Test bank for business law today 8th edition by miller

Chapter 1
The Legal Environment
N.B.: TYPE indicates that a question is new, modified, or unchanged,
as follows.
N
A question new to this edition of the Test Bank.
+ A question modified from the previous edition of the Test
Bank,
= A question included in the previous edition of the Test Bank.
TRUE/FALSE QUESTIONS
1.

The law establishes rights, duties, and privileges that are consistent
with the values of society.
ANSWER: T
NAT: AACSB Reflective

2.

PAGE:

2
TYPE:
=
LOC: AICPA Critical Thinking

Law includes enforceable rules governing relationships between
individuals and their society.
ANSWER: T
NAT: AACSB Analytic

4.

2
TYPE:
=
LOC: AICPA Critical Thinking

How judges apply the law to specific disputes may depend in part on
their personal philosophical views.
ANSWER: T
NAT: AACSB Reflective

3.

PAGE:

PAGE:

2
TYPE:
LOC: AICPA Legal

+

The natural law philosopher believes that the law should reflect
universal moral and ethical principles that are part of human nature.
1


2

UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS

ANSWER: T
NAT: AACSB Ethics

PAGE:

3
TYPE:
=
LOC: AICPA Critical Thinking


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5.

Constitutional law includes only the U.S. Constitution.
ANSWER: F
NAT: AACSB Analytic

6.

PAGE:

6
TYPE:
LOC: AICPA Legal

=

PAGE:

6
TYPE:
LOC: AICPA Legal

=

PAGE:

6
TYPE:
LOC: AICPA Legal

N

PAGE:

6
TYPE:
LOC: AICPA Legal

N

Uniform laws apply in all states, including those in which the laws
have not been adopted.
ANSWER: F
NAT: AACSB Analytic

12.

=

A state constitution is supreme within the state’s borders so long as it
does not conflict with the U.S. Constitution or a federal law.
ANSWER: T
NAT: AACSB Analytic

11.

6
TYPE:
LOC: AICPA Legal

Whether a law is constitutional depends on its source.
ANSWER: F
NAT: AACSB Analytic

10.

PAGE:

The U.S. Constitution is the supreme law of the United States.
ANSWER: T
NAT: AACSB Analytic

9.

=

A state law that conflicts with the U.S. Constitution will be deemed
unconstitutional.
ANSWER: T
NAT: AACSB Analytic

8.

6
TYPE:
LOC: AICPA Legal

A federal law that conflicts with the U.S. Constitution will be deemed
unconstitutional.
ANSWER: T
NAT: AACSB Analytic

7.

PAGE:

PAGE:

7
TYPE:
LOC: AICPA Legal

N

7
TYPE:
LOC: AICPA Legal

N

Federal statutes apply to all states.
ANSWER: T
NAT: AACSB Analytic

PAGE:


4

13.

UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS

Every state has adopted the Uniform Commercial Code in its entirety.
ANSWER: F
NAT: AACSB Reflective

PAGE:

7
TYPE:
LOC: AICPA Legal

N

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14.

Federal administrative agencies specify the powers of Congress.
ANSWER: F
NAT: AACSB Analytic

15.

PAGE:

10
TYPE:
LOC: AICPA Legal

N

PAGE:

10
TYPE:
N
LOC: AICPA Critical Thinking

PAGE:

11

TYPE:
LOC: AICPA Legal

=

PAGE:

11
TYPE:
LOC: AICPA Legal

=

Stare decisis is a doctrine obligating judges to follow precedents
established within their jurisdictions.
ANSWER: T
NAT: AACSB Analytic

21.

=

Judges use precedent when deciding a case in a common law legal
system.
ANSWER: T
NAT: AACSB Analytic

20.

8

TYPE:
LOC: AICPA Legal

A decision on a given issue by a court is not binding on an inferior
court.
ANSWER: F
NAT: AACSB Analytic

19.

PAGE:

Common law is a term for the law that is known to most of us.
ANSWER: F
NAT: AACSB Analytic

18.

=

Common law is no longer a source of legal authority.
ANSWER: F
NAT: AACSB Analytic

17.

8
TYPE:
LOC: AICPA Legal

State agency regulations take precedence over conflicting federal
agency regulations.
ANSWER: F
NAT: AACSB Analytic

16.

PAGE:

PAGE:

11
TYPE:
LOC: AICPA Legal

=

Courts do not depart from precedents.
ANSWER:

F

PAGE:

11

TYPE:

=

6

UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS

NAT: AACSB Reflective
22.

LOC: AICPA Critical Thinking

A court may depart from a precedent if the court decides that the
precedent should no longer be followed.
ANSWER: T
NAT: AACSB Reflective

PAGE:

11
TYPE:
=
LOC: AICPA Critical Thinking


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23.

Equity is a branch of law that seeks to supply remedies other than
damages.
ANSWER: T

NAT: AACSB Analytic

24.

PAGE:

12
TYPE:
LOC: AICPA Legal

=

PAGE:

12
TYPE:
LOC: AICPA Legal

=

PAGE:

13
TYPE:
LOC: AICPA Legal

=

PAGE:

14
TYPE:
LOC: AICPA Legal

=

Equitable remedies include injunctions and decrees of specific
performance.
ANSWER: T
NAT: AACSB Analytic

30.

=

A court’s order to a party to do or to refrain from doing a particular
act is a rescission.
ANSWER: F
NAT: AACSB Analytic

29.

12
TYPE:
LOC: AICPA Legal

In most states, a court can grant legal remedies or equitable
remedies, but not both in the same case.
ANSWER: F
NAT: AACSB Analytic

28.

PAGE:

Monetary damages is a remedy at law.
ANSWER: T
NAT: AACSB Analytic

27.

N

A plaintiff is a person against whom a lawsuit is brought.
ANSWER: F
NAT: AACSB Analytic

26.

12
TYPE:
LOC: AICPA Legal

A defendant is a person against whom a lawsuit is brought.
ANSWER: T
NAT: AACSB Analytic

25.

PAGE:

PAGE:

14
TYPE:
LOC: AICPA Legal

=

A substantive law creates or defines legal rights and obligations.
ANSWER:

T

PAGE:

16

TYPE:

=


8

UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS

NAT: AACSB Analytic
31.

LOC: AICPA Legal

Criminal law focuses on duties that exist between persons.
ANSWER: F
NAT: AACSB Analytic

PAGE:

16
TYPE:
LOC: AICPA Legal

=


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32.

International law is the law of a foreign nation and varies from
country to country.
ANSWER: F
NAT: AACSB Analytic

33.

+

PAGE:

23
TYPE:
LOC: AICPA Research

N

Rules and regulations adopted by federal administrative agencies are
compiled in the Code of Federal Regulations.
ANSWER: T
NAT: AACSB Analytic

35.

17
TYPE:
LOC: AICPA Legal

A reference to “28 U.S.C. Section 1332” means that a federal court’s
decision can be found on Page 28 of Section 1332 of the United
States Cases.
ANSWER: F
NAT: AACSB Analytic

34.

PAGE:

PAGE:

24

TYPE:
LOC: AICPA Research

=

Most state trial court decisions are not published.
ANSWER: T
NAT: AACSB Analytic

PAGE:

24
TYPE:
LOC: AICPA Legal

=

MULTIPLE-CHOICE QUESTIONS
1.

To Pete, the written law of a particular society at a particular time is
most significant. Pete is
a.
b.
c.
d.

a
a
a

a

legal positivist.
legal rationalist.
legal realist.
person who adheres to the natural law tradition.

ANSWER: A
NAT: AACSB Analytic
2.

PAGE:

3
TYPE:
=
LOC: AICPA Critical Thinking

To Opal, the law is a tool for promoting justice. This is a view of what
is sometimes called
a.

promotional jurisprudence.


10

UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS

b.

c.
d.

the just society.
the sociological school.
utilitarianism.

ANSWER: C
NAT: AACSB Analytic

PAGE:

4
TYPE:
N
LOC: AICPA Critical Thinking


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3.

Voters in North Carolina approve a new state constitution, after which
the Ocean City Council passes new ordinances, the North Carolina
Department of Parks and Recreation issues new rules, and the Ocean
City Chamber of Commerce sends out new instructions. Sources of
law do not include
a.
b.
c.

d.

instructions issued by the Ocean City Chamber of Commerce.
ordinances passed by the Ocean City Council.
rules issued by the North Carolina Department of Parks and
Recreation.
state constitutions passed by popular vote.

ANSWER: A
NAT: AACSB Reflective
4.

a
a
a
a

N

case decided by the Nebraska Supreme Court.
provision in the Nebraska constitution.
rule created by a Nebraska state administrative agency.
statute enacted by the Nebraska legislature.

ANSWER: B
NAT: AACSB Reflective

PAGE:

6

TYPE:
LOC: AICPA Legal

=

Hawaii enacts a state law that violates the U.S. Constitution. This law
can be enforced by
a.
b.
c.
d.

no one.
the federal government only.
the state of Hawaii only.
the United States Supreme Court only.

ANSWER: A
NAT: AACSB Reflective
6.

6
TYPE:
LOC: AICPA Legal

In Nebraska, the highest-ranking (superior) law is
a.
b.
c.
d.

5.

PAGE:

PAGE:

6
TYPE:
LOC: AICPA Legal

+

If a provision in the Florida state constitution conflicts with a
provision in the U.S. Constitution
a.
b.
c.
d.

neither provision applies.
the provisions are balanced to reach a compromise.
the state constitution takes precedence.
the U.S. Constitution takes precedence.


12

UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS

ANSWER: D
NAT: AACSB Reflective
7.

PAGE:

6
TYPE:
LOC: AICPA Legal

+

The River City Council, the Santa Clara County Board, the Texas state
legislature, and the U.S. Congress enact laws. These laws constitute
a.
b.
c.
d.

administrative law.
case law.
stare decisis.
statutory law.

ANSWER: D
NAT: AACSB Reflective

PAGE:

6

TYPE:
N
LOC: AICPA Critical Thinking

Mary is a consultant to the National Conference of Commissioners on
Uniform State Laws. This organization
a.
b.
c.
d.

adopts uniform laws for the states.
applies uniform laws to the states.
drafts uniform laws for adoption by the states.
imposes uniform laws on the states.

ANSWER: C
NAT: AACSB Reflective
10.

=

only to matters not covered by state law.
only to those states that adopt the statute.
to all of the states.
to none of the states.

ANSWER: C
NAT: AACSB Reflective

9.

6
TYPE:
LOC: AICPA Legal

The U.S. Congress enacts a new federal statute that sets different
standards for the liability of businesses selling defective products.
This statute applies
a.
b.
c.
d.

8.

PAGE:

PAGE:

7
TYPE:
=
LOC: AICPA Critical Thinking

The Federal Trade Commission (FTC) is a government agency that
issues rules, orders, and decisions. The Georgia state legislature
enacts statutes. The Jackson County Board and the Peach City
Council enacts ordinances. Administrative law includes

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a.
b.
c.
d.

all law that affects a business’s operation.
decisions, orders, and rules of the FTC.
ordinances enacted by county board and the city council.
statutes enacted by the state legislature.

ANSWER: B
NAT: AACSB Reflective
11.

+

all states.
forty-five states.
twenty-five states.
no states.

ANSWER: A
NAT: AACSB Reflective

PAGE:

7

TYPE:
LOC: AICPA Legal

=

Jay is a federal judge. Jay’s judicial decisions are part of case law. This
law includes interpretations of
a.
b.
c.
d.

administrative regulations only.
constitutional provisions only.
statutes only.
administrative regulations, constitutional
statutes.

ANSWER: D
NAT: AACSB Reflective
13.

7
TYPE:
LOC: AICPA Legal

The Uniform Commercial Code has been adopted, at least in part, in
a.
b.
c.

d.

12.

PAGE:

PAGE:

provisions,

and

10
TYPE:
=
LOC: AICPA Critical Thinking

In Alpha v. Beta, a state supreme court held that a minor could cancel
a contract for the sale of a car. Now a trial court in the same state is
deciding Delta v. Gamma, a case with similar facts. Under the
doctrine of stare decisis, the trial court is likely to
a.
b.
c.
d.

allow the minor to cancel the contract.
disregard the previous case.
order the minor to cancel the contract.
require the minor to fulfill the contract.

ANSWER: A
NAT: AACSB Reflective

PAGE:

10
TYPE:
=
LOC: AICPA Critical Thinking


14
14.

UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS

The federal government and the state governments constitute the
U.S. legal system. This system is based on the legal system of
a.
b.
c.
d.

Ancient Greece.
Ancient Rome.
England.
France.

ANSWER: C

NAT: AACSB Reflective

PAGE:

10
TYPE:
LOC: AICPA Legal

+


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15.

Areas of the law not governed by statutory or administrative law are
a.
b.
c.
d.

governed by the common law.
open to each individual’s own interpretation.
regulated by the states under the U.S. Constitution.
subject to local ordinances.

ANSWER: A
NAT: AACSB Analytic
16.

=

it is the law that is familiar to most of us.
it was originally applied only to commoners.
it was more or less uniform throughout England.
the law was issued by courts of common pleas.

ANSWER: C
NAT: AACSB Reflective

PAGE:

10
TYPE:
LOC: AICPA Legal

+

As a judge, Phil applies common law rules. These rules develop from
a.
b.
c.
d.

administrative regulations.
court decisions.
federal and state statutes.
proposed uniform laws.

ANSWER: B

NAT: AACSB Reflective
18.

10
TYPE:
LOC: AICPA Legal

The “common law” is referred to as the common law because
a.
b.
c.
d.

17.

PAGE:

PAGE:

10
TYPE:
LOC: AICPA Legal

=

Jill is an appellate court judge. In this capacity, Jill establishes a rule
of law. Under the doctrine of stare decisis, the principle must be
adhered to by
a.
b.

c.
d.

all courts.
courts of lower rank only.
that court and courts of lower rank.
that court only.

ANSWER: C
NAT: AACSB Analytic

PAGE:

11
TYPE:
LOC: AICPA Legal

=


16
19.

UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS

Kurt is a judge hearing the case of Local Co. v. Macro Corp. Applying
the relevant rule of law to the facts of the case requires Kurt to find
previously decided cases that, in relation to the case under consideration, are
a.
b.

c.
d.

as different as possible.
as similar as possible.
at odds.
exactly identical.

ANSWER: B
NAT: AACSB Reflective
20.

may rule contrary to the precedent.
must apply the precedent.
must refuse to decide the particular case.
must “stand on the decided case.”

ANSWER: A
NAT: AACSB Reflective

PAGE:

11
TYPE:
LOC: AICPA Legal

=

In Hi-Sales Co. v. Imports, Inc., there is no precedent on which the
court can base a decision. The court can consider

a.
b.
c.
d.

neither public policy nor social customs and values.
public policy only.
public policy or social customs and values.
social customs and values only.

ANSWER: C
NAT: AACSB Reflective
22.

11
TYPE:
+
LOC: AICPA Critical Thinking

In Best Sales Corp. v. Carol, the court decides that a precedent is
incorrect or inapplicable. With this in mind, the court
a.
b.
c.
d.

21.

PAGE:

PAGE:

11
TYPE:
=
LOC: AICPA Critical Thinking

A state trial court has before it Eagle Manufacturing Co. v. Fine
Products Corp., a case with no binding authority. The court can
a.
b.
c.
d.

not refuse to decide the Eagle case.
postpone deciding Eagle indefinitely.
postpone deciding Eagle until there is binding authority.
refuse to decide Eagle.


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ANSWER: A
NAT: AACSB Reflective

PAGE:

11
TYPE:
LOC: AICPA Legal

=


18
23.

UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS

In a suit against Adam, Beth obtains a remedy, which is the means
given to a party
a.
b.
c.
d.

only to enforce a right.
only to redress a wrong.
to enforce a right or to redress a wrong.
none of the choices.

ANSWER: C
NAT: AACSB Reflective
24.

the
the
the
the

=

appellant.
appellee.
defendant.
plaintiff.

ANSWER: D
NAT: AACSB Reflective

PAGE:

12
TYPE:
LOC: AICPA Legal

=

Standard Business Company appeals a decision against it, in favor of
Top Flight Corporation, from a lower court to a higher court. Standard
is
a.
b.
c.
d.

the
the
the
the

appellant.
appellee.
defendant.
plaintiff.

ANSWER: A
NAT: AACSB Reflective
26.

12
TYPE:
LOC: AICPA Legal

Net Corporation files a suit against Omega, Inc., alleging that Omega
breached a contract to sell Net a computer system for $100,000. Net
is
a.
b.
c.
d.

25.

PAGE:

PAGE:

12
TYPE:

LOC: AICPA Legal

N

Holly is a state court judge. Ilsa appears in a case in Holly’s court,
claiming that Jim breached a contract. As in most state courts, Holly
may
a.
b.
c.

award damages, cancel a contract, or direct a party to do or
not to do an act.
award damages only.
cancel a contract only.


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d.

direct a party to do or not to do a particular act only.

ANSWER: A
NAT: AACSB Reflective

PAGE:

13
TYPE:

LOC: AICPA Legal

+


20
27.

UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS

In a suit against Charles, Diana obtains the cancellation of a contract,
which is
a.
b.
c.
d.

a decree of specific performance.
an award of damages.
an injunction.
rescission.

ANSWER: D
NAT: AACSB Reflective
28.

=

an equitable remedy and a remedy at law.
an equitable remedy only.

a remedy at law only.
not a remedy.

ANSWER: B
NAT: AACSB Reflective

PAGE:

14
TYPE:
LOC: AICPA Legal

+

Beth is a victim of Carl’s violation of a criminal law. Criminal law is
concerned with
a.
b.
c.
d.

the prosecution of private individuals by other private
individuals.
the prosecution of public officials by private individuals.
the relief available when a person’s rights are violated.
wrongs committed against the public as a whole.

ANSWER: D
NAT: AACSB Reflective
30.

14
TYPE:
LOC: AICPA Legal

In a suit against Kathy, Lon obtains specific performance. This is
a.
b.
c.
d.

29.

PAGE:

PAGE:

14
TYPE:
LOC: AICPA Legal

N

Great Internet, Inc. (GII), is an Internet service provider. GII’s tech
support employees are on strike. Six of the workers are blocking GII’s
door. To get them away from the door, GII should obtain
a.
b.
c.
d.

a decree of specific performance.
an award of damages.
an injunction.
a rescission.


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ANSWER: C
NAT: AACSB Reflective

PAGE:

14
TYPE:
=
LOC: AICPA Decision Modeling


22
31.

UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS

Lev is a judge. In his court, Lev may bar a suit if it is not filed within a
proper time according to
a.
b.
c.

d.

a statute of limitations.
the doctrine of stare decisis.
the chancellor’s discretion.
the king’s conscience.

ANSWER: A
NAT: AACSB Analytic
32.

d.

N

the laws of individual nations only.
treaties and international organizations only.
the laws of individual nations, and treaties and international
organizations.
none of the choices.

ANSWER: C
NAT: AACSB Reflective

PAGE:

17
TYPE:
LOC: AICPA Legal

=

If the title of a case appears as “Quality Sales Corp. v. Regional
Distribution Co.,” the party in whose favor the court decided is
a.
b.
c.
d.

Quality Sales.
Regional Distribution.
either party.
neither party.

ANSWER: C
NAT: AACSB Analytic
34.

15
TYPE:
LOC: AICPA Legal

When Overseas Exports, Inc., based in New York, does business
internationally, the firm may be subject to international law. The
sources of this law include
a.
b.
c.

33.

PAGE:

PAGE:

26
TYPE:
LOC: AICPA Research

=

The Montana Supreme Court decides the case of National Co. v.
Overseas Corp. Of nine justices, eight believe the judgment should be
in National’s favor. Justice Pine disagrees and writes a separate
opinion. This opinion is
a.
b.
c.

a concurring opinion.
a dissenting opinion.
a minority opinion.


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d.

a unanimous opinion.

ANSWER: B
NAT: AACSB Analytic
35.

PAGE:

30
TYPE:
LOC: AICPA Research

N

Metro City Center is an area of tourist attractions in Metro City. The
Center’s director, under the city’s authority, issues a rule to require
street performers to obtain permits. The Center cites Nobby, a
magician, for performing without a permit. Under the principles
discussed in “A Sample Court Case,” Berger v. City of Seattle, the
Center most likely acted
a.
b.
c.
d.

in violation
reasonably
reasonably
reasonably

of Nobby’s rights under the First Amendment.
in issuing the rule but not in citing Nobby.

in citing Nobby but not in issuing the rule.
in the circumstances and under the law.

ANSWER: D
NAT: AACSB Reflective

PAGE:

32
TYPE:
LOC: AICPA Research

N

ESSAY QUESTIONS
1.

In a lawsuit between Digital Sales Corporation and Engineering
Associates, Inc., the court applies the doctrine of stare decisis. What
is this doctrine? What does this doctrine have to do with the
American legal system?
ANSWER: In a common law legal system, past judicial decisions are
binding in current disputes with similar facts. This feature of the common law, which is the basis of the American legal system, is unique
because, unlike the law in other legal systems, it is judge-made law.
Within the common law system, when possible, judges attempt to be
consistent and to base their decisions on the principles suggested by
earlier cases. The body of principles and doctrines that form the
common law emerged over time as judges applied the principles
announced in earlier cases to subsequent legal controversies. The
practice of deciding cases with reference to former decisions, or

precedents—the cornerstone of the American legal system—is called
the doctrine of stare decisis. Under this doctrine, judges are obligated
to follow the precedents established within their jurisdictions. This
helps courts to be more efficient, and makes the law more stable and
predictable.


24

UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS

PAGES:
10–11
NAT: AACSB Reflective
2.

TYPE:
=
LOC: AICPA Legal

Alpha Corporation files a suit against Beta, Inc., alleging that Beta
breached a contract to sell Alpha a computer system for $100,000.
The court rules in Alpha’s favor, and Beta appeals to a higher court.
In the initial suit, who was the plaintiff and who was the defendant,
and on appeal, which party was the appellant and which the
appellee? The higher court’s opinion in the case is at Beta, Inc. v.
Alpha Corp., 307 F.3d 1085 (9th Cir. 2007). Specifically where can this
opinion be found?
ANSWER: In the original suit, Alpha was the plaintiff and Beta was
the defendant. In the appeal, Beta was the appellant (or the

petitioner) and Alpha was the appellee (or the respondent). This case
— Beta, Inc. v. Alpha Corp., 307 F.3d 1085 (9th Cir. 2007)—can be
found in its entirety in volume 307 of the Federal Reporter, Third
Series, on page 1085. The U.S. Court of Appeals for the Ninth Circuit
decided this case in 2007.
PAGES:
12, 26, 27–28 & 30
NAT: AACSB Reflective

TYPE:
N
LOC: AICPA Legal