight navigation equipment, through independent salespersons, to retailers for resale to consumers. The Magnuson-Moss Warranty Act covers a. implied warranties, oral statements, and written promises. b. only implied warranties that consumers are aware of. c. only a salesperson’s oral statements. d. only a seller’s written promises. ANSWER: d

26. Ocean Vessels, Inc., and Pacific Harbor Company enter into a contract for a sale of a boat. Ocean is a merchant who deals in goods of the kind sold. The goods are defective. Under the UCC, the implied warranty of merchantability is breached a. only if Ocean did not know of and could not have discovered the defect. b. only if Ocean did not know of the defect. c. only if Ocean knew about or could have discovered the defect. d. regardless of what Ocean knew or could have discovered. ANSWER: b 27. Eden Valley Ranch and Farm Supply Corporation enter into a contract for a sale of fencing materials. Farm Supply, a merchant who deals in goods of the kind, makes implied and express warranties in connection with the sale. Under the UCC, if these are inconsistent a. all implied warranties displace all express warranties. b. all express warranties displace all implied warranties. c. the implied warranty of fitness for a particular purpose takes precedence. d. the implied warranty of merchantability takes precedence. ANSWER: c 28. Sigrud buys spiked mountain-climbing shoes from Rockridge Gear store. Rockridge does not know that Sigrud plans to wear the shoes to climb Tower Mountain. When Sigrud is on the mountain, the spikes come out of the shoes, causing her to fall and be injured. Rockridge breached a. an express warranty. b. an implied warranty of fitness for a particular purpose. c. an implied warranty of merchantability. d. none of the choices. ANSWER: a 29. FasTite Tool Company employs workers, including Gina, at six locations in two states. FasTite’s discharge of Gina outside the terms of an implied employment contract may result in a. FasTite’s liability for breach of contract. b. Gina’s ineligibility for unemployment compensation. c. the two states’ joint assumption of control over FasTite’s operations. d. none of the choices. ANSWER: a 30. Anna is an employee at Bento Food Mart. Anna is called for jury duty and as a result cannot work her scheduled shift. Bento fires Anna. She successfully sues Bento for reinstatement. With respect to the employment-at-will doctrine, this is a. an example of the doctrine. b. an exception based on contract theory.

c. an exception based on public policy. d. an exception based on tort theory. ANSWER: c 31. Frank is an employee of Guitar Makers, LLC. Guitar’s employee manual states that workers, such as Frank, will be dismissed only for good cause. With respect to the employment-at-will doctrine, this is a. an example of the doctrine. b. an exception based on contract theory. c. an exception based on public policy. d. an exception based on tort theory. ANSWER: b 32. Leon, Mia, Nestor, and Orina are employees of different-sized employers in different industries. Under the Fair Labor Standards Act, all employees in covered industries must be paid per hour a. a minimum wage. b. a maximum wage. c. overtime pay. d. the same amount. ANSWER: a 33. Hunter is seventeen years old. Under the Fair Labor Standards Act, Hunter cannot work a. in the entertainment industry. b. in a hazardous occupation. c. for her parents. d. in the agriculture industry. ANSWER: b 34. If an action is legal, it is ethical. a. True b. False ANSWER: False 35. If people merely comply with the law, they are acting at the lowest ethical level society will tolerate. a. True b. False ANSWER: True 36. An action may be legal but not ethical. a. True b. False

ANSWER: True 37. Acting in good faith gives a business firm a better chance of defending its actions in court. a. True b. False ANSWER: True 38. Ethical reasoning is the process through which an individual links his or her moral convictions or ethical standards to the particular situation at hand. a. True b. False ANSWER: True 39. Duty-based ethical standards often come from religious precepts. a. True b. False ANSWER: True 40. Religious rules generally are absolute with respect to the behavior of their adherents. a. True b. False ANSWER: True 41. Ethical reasoning is the process through which an individual rationalizes whatever action he or she chooses to take. a. True b. False ANSWER: False

PART 2: Short Answer Questions 42. Recreation & Sports Equipment Corporation sells a product that is capable of seriously injuring consumers who misuse it in a foreseeable way. Does the firm owe an ethical duty to take this product off the market? What conflicts might arise if the firm stops selling this product? ANSWER: Ethical behavior can sometimes generate sufficient good will to warrant practicing it out of a desire for increased profits. By the same token, unethical behavior can sometimes generate enough bad publicity to warrant avoiding it out of the same desire. A business firm’s activities that are perceived as ethical and receive wide publicity can benefit the firm’s owners in the short run-and even in the long run if the firm’s enhanced public image continues to attract more consumers to its products. There is nothing unethical about making a profit. It is the behavior that generates the profit that can be questionable. Business ethics thus has a practical element. A business firm should act in its best interest. A firm interested in profits should also be interested in the public’s opinion. Of course, it is not a company’s fault when consumers misuse its product. If continuing to sell a product is not a strict violation of the law, stopping its sale would

likely reduce profits. This could impact the firm’s owners, employees, and others. But suspending sales could reduce injuries, and it could lead to increased profits from the sales of other products, if the suspension stops negative publicity. When a business entity decides to respond to what it sees as a moral or ethical obligation by removing a product from the market, an ethical conflict is raised between the firm and its employees and between the firm and its share-holders. This conflict arises directly out of the impact that the decision has on the firm’s profits. If meeting this perceived obligation increases the firm’s profitability, then all parties “win” and the dilemma would be easily resolved in favor of “doing the right thing.” 43. Frances, an executive with GMO Seed & Feed, Inc., has to decide whether to market a product that could offer substantial benefits but might also have potentially serious side effects for a small percentage of users. How should Frances decide whether to sell the product? How does the standard of ethics that is applied affect this answer? ANSWER: When a corporate executive has to decide whether to market a product that might have undesirable side effects for a small percentage of users but that would be beneficial for most users, the decision turns on the benefit to the many versus the harm to the few. Of course, all possible precautions should be taken to protect the few. A more specific answer depends on which system of ethics is applied. From a religious duty-based perspective, the answer might be absolute: do not sell the product because some would be harmed, sell the product only to those who would not be harmed, or sell the product with clear warnings of the possible harm. Similar conclusions might be reached through a philosophical, “categorical imperative,” dutybased approach, which would consider the result if every corporation chose to sell the product. A principle-of-rights duty-based approach might likewise come to the same conclusions, reasoning that all persons have a right to life, for example, and that the corporation has an ethical duty to respect that right and act accordingly. From a utilitarian perspective, under a cost-benefit analysis, if the product were sold, it could benefit the greatest number of persons—future and current employees, as well as shareholders, and most consumers. If there was “bad” publicity, and it was adverse enough to reduce sales, however, more persons could benefit from the decision not to market the product. Under any of the different corporate social responsibility theories, the decision whether to market the product would acknowledge the firm’s duty to act ethically and be accountable to society. There might be a balancing of the interests of competing stakeholder groups or a shouldering of the responsibility to behave in a socially beneficial way as a good corporate citizen. Of course, the firm would likely have to accept any legal liability that would arise from its sale of the product. To apply any of these approaches, the executive might evaluate the situation according to the five steps for making ethical business decisions. Under this procedure for reviewing ethical conflicts, the first step is to specify the facts, the problem, and the ethical principles at issue. The second step is to discuss potential actions and their effects. The third step is to come to a consensus as to what to do. This consensus should withstand moral scrutiny (the fourth step) and fulfill corporate, community, and individual values (the fifth step). It seems unlikely that a proposed sale of the product would survive the fourth step, under either a duty-based or an outcome-based ethical standard. 44. Sebastian was the manager of Thai Bistro, a restaurant specializing in Southeast Asian foods. Sebastian opened a bank account in Thai Bistro’s name, signing the account signature card as

“owner.” Umeko, who was often at Thai Bistro and had free access to its office, told others that she was “an owner” and “a partner.” She also opened a bank account in Thai Bistro’s name, and signed the account signature card as “owner.” Sebastian told Vijay, the owner of Wong Noodles, Inc., that Umeko was a member of a partnership that owned Thai Bistro. On this basis, Wong Noodles delivered its goods to Thai Bistro on credit. In fact, Thai Bistro was owned by a corporation. When the unpaid account totaled more than $10,000, Wong Noodles filed a suit against Umeko to collect. On what basis might Umeko be liable for the debt? ANSWER: The theory under which Umeko would most likely be liable for Thai Bistro’s debt to Wong Noodles is partnership by estoppel. The first requirement of this theory is a representation, by a nonpartner or by another with the nonpartner’s consent, that the nonpartner is a partner. The second requirement is reliance on that representation. In this case, Wong Noodles could prove both elements. Both Sebastian and Umeko made representations with respect to Umeko’s status in relation to Thai Bistro—they both signed bank cards as “owner,” Umeko was often at Thai Bistro and had free access to its office, Umeko told others that she was a “partner” in the business, which is what Sebastian also told Vijay. As for the reliance element, Wong Noodles extended credit to Thai Bistro only because Wong Noodles believed that Thai Bistro was owned by a partnership. 45. Fresco and Garcia form a partnership—HVAC Pros. Garcia’s capital contribution is $10,000, and Fresco’s is $15,000. The partnership agreement provides that profits are to be shared, with 40 percent for Garcia and 60 percent for Fresco. Later, Garcia makes a $10,000 loan to the partnership when it needs working capital. When the partnership is dissolved, its assets are $50,000, and its debts are $8,000. How should the assets be distributed? ANSWER: On the dissolution and winding up of a partnership, the order of liability payment of the assets is as follows: (a) debts owed to partnership creditors, including partners; and (b) capital contributions of partners and profits as provided or, in the absence of an agreement, equally [UPA 807]. In this question, the partnership’s creditors would be paid $8,000 first, leaving a balance of $42,000 from the $50,000. Next, Garcia would be paid $10,000 for the loan, or advance, leaving $32,000. From this amount, Garcia would receive $10,000 and Fresco $15,000 as payment for their capital contributions, leaving a balance of $7,000. The $7,000 would be split as profits, with 40 percent going to Garcia ($2,800) and 60 percent to Fresco ($4,200). 46. Northwest Energy Company is subject to mandatory workers’ compensation laws in the states in which it does business. Odele and Phelps work for Northwest Energy as part ...