Test Bank for Dynamic Business Law 3rd Edition by Kubasek Browne Herron

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Dynamic Business Law 3rd Edition by Kubasek Browne Herron – Test Bank 

 

Chapter 02

Business Ethics

 

True / False Questions

1. Ethical conversation is primarily about finding the one and only right thing to do.

True    False

 

2. Business ethics is the application of ethics to the special problems and opportunities experienced by business people.

True    False

 

3. The social responsibility of business consists only of the expectations employees have of employers.

True    False

 

4. Insurer American International Group (AIG) is well known in the insurance industry for its ethical and cautious investments protecting investors.

True    False

 

5. In some countries, businesses must pay bribes in order to receive legitimate supplies.

True    False

 

6. In an ethical analysis using the WPH Framework referenced in the text, owners are the most important stakeholders and should receive the greatest consideration in decision making regardless of the type of problem addressed.

True    False

 

7. The definition of stakeholder is the same as the definition of shareholder.

True    False

 

8. The community in which a firm operates would not be considered a stakeholder of the firm.

True    False

 

9. Situational ethics is the same thing as ethical relativism.

True    False

 

10. Consequentialism provides a rigid set of rules to follow regardless of the situation.

True    False

 

11. Utilitarianism is a form of consequentialism.

True    False

 

12. Ethics is not an issue in accounting because of the primarily objective data involved in that field.

True    False

 

 

Multiple Choice Questions

13. Which of the following was the result in regard to the statute of limitations in the Case Opener in which the plaintiff claimed that the drug Accutane caused her to develop ulcerative colitis and irritable bowel syndrome?

A. That because the plaintiff was not warned by her doctor of specific risks caused by the medication, the statute of limitations did not begin to run until she became aware of an advertisement discussing the risk.

 

B. That because the plaintiff was warned by her doctor of specific risks caused by the medication, the statute of limitations began to run prior to the time she became aware of an advertisement discussing the risk; and the statute of limitations barred her claim.

 

C. That the statute of limitations began to run on the plaintiff’s claim when the risk of the drug was discovered by the manufacturer, not on the date on which the plaintiff became aware of the risk and that the statute of limitations, therefore, barred her claim.

 

D. That in lawsuits involving this type of drug, there is no statute of limitations because each day the plaintiff suffers from pain results in the beginning of a new cause of action.

 

E. That the defendant committed fraud preventing it from relying on the statute of limitations.

 

14. Which of the following presents a problem when considering the theory of ethics known as absolutism?

A. The questionable nature of the rules in most absolutist repositories seems overly flexible when applied to different situations.

 

B. The unquestionable nature of the rules in most absolutist repositories seems overly inflexible when applied to different situations.

 

C. The lack of objectivity.

 

D. The fact that most individuals associated with this theory have been proven to have acted to the detriment of their followers in one way or another.

 

E. The allegation that an excessive number of followers actually follow consequentialism.

 

15. Which of the following is the application of ethics to special problems and opportunities experienced by those in business?

A. Situational ethics

 

B. Consequentialism

 

C. Business ethics

 

D. Sarbanes-Oxley principles

 

E. Business utilitarianism

 

16. Which of the following is the study and practice of decisions about what is good, or right?

A. Morals

 

B. Ethics

 

C. Consequences

 

D. Law

 

E. Business

 

17. A local Chamber of Commerce plans a seminar on “the social responsibility of business in our community.” What does that term reference?

A. The responsibility of business to make profit for shareholders.

 

B. The responsibility of business to have annual meetings.

 

C. The expectations that the community imposes on firms doing business inside its borders.

 

D. The expectations of employees regarding wage rates.

 

E. The expectations of management in regard to adequate utility resources.

 

18. Which of the following is the minimal standard essential for the development of business ethics?

A. Meeting the requirements of deontology.

 

B. Meeting the requirement of the public disclosure test.

 

C. Meeting the requirement of utilitarianism.

 

D. Satisfying the company’s board of directors.

 

E. The legality of a decision.

 

19. Which of the following is true regarding business ethics?

A. Business ethics refers to standards of business conduct but does not result in a set of correct decisions.

 

B. Business ethics results in a set of correct decisions and does not simply refer to standards of business conduct.

 

C. Business ethics produces a list of correct business decisions that all ethical businesses will make so long as the theory of deontology is followed.

 

D. Business ethics produces a list of correct business decisions that all ethical businesses will make so long as the theory of rule utilitarianism is followed.

 

E. Business ethics produces a list of correct business decisions that all ethical businesses will make so long as the theory of virtue ethics is followed.

 

20. Which of the following was the result in U.S. v. Alfred Caronia, the case in the text in which the defending pharmaceutical representative was charged with illegally promoting off-label use of a drug?

A. That the defendant had not indeed promoted off-label use of the drug at issue, and the case was dismissed.

 

B. That although the defendant promoted off-label use of the drug at issue, the off-label use was later approved as a valid and appropriate use, and the case was dismissed.

 

C. That the defendant’s speech failed to meet the criteria for classification as commercial speech and that, therefore, the defendant had no constitutional argument in opposition to the charges against him.

 

D. That although the defendant’s speech met the criteria for classification as commercial speech, no constitutional protection has been historically extended to that type of speech; and the defendant, therefore, had no constitutional argument in opposition to the charges against him.

 

E. That although the defendant’s speech met the criteria for classification as commercial speech entitled to constitutional protection under some conditions, the government met the requirements for regulation of the particular speech at issue involving off-label usage.

 

21. Which of the following is true regarding revelations involving Enron and WorldCom?

A. That their upholding of high ethical standards in regard to accounting practices supports the conclusion that the business world should be allowed to regulate itself.

 

B. That WorldCom, a privately held company, had high ethical standards but that Enron, a publicly traded company, engaged in illegal accounting practices supporting the conclusion that privately held companies should be allowed to regulate themselves whereas publicly held companies need significant government regulation.

 

C. That WorldCom, a privately held company, engaged in illegal accounting practices but that Enron, a publicly traded company, had high ethical standards supporting the conclusion that privately held companies need significant government regulation whereas publicly held companies should be allowed to regulate themselves.

 

D. That although illegal accounting practices occurred, it is so difficult to find and regulate such practices that any regulation should be left to the free market.

 

E. That accounting issues with these companies illustrate that the business world cannot be allowed to regulate itself ethically and that government oversight is needed.

 

22. Which of the following is asserted by the principle of rights?

A. That whether a business decision is ethical depends on how the decision affects the rights of all involved.

 

B. That whether a business decision is ethical depends on how the decision affects the rights of stockholders without consideration of other stakeholders.

 

C. That whether a business decision is ethical depends on how the decision affects the rights of employees without consideration of other stakeholders.

 

D. That whether a business decision is ethical depends on how the decision affects the overall economy.

 

E. That whether a business decision is ethical depends on how the decision affects the rights of organized labor without consideration of other stakeholders.

 

23. What is the system of “guanxi” used in China?

A. It refers to a system of relationship building woven together by social ties.

 

B. It refers to a system of strict ethical rules.

 

C. It refers to a prohibition against criticism of government rules and regulations.

 

D. It refers to a system by which business people attempt to avoid strict Chinese regulations.

 

E. It refers to a system of smuggling.

 

24. What do the letters “WPH” mean in reference to the “WPH Framework for Business Ethics” discussed in the text?

A. Who, Purpose, and How

 

B. When, Plan, and How

 

C. Why, Procedure, and Hope

 

D. Where, Plan, and Hope

 

E. Where, Procedure, and How

 

25. Which of the following is true under the WPH process of ethical decision making?

A. The interest of management is ranked higher than that of employees when decisions are made.

 

B. The interest of owners is ranked higher than that of both employees and management when decisions are made.

 

C. When decisions are made, the interest of the community as a whole is considered last.

 

D. The interest of management is ranked higher than that of employees when decisions are made, but the interest of owners is ranked higher than the interest of any group.

 

E. There is not a framework under WPH for ranking one stakeholder above another.

 

26. Which of the following are stakeholders of a business?

A. Shareholders but not employees

 

B. Employees but not shareholders

 

C. Customers but not employees or shareholders

 

D. Management but not employees

 

E. Shareholders, employees, customers, and management

 

  “Environmental Concerns.” Connie, the president of a company that makes paper, has a new interest in the environment. She recently went to a seminar on environmental dangers and has decided to take steps to clean things up. She started at home and has now felt compelled to change things at work. Connie had to face the fact that her company has been cheating and is not in compliance with applicable environmental regulations due to dumping in a nearby river. Her company has never been cited because it employs a very large number of people in the community, including the mayor’s wife and the chief-of-police’s brother. On her mission to clean things up, Connie has decided to go even further than the law requires and install the very latest environmental protections. When she announced her plan, the chair of the company’s board of directors, Brooke, had a meeting with Connie. Brooke told Connie to analyze the situation carefully because the cost of the additional equipment would mean no dividend to shareholders and no raise for employees. Furthermore, Brooke told Connie that installing all the new equipment would result in higher prices for the company’s paper product and could bankrupt the company because of foreign competition. Brooke hinted that Connie could be fired if she persisted. Brooke suggested that Connie just be concerned with a minimal standard of ethics. Connie decides to go forward with her plan to clean things up under the theory that she wants to treat others in the same manner that she wants to be treated. Under Connie’s theory, if she did not understand the importance of the environmental improvements, she would want them to be thrust upon her.

 

27. Which of the following is true regarding meeting the minimal standard of business ethics suggested by Brooke?

A. Decisions must be legal.

 

B. Decisions must meet the criteria of a follower of deontology.

 

C. Decisions must meet the criteria of a follower of utilitarianism.

 

D. Decisions must receive a majority vote of acceptance by employees.

 

E. Decisions must be legal and decisions must also receive a majority vote of acceptance by employees.

 

28. Which of the following would be a stakeholder in the above company?

A. The community only

 

B. The shareholders only

 

C. Future generations only

 

D. The community and shareholders only

 

E. The community, shareholders, and future generations

 

29. Connie’s idea is best referred to as ______.

A. The Golden Rule

 

B. The Disclosure Principle

 

C. The Help Peers Test

 

D. The Sarbanes-Oxley Rule

 

E. The Greenhouse Rule

 

30. Positive abstractions that capture our sense of what is good or desirable are called ______.

A. Ethical ideas

 

B. Values

 

C. Conscience demands

 

D. Desirable principles

 

E. Action goals

 

31. Which of the following are values in the WPH process of ethical decision making?

A. Freedom only

 

B. Security only

 

C. Efficiency only

 

D. Freedom and security, but not efficiency

 

E. Freedom, security, and efficiency

 

32. The idea that we should interact with other people in a manner consistent with the manner in which we would like them to interact with us is called the ______.

A. Equalization Rule

 

B. Ethical Realization Rule

 

C. Silver Rule

 

D. Golden Rule

 

E. Ten Commandments Rule

 

33. What is the name of the law signed by President Bush in the wake of several corporate accounting scandals?

A. The Sarbanes-Oxley Act

 

B. The Public Accounting Act

 

C. The Certified Public Accounting Act

 

D. The Whaley-Mallicoat Act

 

E. The Corporate Scandal Act

 

34. Which of the following is true regarding activities of the Public Company Accounting Oversight Board?

A. The Board ensures that auditors and public accounting firms compile accurate and truthful financial reports for the companies they audit, but it has no responsibility in regard to whistle-blowing protection.

 

B. The Board requires that companies devise a system that allows employees to report suspicions of unethical behavior, but it does not address financial reports prepared by auditors and public accounting firms.

 

C. The Board requires that the universalization test be used as the primary ethical guideline and also mandates protection for whistle-blowers who report suspicious activity involving financial reports.

 

D. The Board ensure that auditors and public accounting firms compile accurate and truthful financial reports for the companies they audit and also requires that companies devise a system that allows employees to report suspicions of unethical behavior.

 

E. The Public Company Accounting Oversight Board was abolished during the Obama administration and no longer exists.

 

35. According to the text, which of the following may be a part of the “how” in the WPH process of decision making?

A. Public disclosure, universalization, security, and the Golden Rule

 

B. Values, public disclosure, and security

 

C. Profit maximization, security, and public disclosure

 

D. Whistle-blowing, the Golden Rule, values, and public disclosure

 

E. Public disclosure, universalization, and the Golden Rule

 

36. The “public disclosure” test for ethical behavior is sometimes referred to as the ______ test.

A. Television

 

B. Powell

 

C. Self-conscious

 

D. Golden

 

E. Primary

 

37. The ______ for ethical behavior seeks consideration of what the world would be like if a decision is copied by everyone else.

A. Golden rule

 

B. Universalization test

 

C. Public disclosure

 

D. Relevant disclosure

 

E. World rule

 

38. Which of the following is true regarding steps taken by news corporations to protect confidential records?

A. News corporations are putting numerous security barriers and encryptions around their records so that nobody can gain access to them.

 

B. News corporations are attempting to protect information written by their own employees, but efforts are not made to protect confidential sources because constitutional protection does not extend to confidential sources.

 

C. News corporations are not bothering with security barriers to the extent as in previous decades because government regulation requires that information be turned over, and there is no point in taking drastic measures to protect such information.

 

D. New regulations make significant privacy barriers illegal in regard to news corporations, so many barriers have been or are being removed.

 

E. Because of the respect given to confidential records by the U.S. government and its enforcement agencies, news corporations see little need to enhance protection of confidential records.

 

  “Accounting Advice.” Brad, a newly hired Certified Public Accountant, who barely passed his boards, was asked by a business client, a chief executive officer, about the effect of the Sarbanes-Oxley Act on an accounting issue. Brad assured the client that the client should not be concerned about the Act because it is very vague, unspecific, and difficult to understand. Brad told the CEO that in any event, the CEO could not be held personally responsible regardless of what happened because only company business was involved. Brad also told the CEO that there is no oversight involved with the act. Later that same day, a coworker of Brad discovered that the CEO had been involved in misstating some financial reports and had also destroyed financial documents to cover up fraud. An employee at the company, Laura, had informed the coworker as well as the SEC. When the issue was mentioned to the CEO, he immediately fired Laura.

 

39. Which of the following is true regarding Brad’s statement that the CEO could not be held liable for violations of the act?

A. Brad is correct. Under no circumstances can a CEO be held personally responsible for violations under the act. Any fines would be imposed upon the business entity.

 

B. Brad is incorrect. The act provides for harsh penalties, and a CEO who knows that the company’s financial reports are incorrect but claims that they are truthful, can be heavily fined. There are no penalties, however, for destruction of financial documents.

 

C. Brad is incorrect. The act provides for harsh penalties, and a CEO who destroys or changes financial documents to mislead can be heavily fined. There are no penalties, however, for misstatements of a company’s financial reports because the company is solely responsible for its statements.

 

D. Brad is incorrect, but any fine against a CEO under the act cannot exceed a nominal amount of $1,000.

 

E. Brad is incorrect. The act provides for harsh penalties, and a CEO who knows that the company’s financial reports are incorrect but claims that they are truthful, can be heavily fined. Additionally, a CEO who destroys or changes financial documents to mislead can be heavily fined.

 

40. Which of the following is true regarding the Act and Laura’s firing?

A. The act does not provide protection for whistle-blowers such as Laura.

 

B. The act provides protection for whistle-blowers only if it can be shown that a significant amount of money, in excess of $5,000, was involved in the incident involved.

 

C. The act provides protection for whistle-blowers only if it can be shown that a significant amount of money, in excess of $10,000, was involved in the incident involved.

 

D. The act provides protection for whistle-blowers who work for an accounting firm, but not for any other employees.

 

E. Laura’s whistle-blowing would be protected under the act, and her firing was illegal.

 

41. Contrary to Brad’s statement, does the Sarbanes-Oxley Act create a board of oversight; and, if so, what is its name?

A. Brad is correct. No oversight board was created.

 

B. A board called the Public Company Accounting Oversight Board was created by the Act.

 

C. A board called the Public Accountability Commission was created by the Act.

 

D. A board called the CPA Oversight Commission was created by the Act.

 

E. A board called the Federal Accountability Commission was created by the Act.

 

42. The ethical theory that requires that we evaluate the morality of an action by imagining ourselves in the position of the person facing the ethical dilemma is called ______.

A. Situational ethics

 

B. Ethical relativism

 

C. Absolutism

 

D. Consequentialism

 

E. Relativity ethics

 

43. How is absolutism different from ethical relativism and situational ethics?

A. It applies utilitarianism.

 

B. It holds that a cost-benefit analysis should be applied.

 

C. It holds that whether an action is moral does not depend on the perspective of the person facing the ethical dilemma.

 

D. It applies virtue ethics and concentrates on the accepted values of the person at issue as well as those of the community involved.

 

E. It applies corporate ethics principles.

 

44. Which of the following is true regarding the relationship between ethical relativism and situational ethics?

A. Like ethical relativism, situational ethics requires that we evaluate the morality of an action by imagining ourselves in the position of the person facing the ethical dilemma; but unlike ethical relativism, situational ethics allows us to judge other people’s actions.

 

B. Like ethical relativism, situational ethics requires that we evaluate the morality of an action by imagining ourselves in the position of the person facing the ethical dilemma and also like ethical relativism, situational ethics allows us to judge the actions of others.

 

C. While the two theories are similar, ethical relativism upholds the existence of objective moral standards whereas situational ethics refuses to recognize the existence of objective moral standards.

 

D. Ethical relativism and situational ethics are the same theory.

 

E. There is no relationship between ethical relativism and situational ethics because the theories are fundamentally opposed to each other.

 

45. Which of the following requires that we see murder as a moral action as long as the murderer believes that the action is best for himself or herself?

A. Absolutism

 

B. Deontology

 

C. Categorical imperative

 

D. Uncertainty of thought

 

E. Ethical relativism

 

46. Which of the following is also referred to as ethical fundamentalism?

A. Ethical relativism

 

B. Absolutism

 

C. Social responsibility

 

D. Ethical absolutism

 

E. Absolute theory

 

  “Fast Food Dilemma.” Richard, who just started at his new job as an assistant manager at a fast-food restaurant, wants to make a good impression. He thinks that things are going great. On only the second day on the job, however, he sees his boss Jill, the manager, slink out of the restaurant with a big box of hamburger that she puts in her car. Jill then speeds away. Richard is fairly certain that Jill did not pay for the hamburger. Richard asks advice of his best friend, Bruce; his girlfriend, Sally; his sister, Jenny; and his dad, Frank. Bruce says that there are no real objective standards and that Richard should just decide what is best for him. Sally says that Richard should focus on the consequences and focus on the greatest benefit to all involved. She believes that it will do no real harm for Richard to keep his mouth shut because the fast-food restaurant is making plenty of money and probably does not pay Jill enough anyway. Plus, getting in trouble with Jill could cause problems at work, and if Richard loses his job, Richard and Sally might have to put off their marriage. Jenny says that on balance the rule producing the greatest good would be to tell Jill because stealing does not generally produce the greatest satisfaction. Richard’s dad says that as a matter of principle Richard should tell Jill because stealing is simply wrong.

 

47. Which of the following theories most accurately fits the advice given by Bruce?

A. Deontology

 

B. Act utilitarianism

 

C. Rule utilitarianism

 

D. Ethical relativism

 

E. Virtue ethics

 

48. Which of the following theories most accurately fits the advice given by Sally?

A. Deontology

 

B. Act utilitarianism

 

C. Rule utilitarianism

 

D. Ethical relativism

 

E. Virtue ethics

 

49. Which of the following theories most accurately fits the advice given by Jenny?

A. Deontology

 

B. Act utilitarianism

 

C. Rule utilitarianism

 

D. Ethical relativism

 

E. Virtue ethics

 

50. Which of the following theories most accurately fits the advice given by Frank?

A. Deontology

 

B. Act utilitarianism

 

C. Rule utilitarianism

 

D. Ethical relativism

 

E. Virtue ethics

 

51. What is the basis of consequentialism?

A. Deontology

 

B. Categorical imperatives

 

C. Inquiry into the consequences

 

D. Disregard of consequences

 

E. Act utilitarianism

 

52. Kantian ethics is involved with which of the following ethical theories?

A. Deontology

 

B. Act utilitarianism

 

C. Rule utilitarianism

 

D. Absolutism

 

E. Situational ethics

 

53. An ethical theory that urges managers to take those actions that provide the greatest pleasure after having subtracted the pain or harm associated with the action in question is called ______.

A. Deontology

 

B. Utilitarianism

 

C. Kantian ethics

 

D. Absolutism

 

E. Ethical relativism

 

54. A business manager who deceives everyone because the manager believes that deception maximizes pleasure over pain in a given situation is acting consistently with which ethical theory?

A. Act deontology

 

B. Ethical relativism

 

C. Act utilitarianism

 

D. Ethical fundamentalism

 

E. Rule utilitarianism

 

55. A business manager may consider it wrong to terminate a person whose spouse has terminal cancer because a firm has an absolute obligation to support its employees when they are vulnerable, period. The business manager is acting consistently with which ethical theory?

A. Deontology

 

B. Ethical relativism

 

C. Act utilitarianism

 

D. Ethical fundamentalism

 

E. Rule utilitarianism

 

56. A person who believes that they should not cheat on a drug test because if everyone did so, the drug test would be meaningless is applying a[n] ______.

A. Ethics of care

 

B. Virtual analysis

 

C. Cost-benefit analysis

 

D. Fundamentalist approach

 

E. Categorical imperative

 

57. Which of the following helps explain why the principle of deontology may be difficult to apply?

A. People disagree about what duties we owe to one another and which duties are more important.

 

B. People disagree about whether consequences are positive or negative.

 

C. People disagree about the ethics of care.

 

D. People disagree about what duties we owe to one another and also whether consequences are positive or negative.

 

E. People disagree about what duties we owe to one another, whether consequences are positive or negative, and about the ethics of care.

 

58. The ethical system in which the development of virtues, or positive character traits such as courage, justice, and truthfulness, is the basis for morality is called ______.

A. Absolutism decision

 

B. Virtual analysis

 

C. Virtue ethics

 

D. Fundamentalist approach

 

E. Categorical imperative

 

59. Which of the following consists of acting on the basis of the recognition that certain actions are right or wrong, regardless of their consequences?

A. Act utilitarianism

 

B. Rule utilitarianism

 

C. Situational ethics

 

D. Virtue ethics

 

E. Deontology

 

60. What is a difficulty with the application of virtue ethics?

A. The applicable categorical imperatives.

 

B. The lack of agreement about the meaning of “the good life.”

 

C. The applicable principle of rights.

 

D. The ethics of care analysis.

 

E. The lack of agreement regarding which rules on balance produce the greatest amount of pleasure for the greatest number of people.

 

61. The ______ adherents believe that when one individual, the caregiver, meets the needs of one other person, the cared-for party, the caregiver is helping to meet the needs of all the individuals who fall within the cared-for party’s web of care.

A. Deontology

 

B. Utilitarianism

 

C. Absolutism

 

D. Virtue ethics

 

E. Ethics of care

 

62. The ______ holds that the right course of action is the option most consistent with the building and maintaining of human relationships.

A. Ethics of care

 

B. Principle of virtue ethics

 

C. Deontology

 

D. Act utilitarianism

 

E. Rule utilitarianism

 

 

Essay Questions

63. Assume you are hired as the president of a new company. Write a code of ethics for the firm.

 

 

 

 

64. Sally is the president of AAA Components, a company that makes small parts for the automotive industry. Customers of AAA components are primarily auto manufacturers. Sally’s cousin, Frank, works at the company as a sales representative. A promotion to the sales manager position is open. Frank has applied and so has Susan, another sales representative. While both Frank and Susan are good employees, they are skilled in different areas. Susan is excellent with technology and with placing orders. She does an excellent job in following through with order problems. Frank, on the other hand, is better with customer relations, and customers seem to like him better. Sally would like to promote Frank but she has two concerns. Her first concern is that she does not want it to be perceived that she is being unfair because Frank is family. Her second concern is that she has a suspicion that some customers are somewhat prejudiced against Susan because she is female. Most customers with whom the sales representatives deal are male, and Sally suspects that they may give Frank more consideration than Sally. Define and discuss the WPH framework for business ethics, and within that framework propose a solution. Be sure to fully address the populations, purposes, and guidelines included within “W,” “P,” and “H.”

 

 

 

 

65. Summarize the following ethical principles:

(a). Ethical relativism
(b). Situational ethics
(c). Consequentialism
(d). Deontology
(e). Virtue ethics
(f). Ethics of care

 

 

 

 

66. Milly’s best friend and roommate, Sarah, is getting ready for a big date. Sarah had her hair and nails done, bought a new dress, and spent two hours getting ready. Just as Milly sees Sarah’s date coming down the street, Sarah comes out and asks Milly how she looks. Unfortunately, the stylist did a terrible job, the nails are an odd shade of purple, and the new dress is extremely unflattering. Sarah has no time to change. Discuss what Milly would say and why under the following principles:

(a). Deontology
(b). Act utilitarianism
(c). Rule utilitarianism
(d). Virtue ethics

 

 

 

 

67. What does a reference to the “social responsibility of business” mean? Should businesses consider community expectations, and why or why not?

 

 

 

 

Chapter 02 Business Ethics Answer Key

True / False Questions

1.
(p. 16)
Ethical conversation is primarily about finding the one and only right thing to do.

FALSE

Ethical conversation is less about finding the one and only right thing to do than it is about finding the better thing to do.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-01 What are business ethics and the social responsibility of business?
Topic: Business Ethics
 

 

2.
(p. 16)
Business ethics is the application of ethics to the special problems and opportunities experienced by business people.

TRUE

Ethics guides us when we are wondering what we should be doing in a particular situation whereas business ethics is the application of ethics to the special problems and opportunities experienced by business people.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-01 What are business ethics and the social responsibility of business?
Topic: Business Ethics and Social Responsibility
 

 

3.
(p. 16)
The social responsibility of business consists only of the expectations employees have of employers.

FALSE

The social responsibility of business consists of the expectations that the community imposes on firms doing business inside its borders.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-01 What are business ethics and the social responsibility of business?
Topic: Business Ethics and Social Responsibility
 

 

4.
(p. 17-18)
Insurer American International Group (AIG) is well known in the insurance industry for its ethical and cautious investments protecting investors.

FALSE

Because of issues including risky bets it made insuring mortgage-backed securities, the company collapsed and received the largest federal bailout in U.S. history.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-01 What are business ethics and the social responsibility of business?
Topic: Business Ethics and Social Responsibility
 

 

5.
(p. 18)
In some countries, businesses must pay bribes in order to receive legitimate supplies.

TRUE

In some countries, businesses must pay bribes to receive legitimate supplies; and although the business person may be morally opposed to paying bribes, the supplies are necessary to stay in business.

 

AACSB: Diversity
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-02 How are business law and business ethics related?
Topic: Business Law and Business Ethics
 

 

6.
(p. 22)
In an ethical analysis using the WPH Framework referenced in the text, owners are the most important stakeholders and should receive the greatest consideration in decision making regardless of the type of problem addressed.

FALSE

The WPH framework considers whom the decision would affect, purpose (values), and how to make ethical decisions.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-03 How can we use the WPH framework for ethical business decisions?
Topic: The WPH Framework for Business Ethics
 

 

7.
(p. 23)
The definition of stakeholder is the same as the definition of shareholder.

FALSE

The stakeholders of a firm are the many groups of people affected by the firm’s decisions.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 02-03 How can we use the WPH framework for ethical business decisions?
Topic: The WPH Framework for Business Ethics
 

 

8.
(p. 23)
The community in which a firm operates would not be considered a stakeholder of the firm.

FALSE

The general community where a firm operates is a stakeholder of the firm.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 02-03 How can we use the WPH framework for ethical business decisions?
Topic: The WPH Framework for Business Ethics
 

 

9.
(p. 33)
Situational ethics is the same thing as ethical relativism.

FALSE

Unlike ethical relativism, situational ethics allows us to judge other people’s actions.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: Appendix 2A Theories of Business Ethics
Topic: Theories of Business Ethics
 

 

10.
(p. 33)
Consequentialism provides a rigid set of rules to follow regardless of the situation.

FALSE

In contrast to absolutism, consequentialism does not provide a rigid set of rules to follow regardless of the situation.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: Appendix 2A Theories of Business Ethics
Topic: Theories of Business Ethics
 

 

11.
(p. 34)
Utilitarianism is a form of consequentialism.

TRUE

Utilitarianism is one form of consequentialism that business managers may find useful.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: Appendix 2A Theories of Business Ethics
Topic: Theories of Business Ethics
 

 

12.
(p. 21)
Ethics is not an issue in accounting because of the primarily objective data involved in that field.

FALSE

As reflected in Exhibit 2-2, during the past several years, ethics violations have been uncovered in the accounting practices of a number of large companies.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-02 How are business law and business ethics related?
Topic: Business Law and Business Ethics
 

 

Multiple Choice Questions

13.
(p. 16)
Which of the following was the result in regard to the statute of limitations in the Case Opener in which the plaintiff claimed that the drug Accutane caused her to develop ulcerative colitis and irritable bowel syndrome?

A. That because the plaintiff was not warned by her doctor of specific risks caused by the medication, the statute of limitations did not begin to run until she became aware of an advertisement discussing the risk.

 

B. That because the plaintiff was warned by her doctor of specific risks caused by the medication, the statute of limitations began to run prior to the time she became aware of an advertisement discussing the risk; and the statute of limitations barred her claim.

 

C. That the statute of limitations began to run on the plaintiff’s claim when the risk of the drug was discovered by the manufacturer, not on the date on which the plaintiff became aware of the risk and that the statute of limitations, therefore, barred her claim.

 

D. That in lawsuits involving this type of drug, there is no statute of limitations because each day the plaintiff suffers from pain results in the beginning of a new cause of action.

 

E. That the defendant committed fraud preventing it from relying on the statute of limitations.

The court found that given that Kendall’s dermatologist was unaware of, and therefore did not warn her of, the risk of her condition resulting from Accutane, a reasonable person in the plaintiff’s situation would not have been aware of the potential for the medication to cause her illness. Therefore, given that the plaintiff was not made aware of the connection between her illness and the medication until the later lawyer’s advertisement, her lawsuit was timely.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-01 What are business ethics and the social responsibility of business?
Topic: Business Ethics
 

 

14.
(p. 33)
Which of the following presents a problem when considering the theory of ethics known as absolutism?

A. The questionable nature of the rules in most absolutist repositories seems overly flexible when applied to different situations.

 

B. The unquestionable nature of the rules in most absolutist repositories seems overly inflexible when applied to different situations.

 

C. The lack of objectivity.

 

D. The fact that most individuals associated with this theory have been proven to have acted to the detriment of their followers in one way or another.

 

E. The allegation that an excessive number of followers actually follow consequentialism.

The unquestionable nature of the rules in most absolutist repositories seems overly inflexible when applied to different situations.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: Appendix 2A Theories of Business Ethics
Topic: Theories of Business Ethics
 

 

15.
(p. 16)
Which of the following is the application of ethics to special problems and opportunities experienced by those in business?

A. Situational ethics

 

B. Consequentialism

 

C. Business ethics

 

D. Sarbanes-Oxley principles

 

E. Business utilitarianism

Business ethics is the application of ethics to special problems and opportunities experienced by business people.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 02-01 What are business ethics and the social responsibility of business?
Topic: Business Ethics and Social Responsibility
 

 

16.
(p. 16)
Which of the following is the study and practice of decisions about what is good, or right?

A. Morals

 

B. Ethics

 

C. Consequences

 

D. Law

 

E. Business

Ethics is the study and practice of decisions about what is good, or right.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 02-01 What are business ethics and the social responsibility of business?
Topic: Business Ethics and Social Responsibility
 

 

17.
(p. 16)
A local Chamber of Commerce plans a seminar on “the social responsibility of business in our community.” What does that term reference?

A. The responsibility of business to make profit for shareholders.

 

B. The responsibility of business to have annual meetings.

 

C. The expectations that the community imposes on firms doing business inside its borders.

 

D. The expectations of employees regarding wage rates.

 

E. The expectations of management in regard to adequate utility resources.

The social responsibility of business consists of the expectations that the community imposes on firms doing business inside its borders.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 02-01 What are business ethics and the social responsibility of business?
Topic: Business Ethics and Social Responsibility
 

 

18.
(p. 18)
Which of the following is the minimal standard essential for the development of business ethics?

A. Meeting the requirements of deontology.

 

B. Meeting the requirement of the public disclosure test.

 

C. Meeting the requirement of utilitarianism.

 

D. Satisfying the company’s board of directors.

 

E. The legality of a decision.

The legality of the decision in choosing a method of production, how to compete with competing firms, and the social responsibilities of the firm is the minimal standard that must be met for the firm to be an ethical business.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 02-02 How are business law and business ethics related?
Topic: Business Law and Business Ethics
 

 

19.
(p. 20)
Which of the following is true regarding business ethics?

A. Business ethics refers to standards of business conduct but does not result in a set of correct decisions.

 

B. Business ethics results in a set of correct decisions and does not simply refer to standards of business conduct.

 

C. Business ethics produces a list of correct business decisions that all ethical businesses will make so long as the theory of deontology is followed.

 

D. Business ethics produces a list of correct business decisions that all ethical businesses will make so long as the theory of rule utilitarianism is followed.

 

E. Business ethics produces a list of correct business decisions that all ethical businesses will make so long as the theory of virtue ethics is followed.

The definition of business ethics refers to standards of business conduct and does not result in a set of correct decisions.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 02-02 How are business law and business ethics related?
Topic: Business Law and Business Ethics
 

 

20.
(p. 18-20)
Which of the following was the result in U.S. v. Alfred Caronia, the case in the text in which the defending pharmaceutical representative was charged with illegally promoting off-label use of a drug?

A. That the defendant had not indeed promoted off-label use of the drug at issue, and the case was dismissed.

 

B. That although the defendant promoted off-label use of the drug at issue, the off-label use was later approved as a valid and appropriate use, and the case was dismissed.

 

C. That the defendant’s speech failed to meet the criteria for classification as commercial speech and that, therefore, the defendant had no constitutional argument in opposition to the charges against him.

 

D. That although the defendant’s speech met the criteria for classification as commercial speech, no constitutional protection has been historically extended to that type of speech; and the defendant, therefore, had no constitutional argument in opposition to the charges against him.

 

E. That although the defendant’s speech met the criteria for classification as commercial speech entitled to constitutional protection under some conditions, the government met the requirements for regulation of the particular speech at issue involving off-label usage.

Although the court in U.S. v. Alfred Caronia found that the defendant’s statements met the criteria for classification as commercial speech entitled to protection under some circumstances, the defendant’s speech was not constitutionally protected because of the reasons advanced by the government for the regulation at issue.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-02 How are business law and business ethics related?
Topic: Business Law and Business Ethics
 

 

21.
(p. 21)
Which of the following is true regarding revelations involving Enron and WorldCom?

A. That their upholding of high ethical standards in regard to accounting practices supports the conclusion that the business world should be allowed to regulate itself.

 

B. That WorldCom, a privately held company, had high ethical standards but that Enron, a publicly traded company, engaged in illegal accounting practices supporting the conclusion that privately held companies should be allowed to regulate themselves whereas publicly held companies need significant government regulation.

 

C. That WorldCom, a privately held company, engaged in illegal accounting practices but that Enron, a publicly traded company, had high ethical standards supporting the conclusion that privately held companies need significant government regulation whereas publicly held companies should be allowed to regulate themselves.

 

D. That although illegal accounting practices occurred, it is so difficult to find and regulate such practices that any regulation should be left to the free market.

 

E. That accounting issues with these companies illustrate that the business world cannot be allowed to regulate itself ethically and that government oversight is needed.

The revelations of Enron and WorldCom suggested quite blatantly that the business world could not be allowed to regulate itself ethically, and their downfall in part led to many federal regulations designed to promote truthfulness and ethical practices among business managers.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-02 How are business law and business ethics related?
Topic: Business Law and Business Ethics
 

 

22.
(p. 35)
Which of the following is asserted by the principle of rights?

A. That whether a business decision is ethical depends on how the decision affects the rights of all involved.

 

B. That whether a business decision is ethical depends on how the decision affects the rights of stockholders without consideration of other stakeholders.

 

C. That whether a business decision is ethical depends on how the decision affects the rights of employees without consideration of other stakeholders.

 

D. That whether a business decision is ethical depends on how the decision affects the overall economy.

 

E. That whether a business decision is ethical depends on how the decision affects the rights of organized labor without consideration of other stakeholders.

The principle of rights asserts that whether a business decision is ethical depends on how the decision affects the rights of all involved, a principle that is foundational to Western culture.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: Appendix 2A Theories of Business Ethics
Topic: Theories of Business Ethics
 

 

23.
(p. 21)
What is the system of “guanxi” used in China?

A. It refers to a system of relationship building woven together by social ties.

 

B. It refers to a system of strict ethical rules.

 

C. It refers to a prohibition against criticism of government rules and regulations.

 

D. It refers to a system by which business people attempt to avoid strict Chinese regulations.

 

E. It refers to a system of smuggling.

“Guanxi” refers to a sort of relationship building and is an intricate system of interpersonal networks woven together by social ties.

 

AACSB: Diversity
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-02 How are business law and business ethics related?
Topic: Business Law and Business Ethics
 

 

24.
(p. 22)
What do the letters “WPH” mean in reference to the “WPH Framework for Business Ethics” discussed in the text?

A. Who, Purpose, and How

 

B. When, Plan, and How

 

C. Why, Procedure, and Hope

 

D. Where, Plan, and Hope

 

E. Where, Procedure, and How

The WPH framework addresses whom a decision would affect, the purpose of the decision, and the guidelines on how to make ethical decisions.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-03 How can we use the WPH framework for ethical business decisions?
Topic: The WPH Framework for Business Ethics
 

 

25.
(p. 22)
Which of the following is true under the WPH process of ethical decision making?

A. The interest of management is ranked higher than that of employees when decisions are made.

 

B. The interest of owners is ranked higher than that of both employees and management when decisions are made.

 

C. When decisions are made, the interest of the community as a whole is considered last.

 

D. The interest of management is ranked higher than that of employees when decisions are made, but the interest of owners is ranked higher than the interest of any group.

 

E. There is not a framework under WPH for ranking one stakeholder above another.

The framework addresses whom a decision would affect, the purpose of the decision, and the guidelines on how to make ethical decisions. There is no reference to ranking stakeholders at a higher level.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-03 How can we use the WPH framework for ethical business decisions?
Topic: The WPH Framework for Business Ethics
 

 

26.
(p. 23)
Which of the following are stakeholders of a business?

A. Shareholders but not employees

 

B. Employees but not shareholders

 

C. Customers but not employees or shareholders

 

D. Management but not employees

 

E. Shareholders, employees, customers, and management

The stakeholders of a firm are the many groups of people affected by the firm’s decisions.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-03 How can we use the WPH framework for ethical business decisions?
Topic: The WPH Framework for Business Ethics
 

 

  “Environmental Concerns.” Connie, the president of a company that makes paper, has a new interest in the environment. She recently went to a seminar on environmental dangers and has decided to take steps to clean things up. She started at home and has now felt compelled to change things at work. Connie had to face the fact that her company has been cheating and is not in compliance with applicable environmental regulations due to dumping in a nearby river. Her company has never been cited because it employs a very large number of people in the community, including the mayor’s wife and the chief-of-police’s brother. On her mission to clean things up, Connie has decided to go even further than the law requires and install the very latest environmental protections. When she announced her plan, the chair of the company’s board of directors, Brooke, had a meeting with Connie. Brooke told Connie to analyze the situation carefully because the cost of the additional equipment would mean no dividend to shareholders and no raise for employees. Furthermore, Brooke told Connie that installing all the new equipment would result in higher prices for the company’s paper product and could bankrupt the company because of foreign competition. Brooke hinted that Connie could be fired if she persisted. Brooke suggested that Connie just be concerned with a minimal standard of ethics. Connie decides to go forward with her plan to clean things up under the theory that she wants to treat others in the same manner that she wants to be treated. Under Connie’s theory, if she did not understand the importance of the environmental improvements, she would want them to be thrust upon her.

 

27.
(p. 18)
Which of the following is true regarding meeting the minimal standard of business ethics suggested by Brooke?

A. Decisions must be legal.

 

B. Decisions must meet the criteria of a follower of deontology.

 

C. Decisions must meet the criteria of a follower of utilitarianism.

 

D. Decisions must receive a majority vote of acceptance by employees.

 

E. Decisions must be legal and decisions must also receive a majority vote of acceptance by employees.

The legality of the decision in choosing a method of production, how to compete with competing firms, and the social responsibilities of the firm is the minimal standard that must be met for the firm to be an ethical business.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-02 How are business law and business ethics related?
Topic: Business Law and Business Ethics
 

 

28.
(p. 23)
Which of the following would be a stakeholder in the above company?

A. The community only

 

B. The shareholders only

 

C. Future generations only

 

D. The community and shareholders only

 

E. The community, shareholders, and future generations

The stakeholders of a firm are the many groups of people affected by the firm’s decisions.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 02-03 How can we use the WPH framework for ethical business decisions?
Topic: The WPH Framework for Business Ethics
 

 

29.
(p. 26)
Connie’s idea is best referred to as ______.

A. The Golden Rule

 

B. The Disclosure Principle

 

C. The Help Peers Test

 

D. The Sarbanes-Oxley Rule

 

E. The Greenhouse Rule

The Golden Rule is referenced as the idea that we should interact with other people in a manner consistent with the way we would like them to interact with us.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 02-03 How can we use the WPH framework for ethical business decisions?
Topic: The WPH Framework for Business Ethics
 

 

30.
(p. 24)
Positive abstractions that capture our sense of what is good or desirable are called ______.

A. Ethical ideas

 

B. Values

 

C. Conscience demands

 

D. Desirable principles

 

E. Action goals

Positive abstractions that capture our sense of what is good or desirable are called values.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-03 How can we use the WPH framework for ethical business decisions?
Topic: The WPH Framework for Business Ethics
 

 

31.
(p. 25)
Which of the following are values in the WPH process of ethical decision making?

A. Freedom only

 

B. Security only

 

C. Efficiency only

 

D. Freedom and security, but not efficiency

 

E. Freedom, security, and efficiency

Exhibit 2-5 “Primary Values and Business Ethics” outlines an efficient way to apply this second step in the WPH framework referencing the values of freedom, security, justice, and efficiency.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-03 How can we use the WPH framework for ethical business decisions?
Topic: The WPH Framework for Business Ethics
 

 

32.
(p. 26)
The idea that we should interact with other people in a manner consistent with the manner in which we would like them to interact with us is called the ______.

A. Equalization Rule

 

B. Ethical Realization Rule

 

C. Silver Rule

 

D. Golden Rule

 

E. Ten Commandments Rule

The idea that we should interact with other people in a manner consistent with the manner in which we would like them to interact with us is called the Golden Rule.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-03 How can we use the WPH framework for ethical business decisions?
Topic: The WPH Framework for Business Ethics
 

 

33.
(p. 28)
What is the name of the law signed by President Bush in the wake of several corporate accounting scandals?

A. The Sarbanes-Oxley Act

 

B. The Public Accounting Act

 

C. The Certified Public Accounting Act

 

D. The Whaley-Mallicoat Act

 

E. The Corporate Scandal Act

The Corporate and Criminal Fraud Accountability Act, also known as the Sarbanes-Oxley Act, was signed by President Bush in 2002 in the wake of several corporate accounting scandals.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-03 How can we use the WPH framework for ethical business decisions?
Topic: The WPH Framework for Business Ethics
 

 

34.
(p. 28)
Which of the following is true regarding activities of the Public Company Accounting Oversight Board?

A. The Board ensures that auditors and public accounting firms compile accurate and truthful financial reports for the companies they audit, but it has no responsibility in regard to whistle-blowing protection.

 

B. The Board requires that companies devise a system that allows employees to report suspicions of unethical behavior, but it does not address financial reports prepared by auditors and public accounting firms.

 

C. The Board requires that the universalization test be used as the primary ethical guideline and also mandates protection for whistle-blowers who report suspicious activity involving financial reports.

 

D. The Board ensure that auditors and public accounting firms compile accurate and truthful financial reports for the companies they audit and also requires that companies devise a system that allows employees to report suspicions of unethical behavior.

 

E. The Public Company Accounting Oversight Board was abolished during the Obama administration and no longer exists.

As set forth in Exhibit 2-7, the Public Company Accounting Oversight Board is responsible for ensuring that auditors and public accounting firms compile accurate and truthful financial reports for the companies they audit. The act also requires that companies devise a system that allows employees to report suspicions of unethical behavior within the company. The act also protects these whistle-blowers from being fired or from retaliation by their employer for reporting a possible problem within the company.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-03 How can we use the WPH framework for ethical business decisions?
Topic: The WPH Framework for Business Ethics
 

 

35.
(p. 22)
According to the text, which of the following may be a part of the “how” in the WPH process of decision making?

A. Public disclosure, universalization, security, and the Golden Rule

 

B. Values, public disclosure, and security

 

C. Profit maximization, security, and public disclosure

 

D. Whistle-blowing, the Golden Rule, values, and public disclosure

 

E. Public disclosure, universalization, and the Golden Rule

Exhibit 2-3, The WPH Process of Ethical Decision Making, reflects that “public disclosure,” “universalization,” and the “Golden Rule” are all part of the How process in the WPH Framework.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-03 How can we use the WPH framework for ethical business decisions?
Topic: The WPH Framework for Business Ethics
 

 

36.
(p. 27)
The “public disclosure” test for ethical behavior is sometimes referred to as the ______ test.

A. Television

 

B. Powell

 

C. Self-conscious

 

D. Golden

 

E. Primary

The “public disclosure” test for ethical behavior is sometimes referred to as the television test because it requires us to imagine that our actions are being broadcast on national television.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-03 How can we use the WPH framework for ethical business decisions?
Topic: The WPH Framework for Business Ethics
 

 

37.
(p. 27)
The ______ for ethical behavior seeks consideration of what the world would be like if a decision is copied by everyone else.

A. Golden rule

 

B. Universalization test

 

C. Public disclosure

 

D. Relevant disclosure

 

E. World rule

The universalization test for ethical behavior seeks consideration of what the world would be like if a decision is copied by everyone else.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-03 How can we use the WPH framework for ethical business decisions?
Topic: The WPH Framework for Business Ethics
 

 

38.
(p. 28)
Which of the following is true regarding steps taken by news corporations to protect confidential records?

A. News corporations are putting numerous security barriers and encryptions around their records so that nobody can gain access to them.

 

B. News corporations are attempting to protect information written by their own employees, but efforts are not made to protect confidential sources because constitutional protection does not extend to confidential sources.

 

C. News corporations are not bothering with security barriers to the extent as in previous decades because government regulation requires that information be turned over, and there is no point in taking drastic measures to protect such information.

 

D. New regulations make significant privacy barriers illegal in regard to news corporations, so many barriers have been or are being removed.

 

E. Because of the respect given to confidential records by the U.S. government and its enforcement agencies, news corporations see little need to enhance protection of confidential records.

Now news corporations are putting numerous security barriers and encryptions around their records so that nobody can gain access to them.

 

AACSB: Technology
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-03 How can we use the WPH framework for ethical business decisions?
Topic: The WPH Framework for Business Ethics
 

 

  “Accounting Advice.” Brad, a newly hired Certified Public Accountant, who barely passed his boards, was asked by a business client, a chief executive officer, about the effect of the Sarbanes-Oxley Act on an accounting issue. Brad assured the client that the client should not be concerned about the Act because it is very vague, unspecific, and difficult to understand. Brad told the CEO that in any event, the CEO could not be held personally responsible regardless of what happened because only company business was involved. Brad also told the CEO that there is no oversight involved with the act. Later that same day, a coworker of Brad discovered that the CEO had been involved in misstating some financial reports and had also destroyed financial documents to cover up fraud. An employee at the company, Laura, had informed the coworker as well as the SEC. When the issue was mentioned to the CEO, he immediately fired Laura.

 

39.
(p. 28)
Which of the following is true regarding Brad’s statement that the CEO could not be held liable for violations of the act?

A. Brad is correct. Under no circumstances can a CEO be held personally responsible for violations under the act. Any fines would be imposed upon the business entity.

 

B. Brad is incorrect. The act provides for harsh penalties, and a CEO who knows that the company’s financial reports are incorrect but claims that they are truthful, can be heavily fined. There are no penalties, however, for destruction of financial documents.

 

C. Brad is incorrect. The act provides for harsh penalties, and a CEO who destroys or changes financial documents to mislead can be heavily fined. There are no penalties, however, for misstatements of a company’s financial reports because the company is solely responsible for its statements.

 

D. Brad is incorrect, but any fine against a CEO under the act cannot exceed a nominal amount of $1,000.

 

E. Brad is incorrect. The act provides for harsh penalties, and a CEO who knows that the company’s financial reports are incorrect but claims that they are truthful, can be heavily fined. Additionally, a CEO who destroys or changes financial documents to mislead can be heavily fined.

As set forth in Exhibit 2-7, if the CEO or CFO knows that the company’s financial reports are incorrect but claims they are truthful, or if he or she destroys or changes financial documents, the imposed fine can run into millions of dollars.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 02-03 How can we use the WPH framework for ethical business decisions?
Topic: The WPH Framework for Business Ethics
 

 

40.
(p. 28)
Which of the following is true regarding the Act and Laura’s firing?

A. The act does not provide protection for whistle-blowers such as Laura.

 

B. The act provides protection for whistle-blowers only if it can be shown that a significant amount of money, in excess of $5,000, was involved in the incident involved.

 

C. The act provides protection for whistle-blowers only if it can be shown that a significant amount of money, in excess of $10,000, was involved in the incident involved.

 

D. The act provides protection for whistle-blowers who work for an accounting firm, but not for any other employees.

 

E. Laura’s whistle-blowing would be protected under the act, and her firing was illegal.

As set forth in Exhibit 2-7, the Sarbanes-Oxley Act protects whistle-blowers from being fired or from retaliation by their employer for reporting a possible problem within the company.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 02-03 How can we use the WPH framework for ethical business decisions?
Topic: The WPH Framework for Business Ethics
 

 

41.
(p. 28)
Contrary to Brad’s statement, does the Sarbanes-Oxley Act create a board of oversight; and, if so, what is its name?

A. Brad is correct. No oversight board was created.

 

B. A board called the Public Company Accounting Oversight Board was created by the Act.

 

C. A board called the Public Accountability Commission was created by the Act.

 

D. A board called the CPA Oversight Commission was created by the Act.

 

E. A board called the Federal Accountability Commission was created by the Act.

As set forth in Exhibit 2-7, the Sarbanes-Oxley Act created the Public Company Accounting Oversight Board.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 02-03 How can we use the WPH framework for ethical business decisions?
Topic: The WPH Framework for Business Ethics
 

 

42.
(p. 33)
The ethical theory that requires that we evaluate the morality of an action by imagining ourselves in the position of the person facing the ethical dilemma is called ______.

A. Situational ethics

 

B. Ethical relativism

 

C. Absolutism

 

D. Consequentialism

 

E. Relativity ethics

Situational ethics requires that we evaluate the morality of an action by imagining ourselves in the position of the person facing the ethical dilemma.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: Appendix 2A Theories of Business Ethics
Topic: Theories of Business Ethics
 

 

43.
(p. 33)
How is absolutism different from ethical relativism and situational ethics?

A. It applies utilitarianism.

 

B. It holds that a cost-benefit analysis should be applied.

 

C. It holds that whether an action is moral does not depend on the perspective of the person facing the ethical dilemma.

 

D. It applies virtue ethics and concentrates on the accepted values of the person at issue as well as those of the community involved.

 

E. It applies corporate ethics principles.

Unlike ethical relativism and situational ethics, absolutism holds that whether an action is moral does not depend on the perspective of the person facing the ethical dilemma.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: Appendix 2A Theories of Business Ethics
Topic: Theories of Business Ethics
 

 

44.
(p. 33)
Which of the following is true regarding the relationship between ethical relativism and situational ethics?

A. Like ethical relativism, situational ethics requires that we evaluate the morality of an action by imagining ourselves in the position of the person facing the ethical dilemma; but unlike ethical relativism, situational ethics allows us to judge other people’s actions.

 

B. Like ethical relativism, situational ethics requires that we evaluate the morality of an action by imagining ourselves in the position of the person facing the ethical dilemma and also like ethical relativism, situational ethics allows us to judge the actions of others.

 

C. While the two theories are similar, ethical relativism upholds the existence of objective moral standards whereas situational ethics refuses to recognize the existence of objective moral standards.

 

D. Ethical relativism and situational ethics are the same theory.

 

E. There is no relationship between ethical relativism and situational ethics because the theories are fundamentally opposed to each other.

Like ethical relativism, situational ethics requires that we evaluate the morality of an action by imagining ourselves in the position of the person facing the ethical dilemma; but unlike ethical relativism, situational ethics allows us to judge other people’s actions.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: Appendix 2A Theories of Business Ethics
Topic: Theories of Business Ethics
 

 

45.
(p. 34)
Which of the following requires that we see murder as a moral action as long as the murderer believes that the action is best for himself or herself?

A. Absolutism

 

B. Deontology

 

C. Categorical imperative

 

D. Uncertainty of thought

 

E. Ethical relativism

Ethical relativism denies the existence of objective moral standards. For example, ethical relativism requires that we see murder as a moral action as long as the murderer believes that the action is best for himself or herself.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: Appendix 2A Theories of Business Ethics
Topic: Theories of Business Ethics
 

 

46.
(p. 33)
Which of the following is also referred to as ethical fundamentalism?

A. Ethical relativism

 

B. Absolutism

 

C. Social responsibility

 

D. Ethical absolutism

 

E. Absolute theory

Absolutism, or ethical fundamentalism, requires that individuals defer to a set of rules to guide them in the ethical decision-making process.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: Appendix 2A Theories of Business Ethics
Topic: Theories of Business Ethics
 

 

  “Fast Food Dilemma.” Richard, who just started at his new job as an assistant manager at a fast-food restaurant, wants to make a good impression. He thinks that things are going great. On only the second day on the job, however, he sees his boss Jill, the manager, slink out of the restaurant with a big box of hamburger that she puts in her car. Jill then speeds away. Richard is fairly certain that Jill did not pay for the hamburger. Richard asks advice of his best friend, Bruce; his girlfriend, Sally; his sister, Jenny; and his dad, Frank. Bruce says that there are no real objective standards and that Richard should just decide what is best for him. Sally says that Richard should focus on the consequences and focus on the greatest benefit to all involved. She believes that it will do no real harm for Richard to keep his mouth shut because the fast-food restaurant is making plenty of money and probably does not pay Jill enough anyway. Plus, getting in trouble with Jill could cause problems at work, and if Richard loses his job, Richard and Sally might have to put off their marriage. Jenny says that on balance the rule producing the greatest good would be to tell Jill because stealing does not generally produce the greatest satisfaction. Richard’s dad says that as a matter of principle Richard should tell Jill because stealing is simply wrong.

 

47.
(p. 33)
Which of the following theories most accurately fits the advice given by Bruce?

A. Deontology

 

B. Act utilitarianism

 

C. Rule utilitarianism

 

D. Ethical relativism

 

E. Virtue ethics

According to ethical relativism, individuals must evaluate actions on the basis of what they feel is best for them.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: Appendix 2A Theories of Business Ethics
Topic: Theories of Business Ethics
 

 

48.
(p. 34)
Which of the following theories most accurately fits the advice given by Sally?

A. Deontology

 

B. Act utilitarianism

 

C. Rule utilitarianism

 

D. Ethical relativism

 

E. Virtue ethics

Act utilitarianism advises examining all the potential actions in each situation and choosing the action that yields the greatest amount of pleasure over pain for all involved.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: Appendix 2A Theories of Business Ethics
Topic: Theories of Business Ethics
 

 

49.
(p. 34)
Which of the following theories most accurately fits the advice given by Jenny?

A. Deontology

 

B. Act utilitarianism

 

C. Rule utilitarianism

 

D. Ethical relativism

 

E. Virtue ethics

Rule utilitarianism holds that general rules that on balance produce the greatest amount of pleasure for all involved should be established and followed in each situation.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: Appendix 2A Theories of Business Ethics
Topic: Theories of Business Ethics
 

 

50.
(p. 34)
Which of the following theories most accurately fits the advice given by Frank?

A. Deontology

 

B. Act utilitarianism

 

C. Rule utilitarianism

 

D. Ethical relativism

 

E. Virtue ethics

Deontology consists of acting on the basis of the recognition that certain actions are right or wrong, regardless of their consequences.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: Appendix 2A Theories of Business Ethics
Topic: Theories of Business Ethics
 

 

51.
(p. 33-34)
What is the basis of consequentialism?

A. Deontology

 

B. Categorical imperatives

 

C. Inquiry into the consequences

 

D. Disregard of consequences

 

E. Act utilitarianism

Consequentialism is a general approach to ethical dilemmas that requires that we inquire about the consequences to relevant people of our making a particular decision.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: Appendix 2A Theories of Business Ethics
Topic: Theories of Business Ethics
 

 

52.
(p. 34)
Kantian ethics is involved with which of the following ethical theories?

A. Deontology

 

B. Act utilitarianism

 

C. Rule utilitarianism

 

D. Absolutism

 

E. Situational ethics

When you see references to Kantian ethics, the analysis that follows the reference will be a discussion of the most famous of the deontological approaches to business ethics.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: Appendix 2A Theories of Business Ethics
Topic: Theories of Business Ethics
 

 

53.
(p. 34)
An ethical theory that urges managers to take those actions that provide the greatest pleasure after having subtracted the pain or harm associated with the action in question is called ______.

A. Deontology

 

B. Utilitarianism

 

C. Kantian ethics

 

D. Absolutism

 

E. Ethical relativism

Like many consequentialist theories of ethics, utilitarianism urges managers to take those actions that provide the greatest pleasure after having subtracted the pain or harm associated with the action in question.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: Appendix 2A Theories of Business Ethics
Topic: Theories of Business Ethics
 

 

54.
(p. 34)
A business manager who deceives everyone because the manager believes that deception maximizes pleasure over pain in a given situation is acting consistently with which ethical theory?

A. Act deontology

 

B. Ethical relativism

 

C. Act utilitarianism

 

D. Ethical fundamentalism

 

E. Rule utilitarianism

According to act utilitarianism, a business manager who deceives an employee may be acting morally if the act of deception maximizes pleasure over pain for everyone involved.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: Appendix 2A Theories of Business Ethics
Topic: Theories of Business Ethics
 

 

55.
(p. 34)
A business manager may consider it wrong to terminate a person whose spouse has terminal cancer because a firm has an absolute obligation to support its employees when they are vulnerable, period. The business manager is acting consistently with which ethical theory?

A. Deontology

 

B. Ethical relativism

 

C. Act utilitarianism

 

D. Ethical fundamentalism

 

E. Rule utilitarianism

Deontology consists of acting on the basis of the recognition that certain actions are right or wrong, regardless of their consequences.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: Appendix 2A Theories of Business Ethics
Topic: Theories of Business Ethics
 

 

56.
(p. 34-35)
A person who believes that they should not cheat on a drug test because if everyone did so, the drug test would be meaningless is applying a[n] ______.

A. Ethics of care

 

B. Virtual analysis

 

C. Cost-benefit analysis

 

D. Fundamentalist approach

 

E. Categorical imperative

According to the categorical imperative, an action is moral only if it would be consistent for everyone in society to act in the same way.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: Appendix 2A Theories of Business Ethics
Topic: Theories of Business Ethics
 

 

57.
(p. 35)
Which of the following helps explain why the principle of deontology may be difficult to apply?

A. People disagree about what duties we owe to one another and which duties are more important.

 

B. People disagree about whether consequences are positive or negative.

 

C. People disagree about the ethics of care.

 

D. People disagree about what duties we owe to one another and also whether consequences are positive or negative.

 

E. People disagree about what duties we owe to one another, whether consequences are positive or negative, and about the ethics of care.

Deontology is difficult to apply because people disagree about what duties we owe to one another and which duties are more important than others when they conflict.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: Appendix 2A Theories of Business Ethics
Topic: Theories of Business Ethics
 

 

58.
(p. 35)
The ethical system in which the development of virtues, or positive character traits such as courage, justice, and truthfulness, is the basis for morality is called ______.

A. Absolutism decision

 

B. Virtual analysis

 

C. Virtue ethics

 

D. Fundamentalist approach

 

E. Categorical imperative

Virtue ethics is an ethical system in which the development of virtues, or positive character traits such as courage, justice, and truthfulness, is the basis for morality.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: Appendix 2A Theories of Business Ethics
Topic: Theories of Business Ethics
 

 

59.
(p. 34)
Which of the following consists of acting on the basis of the recognition that certain actions are right or wrong, regardless of their consequences?

A. Act utilitarianism

 

B. Rule utilitarianism

 

C. Situational ethics

 

D. Virtue ethics

 

E. Deontology

Deontology consists of acting on the basis of the recognition that certain actions are right or wrong, regardless of their consequences.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: Appendix 2A Theories of Business Ethics
Topic: Theories of Business Ethics
 

 

60.
(p. 35)
What is a difficulty with the application of virtue ethics?

A. The applicable categorical imperatives.

 

B. The lack of agreement about the meaning of “the good life.”

 

C. The applicable principle of rights.

 

D. The ethics of care analysis.

 

E. The lack of agreement regarding which rules on balance produce the greatest amount of pleasure for the greatest number of people.

A difficulty with the application of virtue ethics is the lack of agreement about the meaning of “the good life.”

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: Appendix 2A Theories of Business Ethics
Topic: Theories of Business Ethics
 

 

61.
(p. 36)
The ______ adherents believe that when one individual, the caregiver, meets the needs of one other person, the cared-for party, the caregiver is helping to meet the needs of all the individuals who fall within the cared-for party’s web of care.

A. Deontology

 

B. Utilitarianism

 

C. Absolutism

 

D. Virtue ethics

 

E. Ethics of care

Ethics-of-care theorists argue that when one individual, the caregiver, meets the needs of one other person, the cared-for party, the caregiver is actually helping to meet the needs of all the individuals who fall within the cared-for party’s web of care.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: Appendix 2A Theories of Business Ethics
Topic: Theories of Business Ethics
 

 

62.
(p. 36)
The ______ holds that the right course of action is the option most consistent with the building and maintaining of human relationships.

A. Ethics of care

 

B. Principle of virtue ethics

 

C. Deontology

 

D. Act utilitarianism

 

E. Rule utilitarianism

The ethics of care holds that the right course of action is the option most consistent with the building and maintaining of human relationships.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: Appendix 2A Theories of Business Ethics
Topic: Theories of Business Ethics
 

 

Essay Questions

63.
(p. 36)
Assume you are hired as the president of a new company. Write a code of ethics for the firm.

Student responses may vary. Johnson and Johnson’s credo may serve as a guide.

 

AACSB: Ethics
Blooms: Create
Difficulty: 3 Hard
Learning Objective: Appendix 2A Theories of Business Ethics
Topic: Business Ethics and Social Responsibility
 

 

64.
(p. 22)
Sally is the president of AAA Components, a company that makes small parts for the automotive industry. Customers of AAA components are primarily auto manufacturers. Sally’s cousin, Frank, works at the company as a sales representative. A promotion to the sales manager position is open. Frank has applied and so has Susan, another sales representative. While both Frank and Susan are good employees, they are skilled in different areas. Susan is excellent with technology and with placing orders. She does an excellent job in following through with order problems. Frank, on the other hand, is better with customer relations, and customers seem to like him better. Sally would like to promote Frank but she has two concerns. Her first concern is that she does not want it to be perceived that she is being unfair because Frank is family. Her second concern is that she has a suspicion that some customers are somewhat prejudiced against Susan because she is female. Most customers with whom the sales representatives deal are male, and Sally suspects that they may give Frank more consideration than Sally. Define and discuss the WPH framework for business ethics, and within that framework propose a solution. Be sure to fully address the populations, purposes, and guidelines included within “W,” “P,” and “H.”

Students should reference the WPH process of decision making by identifying stakeholders, values, and guidelines. Students should also propose a solution. Solutions may vary.

 

AACSB: Ethics
Blooms: Create
Difficulty: 3 Hard
Learning Objective: 02-03 How can we use the WPH framework for ethical business decisions?
Topic: The WPH Framework for Business Ethics
 

 

65.
(p. 33-36)
Summarize the following ethical principles:

(a). Ethical relativism
(b). Situational ethics
(c). Consequentialism
(d). Deontology
(e). Virtue ethics
(f). Ethics of care

(a). Ethical relativism – Asserts that morality is relative.
(b). Situational ethics – Requires that when we evaluate whether an action is ethical, we imagine ourselves in the position of the person facing an ethical dilemma.
(c). Consequentialism – Considers the consequences (i.e., harms and benefits) of making a particular decision.
(d). Deontology – Recognizes certain actions as right or wrong regardless of the consequences.
(e). Virtue ethics – Encourages individuals to develop virtues (e.g. courage and truthfulness) that guide behavior.
(f). Ethics of care – Holds that ethical behavior is determined by actions that care for and maintain human relationships.

 

AACSB: Ethics
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: Appendix 2A Theories of Business Ethics
Topic: Theories of Business Ethics
 

 

66.
(p. 34-35)
Milly’s best friend and roommate, Sarah, is getting ready for a big date. Sarah had her hair and nails done, bought a new dress, and spent two hours getting ready. Just as Milly sees Sarah’s date coming down the street, Sarah comes out and asks Milly how she looks. Unfortunately, the stylist did a terrible job, the nails are an odd shade of purple, and the new dress is extremely unflattering. Sarah has no time to change. Discuss what Milly would say and why under the following principles:

(a). Deontology
(b). Act utilitarianism
(c). Rule utilitarianism
(d). Virtue ethics

Student answers will likely vary based upon the application of the facts to the ethical principles involved. Following are suggestions:

(a). Under the principle of deontology, which consists of acting on the basis of the recognition that certain actions are right or wrong regardless of consequences, students will likely say that Sarah should be told the truth.
(b). Act utilitarianism says that the action that yields the greatest amount of pleasure over pain for all involved should be chosen. Under this principle, Sarah would likely be told that she looks fine.
(c). Rule utilitarianism holds that general rules that on balance produce the greatest amount of pleasure for all involved should be followed in each situation. Students may say that deception does not generally produce the greatest satisfaction.
(d). Virtue ethics is an ethical system in which the development of virtues or positive character traits is the basis for morality. Students may say that it is virtuous to tell the truth, or some may say that it is more virtuous to spare Sarah’s feelings.

 

AACSB: Ethics
Blooms: Analyze
Difficulty: 3 Hard
Learning Objective: Appendix 2A Theories of Business Ethics
Topic: Theories of Business Ethics
 

 

67.
(p. 16-17)
What does a reference to the “social responsibility of business” mean? Should businesses consider community expectations, and why or why not?

The social responsibility of business consists of the expectations that the community imposes on firms doing business inside its borders. These expectations must be honored to a certain extent, even when a firm wishes to ignore them, because firms are always subject to the implicit threat that legislation will impose social obligations on them. So, if the community expects businesses to obey certain standards of fairness even when the standards interfere with profit maximization, firms that choose to ignore that expectation do so at their peril.

 

AACSB: Ethics
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-01 What are business ethics and the social responsibility of business?
Topic: Business Ethics and Social Responsibility
 

Chapter 05

Constitutional Principles

 

True / False Questions

1. The U.S. Constitution establishes a system of government based on the principle of federalism.

True    False

 

2. Congress has the power to enact legislation, but the president can veto a law that Congress passes.

True    False

 

3. The U.S. Constitution explicitly allows courts to review legislative and executive actions to determine whether they are constitutional.

True    False

 

4. The landmark early U.S. Supreme Court case of Marbury v. Madison recognized the right of courts to exercise judicial review in order to determine the constitutionality of laws.

True    False

 

5. The primary source of authority for federal regulation of business is the First Amendment to the U.S. Constitution.

True    False

 

6. Federal laws include laws passed by federal administrative agencies.

True    False

 

7. Congress can use its spending power to achieve social welfare objectives.

True    False

 

8. The fourteenth amendment is part of the Bill of Rights.

True    False

 

9. No First Amendment protections apply to corporations.

True    False

 

10. Not all corporate speech is political speech.

True    False

 

 

Multiple Choice Questions

11. According to the principle of federalism established by the U.S. Constitution, how is the authority to govern allocated?

A. It is allocated to the federal government.

 

B. It is allocated to the states.

 

C. It is allocated to local jurisdictions.

 

D. It is allocated to the U.S. Senate.

 

E. It is divided between federal and state governments.

 

12. According to the ______ Amendment to the Constitution, all powers that the Constitution neither gives exclusively to the federal government nor takes from the states are reserved for the states.

A. First

 

B. Second

 

C. Fifth

 

D. Sixth

 

E. Tenth

 

13. Why must federal legislation that affects business be based on an expressed constitutional grant of authority?

A. Because the U.S. Congress passed a law to that effect.

 

B. Because the federal government has only those powers granted to it by the Constitution.

 

C. Because President Lincoln issued an executive order to that effect.

 

D. Because President Washington issued an executive order to that effect.

 

E. Because it is a custom.

 

14. The U.S. Constitution allocates the power of the federal government among _____ branches of the government.

A. Two

 

B. Three

 

C. Four

 

D. Five

 

E. Six

 

15. What are the three independent branches of the federal government?

A. Legislative, executive, and judicial.

 

B. Legislative, commerce, and safety.

 

C. Commerce, safety, and law enforcement.

 

D. Executive, safety, and law enforcement.

 

E. Law enforcement, judicial, and statutory.

 

16. How was the process of judicial review established under which courts review legislative and executive actions to determine whether they are constitutional?

A. By vote of the U.S. Senate

 

B. By vote of the U.S. House of Representatives

 

C. By vote of both the U.S. Senate and the U.S. House of Representatives

 

D. By early common law

 

E. By executive proclamation

 

17. Which clause provides that the Constitution, laws, and treaties of the United States constitute the supreme law of the land?

A. The First Amendment, clause three

 

B. The supremacy clause

 

C. The commerce clause

 

D. The Eighth Amendment, clause one

 

E. The federalism clause

 

18. Which of the following is true regarding laws passed by the U.S. Congress under the authority of the commerce clause?

A. As long as the law affects commerce among the states, or interstate commerce, in some way, the regulation is generally constitutional.

 

B. The law will only be constitutional if it affects taxation in some way.

 

C. As long as the law involves in some way a right guaranteed by the Bill of Rights, it is constitutional.

 

D. As long as the law is approved by any state affected, it is constitutional.

 

E. As long as the law is not objected to by any state affected within six months of its passage, it is constitutional.

 

  “Junk Food.” Mary Dogood, a member of the school board in ABC County, is appalled at the amount of junk food in the schools. She convinces the state legislature to pass an ordinance that no stores may sell any unhealthy junk food within 500 feet of any school or day care center. A teacher of political science raises the issue of whether the regulation is valid and is told that it is a valid exercise of the jurisdiction’s police power to protect its citizens. Convenience stores balk at the regulation and challenge it in court claiming that the law impermissibly affects interstate commerce.

 

19. What does the term “police power” reference?

A. The residual powers retained by each state to safeguard the health and welfare of its citizenry.

 

B. The residual powers retained by the federal government to enforce valid laws and regulations.

 

C. The powers granted to local government to enter residences without a search warrant.

 

D. The powers granted to state governments to tax for the purposes of having law enforcement.

 

E. The powers granted to state government to imprison citizens of other states who commit crimes within a state.

 

20. What do courts generally presume regarding laws passed in accordance with states’ police power?

A. There is no presumption.

 

B. The laws are valid.

 

C. The laws are invalid.

 

D. The laws are invalid unless it involves a First Amendment right.

 

E. The laws are invalid unless it involves regulation of interstate commerce.

 

21. Restrictions on states’ authority to pass laws that substantially affect interstate commerce are referenced by which of the following?

A. The dormant commerce clause

 

B. The superior commerce clause

 

C. The interstate trafficking commerce clause

 

D. The tracking clause

 

E. The state authority clause

 

22. Which of the following was the result in Family Winemakers of California v. Jenkins, the case brought by winemakers from California challenging a Massachusetts law distinguishing between how large and small winemakers could distribute their wines in Massachusetts?

A. That the law impermissibly discriminated against out-of-state winemakers in violation of the Commerce Clause.

 

B. That the law permissibly discriminated against out-of-state winemakers and did not violate the commerce clause.

 

C. That the law impermissibly discriminated against out-of-state winemakers in violation of the Twenty-first Amendment to the U.S. Constitution.

 

D. That the law impermissibly discriminated against out-of-state winemakers in violation of the Webb-Kenyon Acts.

 

E. That the law did not discriminate against out-of-state winemakers and that, therefore, no violation occurred.

 

23. Which of the following was the result at the U.S. Supreme Court level in United States v. Lopez, the case in which the Court addressed the constitutionality of the Gun-Free School Zone Act?

A. The Court ruled that the law was a valid exercise of congressional authority under the full faith and credit clause.

 

B. The Court ruled that the law was a valid exercise of congressional authority contained within the Bill of Rights.

 

C. The Court ruled that Congress exceeded its power under the Bill of Rights when it passed the act.

 

D. The Court ruled that Congress exceeded its commerce clause authority when it passed the act.

 

E. The Court ruled that the law was a valid exercise of the Court’s authority under the commerce clause.

 

24. Which of the following prohibits states from discriminating against citizens of other states when those nonresidents engage in ordinary and essential activities such as seeking employment?

A. The full faith and credit clause

 

B. The privileges and immunities clause

 

C. The contract clause

 

D. The citizens’ rights clause

 

E. The first amendment

 

25. Which of the following requires that courts in all states uphold contracts and public acts of every state thereby protecting wills, divorce decrees, and judgments in civil courts?

A. The full faith and credit clause

 

B. The privileges and immunities clause

 

C. The commerce clause

 

D. The contract clause

 

E. The Bill of Rights clause

 

  “Animal Care.” Susan, a licensed veterinarian, was recently elected to the U.S. Senate. Susan is very concerned about the lack of care for homeless cats and dogs. She proposes legislation that citizens of all states be taxed sufficiently to provide for no-kill animal shelters that citizens in states with higher than average incomes be taxed at a higher rate than citizens of other states. She also proposed that federal funds for state highways be denied to any state that fails to provide assistance to low income citizens in covering pet vaccinations. Bill, another new senator, tells Susan that, apart from the mandated federal income tax, Congress lacks the authority to tax states because the U.S. Constitution expressly reserves that right to the states. Sam, another senator, tells Susan that Congress has no authority to link highway funds or any other funds with social welfare objectives. Ellen, a clerk in the Senate, tells Susan that Congress is absolutely prohibited from taxing residents of one state at a higher rate than citizens of another state.

 

26. Is Bill correct?

A. He is incorrect. The U.S. Constitution contains no such reservation.

 

B. He is incorrect because while the U.S. Constitution prohibits taxation in areas in which states also tax, most states are not taxing for pet care purposes at this time.

 

C. He is incorrect in saying that the U.S. Constitution generally reserves the right to tax to the states but he is correct in saying that Congress lacks the authority to tax in this manner because Congress cannot lay taxes for any reason other than essential needs of the federal government.

 

D. He is incorrect in saying that the U.S. Constitution generally reserves the right to tax to the states but he is correct in saying that Congress lacks the authority to tax in this manner because the president has issued an executive order prohibiting such taxation.

 

E. He is incorrect because the prohibition against Congress imposing taxes apart from the federal income tax is contained in a federal statute passed by Congress, not in the U.S. Constitution.

 

27. Which of the following is true regarding Sam’s statement?

A. Sam is correct.

 

B. Sam is correct only if the state is making efforts to put social programs into effect and is not acting unreasonably in refusing to provide other needed services.

 

C. Sam is partially correct in saying that Congress has no authority to link highway funds with social services, but any other funds may be linked to social services by executive order.

 

D. Sam is partially correct in saying that Congress has no authority to link highway funds with social services, but other funds may be linked to social services by an act of Congress.

 

E. Sam is incorrect.

 

28. Which of the following is true regarding Ellen’s statement?

A. Ellen is incorrect. The U.S. Congress has complete discretion on taxation.

 

B. Ellen is partially incorrect because before the U.S. Congress taxes one state’s residents at a higher rate than citizens of other states, a rational relationship between the difference and governmental need must be shown.

 

C. Ellen is incorrect because before the U.S. Congress taxes one state’s residents at a higher rate than citizens of other states, an important need must be shown.

 

D. Ellen is incorrect because before the U.S. Congress taxes one state’s residents at a higher rate than citizens of other states, a disparity of income of over 30% between one state and another must be shown.

 

E. Ellen is correct.

 

29. The first _____ amendments to the U.S. Constitution are known as the Bill of Rights.

A. Five

 

B. Six

 

C. Eight

 

D. Nine

 

E. Ten

 

30. Which amendment extends most of the provisions of the Bill of Rights to the states?

A. Thirteenth

 

B. Fourteenth

 

C. Twenty-first

 

D. Twenty-second

 

E. Fortieth

 

31. Which amendment provides that the government cannot infringe on citizens’ right to bear arms?

A. First

 

B. Second

 

C. Fifth

 

D. Sixth

 

E. None

 

32. Which amendment prohibits cruel and unusual punishment?

A. Second

 

B. Fourth

 

C. Fifth

 

D. Eighth

 

E. Tenth

 

33. Today, when the First Amendment is concerned, what does the term “political speech” reference?

A. Speech that occurs when corporations support political candidates.

 

B. Speech by any citizen in connection with an election campaign.

 

C. Speech by elected officials regarding other elected officials.

 

D. Speech by private citizens involving advertising that is regulated by state government.

 

E. While the term “political speech” has historical connections, the First Amendment is not referenced in relation to “political speech” today because today all speech is considered at the same level.

 

34. Which of the following is true regarding the protection of “fighting words” under the First Amendment?

A. Fighting words are unprotected speech under the First Amendment.

 

B. Fighting words are protected speech under the First Amendment only if they are uttered by an individual citizen, not by a corporate representative.

 

C. Fighting words are protected speech under the First Amendment only if they involve political activity.

 

D. Fighting words are protected speech under the First Amendment only if they are made in connection with a protest march.

 

E. Fighting words are protected speech under the First Amendment only if they are made in conjunction with self-defense.

 

35. Which amendment protects freedom of religion?

A. First

 

B. Second

 

C. Fourth

 

D. Sixth

 

E. Eighth

 

36. As expressed in the text, which of the following expresses the United Nations declaration on hate speech?

A. The United Nations’ declaration protects hate speech to the same degree as courts in the U.S. discussed in the text.

 

B. The United Nations’ declaration states that speech is only recognized as “hate speech” if it is gender-based.

 

C. The United Nations’ declaration states that speech is only recognized as “hate speech” if it is racially based.

 

D. The United Nations’ declaration states that hate speech is not a protected form of expression.

 

E. There is no United Nations declaration on hate speech because that body expressly determined that any decision on the matter should be postponed.

 

37. What does the establishment clause of the First Amendment provide?

A. Government cannot make a law prohibiting the free exercise of religion.

 

B. Government cannot make a law establishing a religion.

 

C. Government cannot make a law referencing religion in any manner.

 

D. Government must establish laws respecting religion in order to prevent disruptive behavior such as terrorism and to allow free-exercise by the majority.

 

E. That only religions recognized when the First Amendment was passed are entitled to recognition and protection.

 

38. What does the free-exercise clause of the First Amendment provide?

A. Government cannot make a law prohibiting choice in relation to religion.

 

B. Government cannot make a law establishing a religion.

 

C. Government cannot make a law referencing religion in any manner.

 

D. Government must establish laws respecting religion in order to prevent disruptive behavior such as terrorism and to allow free-exercise by the majority.

 

E. That only religions recognized when the First Amendment was passed are entitled to recognition and protection.

 

39. A ______ is a court order that authorizes law enforcement agents to search for or seize items specifically described in the warrant.

A. Search warrant

 

B. Subpoena warrant

 

C. Search authorization form

 

D. Seek warrant

 

E. Review authorization

 

40. When can government agents obtain a search warrant?

A. When they can establish reasonable cause.

 

B. When they can establish probable cause.

 

C. When they can establish cause to a substantial certainty.

 

D. Anytime they have an informant.

 

E. Anytime the judge is in his office and they show identification as government agents.

 

41. Which amendment protects citizens from unreasonable searches and seizures?

A. First

 

B. Third

 

C. Fourth

 

D. Sixth

 

E. Tenth

 

42. When may government agents search without a search warrant?

A. When law enforcement officials believe it is likely that the items sought will be removed before they can obtain a warrant.

 

B. Outside of normal working hours for a judge.

 

C. When they can show that the suspect who lives in the residence at issue has been in jail previously.

 

D. When they can show that a felony is involved.

 

E. When they can show that they have heightened probable cause.

 

43. Which of the following is an exception to the rule that administrative searches usually require search warrants?

A. The regulatory exception

 

B. The reasonable-search exception

 

C. The pervasive-regulation exception

 

D. The compelling-need exception

 

E. The controlling-principle exception

 

44. Which of the following is true regarding the right of the federal government to obtain business books and records?

A. The government has an absolute right to business books and records so long as a subpoena is issued by a grand jury.

 

B. The government has no rights to such records without a search warrant, and a grand jury subpoena is insufficient regardless of whether a sole proprietor or a corporate shareholder is involved.

 

C. Obtaining books and records from a sole shareholder of a corporation and also from a sole proprietor based only upon a subpoena issued by a grand jury violates the right against self-incrimination.

 

D. Obtaining books and records from a sole proprietor based only on a subpoena from a grand jury violates the owner’s rights against self-incrimination, but seizing records from a sole shareholder of a corporation in that manner does not violate rights against self-incrimination.

 

E. Obtaining books and records from a sole shareholder of a corporation based only on a subpoena from a grand jury violates the shareholder’s rights against self-incrimination, but seizing records from a sole proprietor in that manner does not violate rights against self-incrimination.

 

  “Thermal Imaging.” Sam was engaged in the criminal activity of growing marijuana in his home using heat lamps in the process. The police randomly selected his street to search for illegal activity. Without any kind of a warrant, they used a thermal imager, an instrument that detects heat emissions, to determine that he was possibly engaged in illegal activity. The police immediately broke down Sam’s door, searched his home, and arrested him. The police officer in charge told Sam that he had no right to keep silent and that he might as well confess. Sam proceeded to confess to growing marijuana and a number of other crimes. The judge was so angry with Sam that he threw him in jail for two months without any kind of hearing. Sam’s lawyer, who just graduated from law school, is not sure if the police acted legally in Sam’s case by using the thermal imager. Sam’s lawyer also questions whether Sam had a right to remain silent, and he is concerned that the judge has not granted Sam a hearing.

 

45. Which of the following is true on the issue of whether the police acted within their rights by using the thermal imager?

A. The police acted within their rights so long as they can show that they asked a judge for a warrant before using the thermal imager, but the judge refused.

 

B. The police acted within their rights so long as they can show that the street was truly chosen at random for a search.

 

C. The police acted within their rights so long as they can show that Sam had been in jail previously on a drug offense charge.

 

D. The police acted legally so long as they can show that Sam had been in jail previously for any offense.

 

E. The police violated Sam’s Fourth Amendment rights in using the thermal imager.

 

46. Which of the following is true on the issue of whether Sam had a right to remain silent?

A. The officer was incorrect, and Sam had the right to remain silent based on his constitutional protection against self-incrimination.

 

B. The officer was correct that Sam had no right to remain silent, and there has never been a constitutional right entitling a defendant to remain silent.

 

C. The officer was correct that Sam had no right to remain silent because while at one time there was a constitutional right entitling a defendant to remain silent, that right was repealed by constitutional amendment.

 

D. The officer was correct, and Sam had no right to remain silent because the right against self-incrimination only protects against crimes involving physical harm to another.

 

E. The officer was partially correct because while Sam had a right to remain silent about other crimes, he did not have the right to remain silent about the drugs found in the initial search.

 

47. Which of the following references rights Sam had in regard to a hearing?

A. Sam’s right to substantive due process.

 

B. Sam’s First Amendment rights.

 

C. Sam’s right to procedural due process.

 

D. Sam’s Fourth Amendment rights.

 

E. Sam’s Second Amendment rights.

 

48. Which of the following is true regarding the Fifth Amendment’s protection against self-incrimination?

A. A person only has to be a witness against himself or herself if a felony is involved.

 

B. A person does not have to be a witness against himself or herself if a first criminal offense is involved.

 

C. A person does not have to be a witness against himself or herself if prison time is involved as opposed to a mere fine.

 

D. A person does not have to be a witness against himself or herself in a criminal case.

 

E. A person has to be a witness against himself or herself.

 

49. Which amendment protects against double jeopardy?

A. The First Amendment

 

B. The Second Amendment

 

C. The Third Amendment

 

D. The Fourth Amendment

 

E. The Fifth Amendment

 

50. What does protection against “double jeopardy” mean?

A. The government cannot try a person more than once for the same crime.

 

B. The government cannot try a person more than twice for the same crime.

 

C. The government must have double proof to prosecute a person twice for the same crime.

 

D. The government must show that at least two people were injured by the defendant in order to justify trying the defendant twice for the same crime.

 

E. The government may impose a double sentence on a repeat offender in order to protect the public.

 

51. Which of the following are types of due process?

A. Procedural, substantive, and independent

 

B. Substantive, independent, and full faith

 

C. Independent, full faith, and substantive

 

D. Independent, full faith, and procedural

 

E. Procedural and substantive

 

52. Which of the following refers to the basic fairness of laws that may deprive an individual of her life, liberty, or property?

A. Procedural due process

 

B. Substantive due process

 

C. Independent due process

 

D. The prohibition against taking

 

E. The prohibition against pervasive regulation

 

53. What does the Fifth Amendment’s takings clause reference?

A. The right of the government to take private property for public use without paying compensation to the owner.

 

B. The requirement that the government pay the owner just compensation if the government wants to take private property for public use.

 

C. The right of the government to put individuals in jail for up to ten days without a hearing.

 

D. The right of the government to put individuals in jail for up to five days without a hearing.

 

E. The requirement that the government compensate an owner for anything destroyed during a search.

 

54. Which of the following is true regarding privacy rights?

A. The U.S. Supreme Court has said that the U.S. Constitution does not provide any right to privacy.

 

B. The U.S. Supreme Court has found that U.S. citizens have a right to privacy based upon the U.S. Constitution.

 

C. The U.S. Constitution specifically provides for a right to privacy within the Second Amendment.

 

D. The U.S. Constitution specifically provides for a right to privacy within the Sixth Amendment.

 

E. The U.S. Supreme Court has found that U.S. citizens have a right to privacy based upon the U.S. Constitution, and the U.S. Constitution specifically provides for a right to privacy within the Sixth Amendment.

 

55. If a law prevents individuals from exercising a fundamental right, the law will be subject to ___.

A. Intermediate scrutiny

 

B. Rational basis scrutiny

 

C. Severe scrutiny

 

D. Strict scrutiny

 

E. Legal scrutiny

 

56. If the law’s classification scheme is based on gender, the law will be subject to ___.

A. Rational basis scrutiny

 

B. Intermediate scrutiny

 

C. Severe scrutiny

 

D. Strict scrutiny

 

E. Legal scrutiny

 

57. Which of the following is true regarding rights of the citizens of Belarus?

A. The constitution restricts movement outside of the country.

 

B. The defendant in a criminal case has no protection from providing evidence against himself or herself.

 

C. Citizens have the right to profess any religion, but they must profess some religion.

 

D. The constitution limits the workweek to 30 hours.

 

E. Citizens accused of crimes are presumed innocent until proven guilty.

 

58. What did the U.S. Supreme Court rule in South Dakota v. Dole, the case involving the validity of a federal statute granting federal funds for state highways to only those states in which 21 is the legal drinking age?

A. The Court upheld the statute.

 

B. The Court upheld the statute only in the case of states that could not provide matching funds; and if matching funds could be provided, the Court ruled that there was insufficient reason for the law.

 

C. The Court upheld the statute only in the case of states that could provide matching funds; and if matching funds could not be provided, the Court ruled that Congress was overreaching in regard to partnership between state and federal government.

 

D. The Court struck the statute on the basis that it violated the Commerce Clause under the U.S. Constitution.

 

E. The Court struck the statute on the basis that it violated the taxing and spending powers of the federal government under the U.S. Constitution.

 

59. What was the result at the U.S. Supreme Court level in the Case Opener involving the constitutionality of the “individual mandate” contained within the Affordable Care Act requiring that most Americans obtain minimum essential health insurance contained within the Affordable Care Act?

A. The Supreme Court upheld the “individual mandate” of the Affordable Care Act on the basis that it was a valid exercise of congressional power under the taxing clause.

 

B. The Supreme Court upheld the “individual mandate of the Affordable Care Act on the basis that it was a valid exercise of congressional power” under the commerce clause.

 

C. The Supreme Court upheld the “individual mandate” of the Affordable Care Act on the basis that it was a valid exercise of congressional power under the taxing clause and also under the Commerce Clause.

 

D. The Supreme Court struck the “individual mandate” from the Affordable Care Act as a violation of the Commerce Clause but allowed the remainder of the law to remain.

 

E. The Supreme Court struck the “individual mandate” from the Affordable Care Act as a violation of the taxing clause but allowed the remainder of the law to remain.

 

60. Which of the following was the result at the U.S. Supreme Court level in Christy Brzonkala v. Antonio Morrison, the case in the text involving the constitutionality of the section of the Violence Against Women Act providing for a civil remedy?

A. That Congress lacked authority under the Commerce Clause to pass the section at issue.

 

B. That because of its police powers, Congress had authority under the Commerce Clause to pass the section at issue.

 

C. That because gender-motivated crimes were at issue, Congress had authority under the Commerce Clause to pass the section at issue.

 

D. That because violent crime was involved, Congress had authority under the Commerce Clause to pass the section at issue.

 

E. That because the petitioner established a link between the cost of crime against women and national productivity, Congress had authority under the Commerce Clause to pass the section at issue.

 

61. What was the result at the federal appellate court level in Trunk v. San Diego, the case in the text involving whether the presence of a cross on federal land near a Korean War memorial violated the First Amendment?

A. The court ruled that the presence of the cross violated the First Amendment.

 

B. The court ruled that the presence of the cross did not violate the First Amendment because the cross promoted the service of veterans, not a religion.

 

C. The court ruled that the presence of the cross did not violate the First Amendment because it was initially erected by private parties and had historical significance.

 

D. The court ruled that the presence of the cross did not violate the First Amendment because although it was erected by public authorities, it had historical significance independent of its governmental ties.

 

E. The court ruled that the presence of the cross did not violate the First Amendment because although it did promote a particular religion, that religion was practiced by large numbers of the surrounding citizens.

 

62. Which of the following is true regarding the ability of individual states to collect sales tax on Internet transactions?

A. Individual states may without restriction collect sales tax from merchants on items purchased through the Internet by in-state residents.

 

B. Only with permission of Congress, granted on a state-by-state basis, may individual states collect from merchants sales tax on items purchased through the Internet by in-state residents.

 

C. States cannot collect sales tax on Internet sales from merchants nor may a state require that its citizens report Internet purchases so that they may be taxed.

 

D. A state cannot collect sales tax from merchants unless sales to the state’s citizens amount to more than 1 million in the aggregate.

 

E. A state can collect sales tax from a merchant only if the merchant has a store or distribution center in the state.

 

 

Essay Questions

63. Explain the system of checks and balances and how it works.

 

 

 

 

64. Explain the concept of the “dormant commerce clause.”

 

 

 

 

65. Christen who just turned eighteen is out with several friends. They decide to see a movie, but it is sold out. Christen hid in the back of the theatre and yelled “Fire” as loudly as she could. Everyone ran out of the theatre, and a number got in their vehicles and left. Christen and her friends thought that seeing the movie was now possible. Unfortunately, a theatre employee saw Christen yelling, called the police, and she was arrested. Christen told the police officers that she was only exercising her free speech rights. She also told the police that the theatre employee lied and that she personally saw him stealing popcorn. The theatre employee told Christen that he was going to sue for defamation, and she told him that she would win based on her right to free speech. Discuss whether or not Christen is right on both counts and why.

 

 

 

 

66. Set forth the Central Hudson Test for Commercial Speech.

 

 

 

 

67. When is a strict-scrutiny standard used to examine laws, how is this standard applied, and what presumption do courts apply, if any, in cases involving this standard?

 

 

 

 

Chapter 05 Constitutional Principles Answer Key

True / False Questions

1.
(p. 93)
The U.S. Constitution establishes a system of government based on the principle of federalism.

TRUE

The U.S. Constitution establishes a system of government based on the principle of federalism, according to which the authority to govern is divided between federal and state governments.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 05-01 What is federalism?
Topic: The U.S. Constitution
 

 

2.
(p. 93)
Congress has the power to enact legislation, but the president can veto a law that Congress passes.

TRUE

Congress, the legislative or lawmaking branch, has the power to enact legislation, but the president can veto a law that Congress passes.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 05-02 How does the U.S. government’s system of checks and balances operate?
Topic: The U.S. Constitution
 

 

3.
(p. 93)
The U.S. Constitution explicitly allows courts to review legislative and executive actions to determine whether they are constitutional.

FALSE

Although the Constitution does not explicitly allow courts to review legislative and executive actions to determine whether they are constitutional, early common law established this process, which is known as judicial review.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 05-02 How does the U.S. government’s system of checks and balances operate?
Topic: The U.S. Constitution
 

 

4.
(p. 94)
The landmark early U.S. Supreme Court case of Marbury v. Madison recognized the right of courts to exercise judicial review in order to determine the constitutionality of laws.

TRUE

The landmark 1803 U.S. Supreme Court case of Marbury v. Madison established that if the law and the constitution apply to a case, the court must determine which of the rules governs, which is the essence of judicial duty.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-02 How does the U.S. government’s system of checks and balances operate?
Topic: The U.S. Constitution
 

 

5.
(p. 95)
The primary source of authority for federal regulation of business is the First Amendment to the U.S. Constitution.

FALSE

The primary source of authority for federal regulation of business is the commerce clause, located in Article I, Section 8, of the Constitution.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 05-03 What effects does the commerce clause have on the government’s regulation of business?
Topic: The Commerce Clause
 

 

6.
(p. 95)
Federal laws include laws passed by federal administrative agencies.

TRUE

Federal laws include laws passed by federal administrative agencies.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 05-02 How does the U.S. government’s system of checks and balances operate?
Topic: The Supremacy Clause and Federal Preemption
 

 

7.
(p. 102-103)
Congress can use its spending power to achieve social welfare objectives.

TRUE

As with its power to tax, Congress can use its spending power to achieve social welfare objectives.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 05-03 What effects does the commerce clause have on the government’s regulation of business?
Topic: Taxing and Spending Powers of the Federal Government
 

 

8.
(p. 104)
The fourteenth amendment is part of the Bill of Rights.

FALSE

The first 10 amendments to the U.S. Constitution, known as the Bill of Rights, substantially affect government regulation of business.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

 

9.
(p. 104)
No First Amendment protections apply to corporations.

FALSE

The First Amendment protections apply to corporations although courts do not, however, treat all corporate speech the same.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

 

10.
(p. 106)
Not all corporate speech is political speech.

TRUE

Not all corporate speech is political speech; and some corporate speech is commercial speech meaning speech that conveys information related to the sale of goods and services.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Evaluate
Difficulty: 1 Easy
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

 

Multiple Choice Questions

11.
(p. 93)
According to the principle of federalism established by the U.S. Constitution, how is the authority to govern allocated?

A. It is allocated to the federal government.

 

B. It is allocated to the states.

 

C. It is allocated to local jurisdictions.

 

D. It is allocated to the U.S. Senate.

 

E. It is divided between federal and state governments.

The U.S. Constitution establishes a system of government based on the principle of federalism, according to which the authority to govern is divided between federal and state governments.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 05-01 What is federalism?
Topic: The U.S. Constitution
 

 

12.
(p. 93)
According to the ______ Amendment to the Constitution, all powers that the Constitution neither gives exclusively to the federal government nor takes from the states are reserved for the states.

A. First

 

B. Second

 

C. Fifth

 

D. Sixth

 

E. Tenth

According to the Tenth Amendment to the Constitution, all powers that the Constitution neither gives exclusively to the federal government nor takes from the states are reserved for the states.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 05-01 What is federalism?
Topic: The U.S. Constitution
 

 

13.
(p. 93)
Why must federal legislation that affects business be based on an expressed constitutional grant of authority?

A. Because the U.S. Congress passed a law to that effect.

 

B. Because the federal government has only those powers granted to it by the Constitution.

 

C. Because President Lincoln issued an executive order to that effect.

 

D. Because President Washington issued an executive order to that effect.

 

E. Because it is a custom.

Because the federal government has only those powers granted to it by the Constitution, federal legislation that affects business must be based on an expressed constitutional grant of authority.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 05-01 What is federalism?
Topic: The U.S. Constitution
 

 

14.
(p. 93)
The U.S. Constitution allocates the power of the federal government among _____ branches of the government.

A. Two

 

B. Three

 

C. Four

 

D. Five

 

E. Six

In addition to allocating authority between state and federal governments, the Constitution allocates the power of the federal government among the three branches of government.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 How does the U.S. government’s system of checks and balances operate?
Topic: The U.S. Constitution
 

 

15.
(p. 93)
What are the three independent branches of the federal government?

A. Legislative, executive, and judicial.

 

B. Legislative, commerce, and safety.

 

C. Commerce, safety, and law enforcement.

 

D. Executive, safety, and law enforcement.

 

E. Law enforcement, judicial, and statutory.

The first three articles of the Constitution establish three independent branches of the federal government: the legislative, executive, and judicial branches.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 How does the U.S. government’s system of checks and balances operate?
Topic: The U.S. Constitution
 

 

16.
(p. 93)
How was the process of judicial review established under which courts review legislative and executive actions to determine whether they are constitutional?

A. By vote of the U.S. Senate

 

B. By vote of the U.S. House of Representatives

 

C. By vote of both the U.S. Senate and the U.S. House of Representatives

 

D. By early common law

 

E. By executive proclamation

Although the Constitution does not explicitly allow courts to review legislative and executive actions to determine whether they are constitutional, early common law established this process, which is known as judicial review.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 05-02 How does the U.S. government’s system of checks and balances operate?
Topic: The U.S. Constitution
 

 

17.
(p. 94)
Which clause provides that the Constitution, laws, and treaties of the United States constitute the supreme law of the land?

A. The First Amendment, clause three

 

B. The supremacy clause

 

C. The commerce clause

 

D. The Eighth Amendment, clause one

 

E. The federalism clause

The supremacy clause, located in Article VI of the Constitution, provides that the Constitution, laws, and treaties of the United States constitute the supreme law of the land, “any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.”

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 05-02 How does the U.S. government’s system of checks and balances operate?
Topic: The Supremacy Clause and Federal Preemption
 

 

18.
(p. 95)
Which of the following is true regarding laws passed by the U.S. Congress under the authority of the commerce clause?

A. As long as the law affects commerce among the states, or interstate commerce, in some way, the regulation is generally constitutional.

 

B. The law will only be constitutional if it affects taxation in some way.

 

C. As long as the law involves in some way a right guaranteed by the Bill of Rights, it is constitutional.

 

D. As long as the law is approved by any state affected, it is constitutional.

 

E. As long as the law is not objected to by any state affected within six months of its passage, it is constitutional.

As long as the law affects commerce among the states, or interstate commerce, in some way, the regulation is generally constitutional.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 05-03 What effects does the commerce clause have on the government’s regulation of business?
Topic: The Commerce Clause
 

 

  “Junk Food.” Mary Dogood, a member of the school board in ABC County, is appalled at the amount of junk food in the schools. She convinces the state legislature to pass an ordinance that no stores may sell any unhealthy junk food within 500 feet of any school or day care center. A teacher of political science raises the issue of whether the regulation is valid and is told that it is a valid exercise of the jurisdiction’s police power to protect its citizens. Convenience stores balk at the regulation and challenge it in court claiming that the law impermissibly affects interstate commerce.

 

19.
(p. 100)
What does the term “police power” reference?

A. The residual powers retained by each state to safeguard the health and welfare of its citizenry.

 

B. The residual powers retained by the federal government to enforce valid laws and regulations.

 

C. The powers granted to local government to enter residences without a search warrant.

 

D. The powers granted to state governments to tax for the purposes of having law enforcement.

 

E. The powers granted to state government to imprison citizens of other states who commit crimes within a state.

Police power consists of the residual powers retained by each state to safeguard the health and welfare of its citizenry.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-03 What effects does the commerce clause have on the government’s regulation of business?
Topic: The Commerce Clause
 

 

20.
(p. 100)
What do courts generally presume regarding laws passed in accordance with states’ police power?

A. There is no presumption.

 

B. The laws are valid.

 

C. The laws are invalid.

 

D. The laws are invalid unless it involves a First Amendment right.

 

E. The laws are invalid unless it involves regulation of interstate commerce.

Although the supremacy clause establishes the sovereignty of federal law, courts generally presume that laws passed in accordance with states’ police power are valid.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 05-03 What effects does the commerce clause have on the government’s regulation of business?
Topic: The Commerce Clause
 

 

21.
(p. 100)
Restrictions on states’ authority to pass laws that substantially affect interstate commerce are referenced by which of the following?

A. The dormant commerce clause

 

B. The superior commerce clause

 

C. The interstate trafficking commerce clause

 

D. The tracking clause

 

E. The state authority clause

The restriction on states’ authority to pass laws that substantially affect interstate commerce is called the dormant commerce clause.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 05-03 What effects does the commerce clause have on the government’s regulation of business?
Topic: The Commerce Clause
 

 

22.
(p. 101)
Which of the following was the result in Family Winemakers of California v. Jenkins, the case brought by winemakers from California challenging a Massachusetts law distinguishing between how large and small winemakers could distribute their wines in Massachusetts?

A. That the law impermissibly discriminated against out-of-state winemakers in violation of the Commerce Clause.

 

B. That the law permissibly discriminated against out-of-state winemakers and did not violate the commerce clause.

 

C. That the law impermissibly discriminated against out-of-state winemakers in violation of the Twenty-first Amendment to the U.S. Constitution.

 

D. That the law impermissibly discriminated against out-of-state winemakers in violation of the Webb-Kenyon Acts.

 

E. That the law did not discriminate against out-of-state winemakers and that, therefore, no violation occurred.

We court held that the law violated the Commerce Clause “because the effect of its particular gallonage cap is to change the competitive balance between in-state and out-of-state wineries in a way that benefits Massachusetts’s wineries and significantly burdens out-of-state competitors.”

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 05-03 What effects does the commerce clause have on the government’s regulation of business?
Topic: The Commerce Clause
 

 

23.
(p. 96)
Which of the following was the result at the U.S. Supreme Court level in United States v. Lopez, the case in which the Court addressed the constitutionality of the Gun-Free School Zone Act?

A. The Court ruled that the law was a valid exercise of congressional authority under the full faith and credit clause.

 

B. The Court ruled that the law was a valid exercise of congressional authority contained within the Bill of Rights.

 

C. The Court ruled that Congress exceeded its power under the Bill of Rights when it passed the act.

 

D. The Court ruled that Congress exceeded its commerce clause authority when it passed the act.

 

E. The Court ruled that the law was a valid exercise of the Court’s authority under the commerce clause.

In Lopez the Court ruled that Congress had exceeded its commerce clause authority when it passed the Gun-Free School Zone Act.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 05-03 What effects does the commerce clause have on the government’s regulation of business?
Topic: The Commerce Clause
 

 

24.
(p. 103)
Which of the following prohibits states from discriminating against citizens of other states when those nonresidents engage in ordinary and essential activities such as seeking employment?

A. The full faith and credit clause

 

B. The privileges and immunities clause

 

C. The contract clause

 

D. The citizens’ rights clause

 

E. The first amendment

The privileges and immunities clause prohibits states from discriminating against citizens of other states when those nonresidents engage in ordinary and essential activities including buying and selling property, seeking employment, and using the court system.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 05-03 What effects does the commerce clause have on the government’s regulation of business?
Topic: Other Constitutional Restrictions on Government
 

 

25.
(p. 103)
Which of the following requires that courts in all states uphold contracts and public acts of every state thereby protecting wills, divorce decrees, and judgments in civil courts?

A. The full faith and credit clause

 

B. The privileges and immunities clause

 

C. The commerce clause

 

D. The contract clause

 

E. The Bill of Rights clause

The full faith and credit clause provision requires that courts in all states uphold contracts and public acts established in other states.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-03 What effects does the commerce clause have on the government’s regulation of business?
Topic: Other Constitutional Restrictions on Government
 

 

  “Animal Care.” Susan, a licensed veterinarian, was recently elected to the U.S. Senate. Susan is very concerned about the lack of care for homeless cats and dogs. She proposes legislation that citizens of all states be taxed sufficiently to provide for no-kill animal shelters that citizens in states with higher than average incomes be taxed at a higher rate than citizens of other states. She also proposed that federal funds for state highways be denied to any state that fails to provide assistance to low income citizens in covering pet vaccinations. Bill, another new senator, tells Susan that, apart from the mandated federal income tax, Congress lacks the authority to tax states because the U.S. Constitution expressly reserves that right to the states. Sam, another senator, tells Susan that Congress has no authority to link highway funds or any other funds with social welfare objectives. Ellen, a clerk in the Senate, tells Susan that Congress is absolutely prohibited from taxing residents of one state at a higher rate than citizens of another state.

 

26.
(p. 102)
Is Bill correct?

A. He is incorrect. The U.S. Constitution contains no such reservation.

 

B. He is incorrect because while the U.S. Constitution prohibits taxation in areas in which states also tax, most states are not taxing for pet care purposes at this time.

 

C. He is incorrect in saying that the U.S. Constitution generally reserves the right to tax to the states but he is correct in saying that Congress lacks the authority to tax in this manner because Congress cannot lay taxes for any reason other than essential needs of the federal government.

 

D. He is incorrect in saying that the U.S. Constitution generally reserves the right to tax to the states but he is correct in saying that Congress lacks the authority to tax in this manner because the president has issued an executive order prohibiting such taxation.

 

E. He is incorrect because the prohibition against Congress imposing taxes apart from the federal income tax is contained in a federal statute passed by Congress, not in the U.S. Constitution.

Article I, Section 8, of the Constitution gives the federal government the “Power to lay and collect Taxes, Duties, Imports and Excises,” and the federal government can use taxes for purposes other than the provision of essential services.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 05-03 What effects does the commerce clause have on the government’s regulation of business?
Topic: Taxing and Spending Powers of the Federal Government
 

 

27.
(p. 102-103)
Which of the following is true regarding Sam’s statement?

A. Sam is correct.

 

B. Sam is correct only if the state is making efforts to put social programs into effect and is not acting unreasonably in refusing to provide other needed services.

 

C. Sam is partially correct in saying that Congress has no authority to link highway funds with social services, but any other funds may be linked to social services by executive order.

 

D. Sam is partially correct in saying that Congress has no authority to link highway funds with social services, but other funds may be linked to social services by an act of Congress.

 

E. Sam is incorrect.

As with its power to tax, Congress can use its spending power to achieve social welfare objectives, and as an example, in the 1987 case of South Dakota v. Dole, the Supreme Court upheld a federal statute granting federal funds for state highways to only those states in which 21 is the legal drinking age.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 05-03 What effects does the commerce clause have on the government’s regulation of business?
Topic: Taxing and Spending Powers of the Federal Government
 

 

28.
(p. 102)
Which of the following is true regarding Ellen’s statement?

A. Ellen is incorrect. The U.S. Congress has complete discretion on taxation.

 

B. Ellen is partially incorrect because before the U.S. Congress taxes one state’s residents at a higher rate than citizens of other states, a rational relationship between the difference and governmental need must be shown.

 

C. Ellen is incorrect because before the U.S. Congress taxes one state’s residents at a higher rate than citizens of other states, an important need must be shown.

 

D. Ellen is incorrect because before the U.S. Congress taxes one state’s residents at a higher rate than citizens of other states, a disparity of income of over 30% between one state and another must be shown.

 

E. Ellen is correct.

Although Article I, Section 8, of the Constitution gives the federal government the “Power to lay and collect Taxes, Duties, Imports and Excises,” the taxes laid by Congress must be uniform across the states.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 05-03 What effects does the commerce clause have on the government’s regulation of business?
Topic: Taxing and Spending Powers of the Federal Government
 

 

29.
(p. 104)
The first _____ amendments to the U.S. Constitution are known as the Bill of Rights.

A. Five

 

B. Six

 

C. Eight

 

D. Nine

 

E. Ten

The first 10 amendments to the U.S. Constitution, known as the Bill of Rights, substantially affect government regulation of business.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

 

30.
(p. 104)
Which amendment extends most of the provisions of the Bill of Rights to the states?

A. Thirteenth

 

B. Fourteenth

 

C. Twenty-first

 

D. Twenty-second

 

E. Fortieth

The Fourteenth Amendment extends most of the provisions in the Bill of Rights to the states, prohibiting state interference in citizens’ exercise of their rights.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

 

31.
(p. 105)
Which amendment provides that the government cannot infringe on citizens’ right to bear arms?

A. First

 

B. Second

 

C. Fifth

 

D. Sixth

 

E. None

Exhibit 5-2, “Summary of the Bill of Rights,” reflects the protection of the Second Amendment that in light of the need for a well-regulated militia for security, government cannot infringe on citizens’ right to bear arms.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

 

32.
(p. 105)
Which amendment prohibits cruel and unusual punishment?

A. Second

 

B. Fourth

 

C. Fifth

 

D. Eighth

 

E. Tenth

Exhibit 5-2, “Summary of the Bill of Rights” reflects the protection of the Eighth Amendment prohibiting cruel and unusual punishment.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

 

33.
(p. 104)
Today, when the First Amendment is concerned, what does the term “political speech” reference?

A. Speech that occurs when corporations support political candidates.

 

B. Speech by any citizen in connection with an election campaign.

 

C. Speech by elected officials regarding other elected officials.

 

D. Speech by private citizens involving advertising that is regulated by state government.

 

E. While the term “political speech” has historical connections, the First Amendment is not referenced in relation to “political speech” today because today all speech is considered at the same level.

Corporations engage in political speech when they support political candidates or referenda.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

 

34.
(p. 110)
Which of the following is true regarding the protection of “fighting words” under the First Amendment?

A. Fighting words are unprotected speech under the First Amendment.

 

B. Fighting words are protected speech under the First Amendment only if they are uttered by an individual citizen, not by a corporate representative.

 

C. Fighting words are protected speech under the First Amendment only if they involve political activity.

 

D. Fighting words are protected speech under the First Amendment only if they are made in connection with a protest march.

 

E. Fighting words are protected speech under the First Amendment only if they are made in conjunction with self-defense.

Fighting words are a class of unprotected speech.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

 

35.
(p. 110)
Which amendment protects freedom of religion?

A. First

 

B. Second

 

C. Fourth

 

D. Sixth

 

E. Eighth

The First Amendment contains two provisions, establishment clause and free-exercise clause that protect citizens’ freedom of religion.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

 

36.
(p. 110)
As expressed in the text, which of the following expresses the United Nations declaration on hate speech?

A. The United Nations’ declaration protects hate speech to the same degree as courts in the U.S. discussed in the text.

 

B. The United Nations’ declaration states that speech is only recognized as “hate speech” if it is gender-based.

 

C. The United Nations’ declaration states that speech is only recognized as “hate speech” if it is racially based.

 

D. The United Nations’ declaration states that hate speech is not a protected form of expression.

 

E. There is no United Nations declaration on hate speech because that body expressly determined that any decision on the matter should be postponed.

The international community is less protective of hate speech than the U.S., and the United Nations declaration and a number of foreign laws state that hate speech is not a protected form of expression.

 

AACSB: Diversity
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

 

37.
(p. 110)
What does the establishment clause of the First Amendment provide?

A. Government cannot make a law prohibiting the free exercise of religion.

 

B. Government cannot make a law establishing a religion.

 

C. Government cannot make a law referencing religion in any manner.

 

D. Government must establish laws respecting religion in order to prevent disruptive behavior such as terrorism and to allow free-exercise by the majority.

 

E. That only religions recognized when the First Amendment was passed are entitled to recognition and protection.

The establishment clause maintains that government “shall make no law respecting an establishment of religion.”

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

 

38.
(p. 111)
What does the free-exercise clause of the First Amendment provide?

A. Government cannot make a law prohibiting choice in relation to religion.

 

B. Government cannot make a law establishing a religion.

 

C. Government cannot make a law referencing religion in any manner.

 

D. Government must establish laws respecting religion in order to prevent disruptive behavior such as terrorism and to allow free-exercise by the majority.

 

E. That only religions recognized when the First Amendment was passed are entitled to recognition and protection.

The free-exercise clause states that government cannot make a law “prohibiting the free exercise” of religion.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

 

39.
(p. 112)
A ______ is a court order that authorizes law enforcement agents to search for or seize items specifically described in the warrant.

A. Search warrant

 

B. Subpoena warrant

 

C. Search authorization form

 

D. Seek warrant

 

E. Review authorization

A search warrant is a court order that authorizes law enforcement agents to search for or seize items specifically described in the warrant.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

 

40.
(p. 112)
When can government agents obtain a search warrant?

A. When they can establish reasonable cause.

 

B. When they can establish probable cause.

 

C. When they can establish cause to a substantial certainty.

 

D. Anytime they have an informant.

 

E. Anytime the judge is in his office and they show identification as government agents.

Government officials can obtain search warrants only if they can show probable cause to believe that the search will uncover specific evidence of criminal activity.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

 

41.
(p. 112)
Which amendment protects citizens from unreasonable searches and seizures?

A. First

 

B. Third

 

C. Fourth

 

D. Sixth

 

E. Tenth

The Fourth Amendment guarantees citizens the right to be “secure in their persons, their homes, and their personal property.”

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

 

42.
(p. 112)
When may government agents search without a search warrant?

A. When law enforcement officials believe it is likely that the items sought will be removed before they can obtain a warrant.

 

B. Outside of normal working hours for a judge.

 

C. When they can show that the suspect who lives in the residence at issue has been in jail previously.

 

D. When they can show that a felony is involved.

 

E. When they can show that they have heightened probable cause.

An example of when government officials do not need a search warrant is when law enforcement officials believe it is likely that the items sought will be removed before they can obtain a warrant.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

 

43.
(p. 114)
Which of the following is an exception to the rule that administrative searches usually require search warrants?

A. The regulatory exception

 

B. The reasonable-search exception

 

C. The pervasive-regulation exception

 

D. The compelling-need exception

 

E. The controlling-principle exception

Although administrative searches usually require search warrants, courts have established an exception to this rule in that if an industry has a long history of pervasive regulation, a warrantless search is not unreasonable although the pervasive-regulation exception is not always easy to interpret.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

 

44.
(p. 114)
Which of the following is true regarding the right of the federal government to obtain business books and records?

A. The government has an absolute right to business books and records so long as a subpoena is issued by a grand jury.

 

B. The government has no rights to such records without a search warrant, and a grand jury subpoena is insufficient regardless of whether a sole proprietor or a corporate shareholder is involved.

 

C. Obtaining books and records from a sole shareholder of a corporation and also from a sole proprietor based only upon a subpoena issued by a grand jury violates the right against self-incrimination.

 

D. Obtaining books and records from a sole proprietor based only on a subpoena from a grand jury violates the owner’s rights against self-incrimination, but seizing records from a sole shareholder of a corporation in that manner does not violate rights against self-incrimination.

 

E. Obtaining books and records from a sole shareholder of a corporation based only on a subpoena from a grand jury violates the shareholder’s rights against self-incrimination, but seizing records from a sole proprietor in that manner does not violate rights against self-incrimination.

In Braswell v. United States, the U.S. Supreme Court found that “subpoenaed business records are not privileged, and as a custodian for the records, the act of producing the records is in a representative capacity, not a personal one, so the records must be produced.” The Court held that a subpoena on such records violates the privilege against self-incrimination if a business is a sole proprietorship.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

 

  “Thermal Imaging.” Sam was engaged in the criminal activity of growing marijuana in his home using heat lamps in the process. The police randomly selected his street to search for illegal activity. Without any kind of a warrant, they used a thermal imager, an instrument that detects heat emissions, to determine that he was possibly engaged in illegal activity. The police immediately broke down Sam’s door, searched his home, and arrested him. The police officer in charge told Sam that he had no right to keep silent and that he might as well confess. Sam proceeded to confess to growing marijuana and a number of other crimes. The judge was so angry with Sam that he threw him in jail for two months without any kind of hearing. Sam’s lawyer, who just graduated from law school, is not sure if the police acted legally in Sam’s case by using the thermal imager. Sam’s lawyer also questions whether Sam had a right to remain silent, and he is concerned that the judge has not granted Sam a hearing.

 

45.
(p. 113)
Which of the following is true on the issue of whether the police acted within their rights by using the thermal imager?

A. The police acted within their rights so long as they can show that they asked a judge for a warrant before using the thermal imager, but the judge refused.

 

B. The police acted within their rights so long as they can show that the street was truly chosen at random for a search.

 

C. The police acted within their rights so long as they can show that Sam had been in jail previously on a drug offense charge.

 

D. The police acted legally so long as they can show that Sam had been in jail previously for any offense.

 

E. The police violated Sam’s Fourth Amendment rights in using the thermal imager.

The U.S. Supreme Court, in a 2001 case, ruled that police using thermal-imaging devices to detect heat patterns emanating from private homes constitutes a search that requires a warrant.

 

AACSB: Technology
Accessibility: Keyboard Navigation
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

 

46.
(p. 114)
Which of the following is true on the issue of whether Sam had a right to remain silent?

A. The officer was incorrect, and Sam had the right to remain silent based on his constitutional protection against self-incrimination.

 

B. The officer was correct that Sam had no right to remain silent, and there has never been a constitutional right entitling a defendant to remain silent.

 

C. The officer was correct that Sam had no right to remain silent because while at one time there was a constitutional right entitling a defendant to remain silent, that right was repealed by constitutional amendment.

 

D. The officer was correct, and Sam had no right to remain silent because the right against self-incrimination only protects against crimes involving physical harm to another.

 

E. The officer was partially correct because while Sam had a right to remain silent about other crimes, he did not have the right to remain silent about the drugs found in the initial search.

The Fifth Amendment protects against self-incrimination, meaning that in a criminal case, the defendant does not have to testify in court as a witness against herself or himself.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

 

47.
(p. 114)
Which of the following references rights Sam had in regard to a hearing?

A. Sam’s right to substantive due process.

 

B. Sam’s First Amendment rights.

 

C. Sam’s right to procedural due process.

 

D. Sam’s Fourth Amendment rights.

 

E. Sam’s Second Amendment rights.

At a minimum, procedural due process entitles a person to notice of any legal action against them, and to a hearing before an impartial tribunal.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

 

48.
(p. 114)
Which of the following is true regarding the Fifth Amendment’s protection against self-incrimination?

A. A person only has to be a witness against himself or herself if a felony is involved.

 

B. A person does not have to be a witness against himself or herself if a first criminal offense is involved.

 

C. A person does not have to be a witness against himself or herself if prison time is involved as opposed to a mere fine.

 

D. A person does not have to be a witness against himself or herself in a criminal case.

 

E. A person has to be a witness against himself or herself.

The Fifth Amendment protects against self-incrimination, meaning that in a criminal case, the defendant does not have to testify in court as a witness against herself or himself.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

 

49.
(p. 114)
Which amendment protects against double jeopardy?

A. The First Amendment

 

B. The Second Amendment

 

C. The Third Amendment

 

D. The Fourth Amendment

 

E. The Fifth Amendment

The Fifth Amendment protects against double jeopardy.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

 

50.
(p. 114)
What does protection against “double jeopardy” mean?

A. The government cannot try a person more than once for the same crime.

 

B. The government cannot try a person more than twice for the same crime.

 

C. The government must have double proof to prosecute a person twice for the same crime.

 

D. The government must show that at least two people were injured by the defendant in order to justify trying the defendant twice for the same crime.

 

E. The government may impose a double sentence on a repeat offender in order to protect the public.

The Fifth Amendment protects against double jeopardy meaning that the government cannot try a person more than once for the same crime.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

 

51.
(p. 114)
Which of the following are types of due process?

A. Procedural, substantive, and independent

 

B. Substantive, independent, and full faith

 

C. Independent, full faith, and substantive

 

D. Independent, full faith, and procedural

 

E. Procedural and substantive

The due process clause guarantees two types of due process: procedural and substantive.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

 

52.
(p. 115)
Which of the following refers to the basic fairness of laws that may deprive an individual of her life, liberty, or property?

A. Procedural due process

 

B. Substantive due process

 

C. Independent due process

 

D. The prohibition against taking

 

E. The prohibition against pervasive regulation

Substantive due process refers to the basic fairness of laws that may deprive an individual of her life, liberty, or property.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

 

53.
(p. 115)
What does the Fifth Amendment’s takings clause reference?

A. The right of the government to take private property for public use without paying compensation to the owner.

 

B. The requirement that the government pay the owner just compensation if the government wants to take private property for public use.

 

C. The right of the government to put individuals in jail for up to ten days without a hearing.

 

D. The right of the government to put individuals in jail for up to five days without a hearing.

 

E. The requirement that the government compensate an owner for anything destroyed during a search.

The Fifth Amendment’s taking clause provides that when government takes private property for public use, it must pay the owner just compensation, or fair market value, for the property.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

 

54.
(p. 117)
Which of the following is true regarding privacy rights?

A. The U.S. Supreme Court has said that the U.S. Constitution does not provide any right to privacy.

 

B. The U.S. Supreme Court has found that U.S. citizens have a right to privacy based upon the U.S. Constitution.

 

C. The U.S. Constitution specifically provides for a right to privacy within the Second Amendment.

 

D. The U.S. Constitution specifically provides for a right to privacy within the Sixth Amendment.

 

E. The U.S. Supreme Court has found that U.S. citizens have a right to privacy based upon the U.S. Constitution, and the U.S. Constitution specifically provides for a right to privacy within the Sixth Amendment.

Courts have interpreted the Ninth Amendment, together with the First, Third, Fourth, and Fifth amendments, as providing individuals with a right to privacy.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

 

55.
(p. 117)
If a law prevents individuals from exercising a fundamental right, the law will be subject to ___.

A. Intermediate scrutiny

 

B. Rational basis scrutiny

 

C. Severe scrutiny

 

D. Strict scrutiny

 

E. Legal scrutiny

If a law prevents individuals from exercising a fundamental right, the action will be subject to strict scrutiny.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

 

56.
(p. 118)
If the law’s classification scheme is based on gender, the law will be subject to ___.

A. Rational basis scrutiny

 

B. Intermediate scrutiny

 

C. Severe scrutiny

 

D. Strict scrutiny

 

E. Legal scrutiny

If the law’s classification scheme is based on gender or on the legitimacy of children, courts use intermediate scrutiny.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

 

57.
(p. 118)
Which of the following is true regarding rights of the citizens of Belarus?

A. The constitution restricts movement outside of the country.

 

B. The defendant in a criminal case has no protection from providing evidence against himself or herself.

 

C. Citizens have the right to profess any religion, but they must profess some religion.

 

D. The constitution limits the workweek to 30 hours.

 

E. Citizens accused of crimes are presumed innocent until proven guilty.

The constitution of Belarus, adopted in 1994, provides Belarusian citizens with an exhaustive set of rights that surpasses most other nations’ constitutions and guarantees, for example, that citizens accused of crimes are presumed innocent until proven guilty.

 

AACSB: Diversity
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 3 Hard
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

 

58.
(p. 103)
What did the U.S. Supreme Court rule in South Dakota v. Dole, the case involving the validity of a federal statute granting federal funds for state highways to only those states in which 21 is the legal drinking age?

A. The Court upheld the statute.

 

B. The Court upheld the statute only in the case of states that could not provide matching funds; and if matching funds could be provided, the Court ruled that there was insufficient reason for the law.

 

C. The Court upheld the statute only in the case of states that could provide matching funds; and if matching funds could not be provided, the Court ruled that Congress was overreaching in regard to partnership between state and federal government.

 

D. The Court struck the statute on the basis that it violated the Commerce Clause under the U.S. Constitution.

 

E. The Court struck the statute on the basis that it violated the taxing and spending powers of the federal government under the U.S. Constitution.

In the 1987 case South Dakota v. Dole, the Supreme Court upheld a federal statute that grants federal funds for state highways to only those states in which 21 is the legal drinking age.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-03 What effects does the commerce clause have on the government’s regulation of business?
Topic: Taxing and Spending Powers of the Federal Government
 

 

59.
(p. 118)
What was the result at the U.S. Supreme Court level in the Case Opener involving the constitutionality of the “individual mandate” contained within the Affordable Care Act requiring that most Americans obtain minimum essential health insurance contained within the Affordable Care Act?

A. The Supreme Court upheld the “individual mandate” of the Affordable Care Act on the basis that it was a valid exercise of congressional power under the taxing clause.

 

B. The Supreme Court upheld the “individual mandate of the Affordable Care Act on the basis that it was a valid exercise of congressional power” under the commerce clause.

 

C. The Supreme Court upheld the “individual mandate” of the Affordable Care Act on the basis that it was a valid exercise of congressional power under the taxing clause and also under the Commerce Clause.

 

D. The Supreme Court struck the “individual mandate” from the Affordable Care Act as a violation of the Commerce Clause but allowed the remainder of the law to remain.

 

E. The Supreme Court struck the “individual mandate” from the Affordable Care Act as a violation of the taxing clause but allowed the remainder of the law to remain.

The United States Supreme Court upheld the individual mandate of the Affordable Care Act (ACA) on the ground that it was a valid exercise of congressional power under the taxing clause.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

 

60.
(p. 98)
Which of the following was the result at the U.S. Supreme Court level in Christy Brzonkala v. Antonio Morrison, the case in the text involving the constitutionality of the section of the Violence Against Women Act providing for a civil remedy?

A. That Congress lacked authority under the Commerce Clause to pass the section at issue.

 

B. That because of its police powers, Congress had authority under the Commerce Clause to pass the section at issue.

 

C. That because gender-motivated crimes were at issue, Congress had authority under the Commerce Clause to pass the section at issue.

 

D. That because violent crime was involved, Congress had authority under the Commerce Clause to pass the section at issue.

 

E. That because the petitioner established a link between the cost of crime against women and national productivity, Congress had authority under the Commerce Clause to pass the section at issue.

The court refused to find the section constitutional rejecting the argument that Congress may regulate noneconomic, violent criminal conduct based solely on that conduct’s aggregate effect on interstate commerce.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 05-03 What effects does the commerce clause have on the government’s regulation of business?
Topic: The Commerce Clause
 

 

61.
(p. 111)
What was the result at the federal appellate court level in Trunk v. San Diego, the case in the text involving whether the presence of a cross on federal land near a Korean War memorial violated the First Amendment?

A. The court ruled that the presence of the cross violated the First Amendment.

 

B. The court ruled that the presence of the cross did not violate the First Amendment because the cross promoted the service of veterans, not a religion.

 

C. The court ruled that the presence of the cross did not violate the First Amendment because it was initially erected by private parties and had historical significance.

 

D. The court ruled that the presence of the cross did not violate the First Amendment because although it was erected by public authorities, it had historical significance independent of its governmental ties.

 

E. The court ruled that the presence of the cross did not violate the First Amendment because although it did promote a particular religion, that religion was practiced by large numbers of the surrounding citizens.

According to the Ninth Circuit, “the prominence of the Cross in the Memorial, leads us to conclude that a reasonable observer would perceive the Memorial as projecting a message of religious endorsement, not simply secular memorialization,” and the memorial was therefore found to violate the establishment clause.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

 

62.
(p. 103)
Which of the following is true regarding the ability of individual states to collect sales tax on Internet transactions?

A. Individual states may without restriction collect sales tax from merchants on items purchased through the Internet by in-state residents.

 

B. Only with permission of Congress, granted on a state-by-state basis, may individual states collect from merchants sales tax on items purchased through the Internet by in-state residents.

 

C. States cannot collect sales tax on Internet sales from merchants nor may a state require that its citizens report Internet purchases so that they may be taxed.

 

D. A state cannot collect sales tax from merchants unless sales to the state’s citizens amount to more than 1 million in the aggregate.

 

E. A state can collect sales tax from a merchant only if the merchant has a store or distribution center in the state.

Sales taxes are a large source of revenue for state governments, but states can require that a business submit sales tax payments only if the business has a store or distribution center in the state.

 

AACSB: Technology
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 05-03 What effects does the commerce clause have on the government’s regulation of business?
Topic: Taxing and Spending Powers of the Federal Government
 

 

Essay Questions

63.
(p. 93)
Explain the system of checks and balances and how it works.

The Constitution establishes the system of checks and balances. Each branch’s powers keep the other branches from dominating the government. Congress, the legislative branch, has the power to enact legislation, but the president can veto a law that Congress passes. The legislature, however, can overturn a presidential veto with a two-thirds vote of the members of Congress. Also, if Congress passes a bill and the president signs it, the judiciary can strike it down as unconstitutional.

 

AACSB: Analytic
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 05-02 How does the U.S. government’s system of checks and balances operate?
Topic: The U.S. Constitution
 

 

64.
(p. 100)
Explain the concept of the “dormant commerce clause.”

The dormant commerce clause is a restriction on the state’s authority to pass laws that substantially affect interstate commerce. If the purpose of a state law is to regulate interstate commerce or to discriminate against interstate commerce, the law is usually unconstitutional. Likewise, if a law substantially interferes with interstate commerce, it is generally unconstitutional.

 

AACSB: Analytic
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 05-03 What effects does the commerce clause have on the government’s regulation of business?
Topic: The Commerce Clause
 

 

65.
(p. 104)
Christen who just turned eighteen is out with several friends. They decide to see a movie, but it is sold out. Christen hid in the back of the theatre and yelled “Fire” as loudly as she could. Everyone ran out of the theatre, and a number got in their vehicles and left. Christen and her friends thought that seeing the movie was now possible. Unfortunately, a theatre employee saw Christen yelling, called the police, and she was arrested. Christen told the police officers that she was only exercising her free speech rights. She also told the police that the theatre employee lied and that she personally saw him stealing popcorn. The theatre employee told Christen that he was going to sue for defamation, and she told him that she would win based on her right to free speech. Discuss whether or not Christen is right on both counts and why.

While the First Amendment protects freedom of speech, like other rights, First Amendment rights are not absolute. For that reason, a person does not have the right to yell fire as did Christen. Additionally, the First Amendment does not protect false statements about another that are injurious to that person’s reputation.

 

AACSB: Reflective Thinking
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

 

66.
(p. 107)
Set forth the Central Hudson Test for Commercial Speech.

The test has four aspects as follows:

(1) Does the speech concern an illegal activity? Is it misleading?
(2) Is the government interest served by the restriction on commercial speech substantial?
(3) Does the regulation directly advance the government interest asserted?
(4) Is the regulation more extensive than necessary to serve the government interest?

As long as the speech is not illegal or misleading, in order to have a restriction on speech upheld, the government must show that the interest served by the restriction on commercial speech is substantial. The regulation at issue must also directly advance the government interest asserted, and the regulation must not be more extensive than necessary to serve the government interest involved.

 

AACSB: Analytic
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

 

67.
(p. 117)
When is a strict-scrutiny standard used to examine laws, how is this standard applied, and what presumption do courts apply, if any, in cases involving this standard?

If a law prevents individuals from exercising a fundamental right, or if the law’s classification scheme involves suspect classifications, the action will be subject to strict scrutiny. Suspect classifications include classifications based on race, national origin, and citizenship. Courts uphold suspect classifications only if they are necessary to promote a compelling state interest. In cases involving suspect classifications, courts do not begin their analysis with a presumption that the classification is constitutional, so few laws pass the strict-scrutiny standard.

 

AACSB: Analytic
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 05-04 How does the Bill of Rights protect the citizens of the United States?
Topic: The Amendments to the Constitution
 

Chapter 13

Introduction to Contracts

 

True / False Questions

1. The term “consideration” in relation to contracts involves parties acting in an ethical manner.

True    False

 

2. The Restatement (Second) of the Law of Contracts is not actually the law itself.

True    False

 

3. Whether a contract is bilateral or unilateral depends upon what response the offeror expects from the offeree.

True    False

 

4. Today, courts hold that once an offeree begins performance on a unilateral contract, the offeror must hold the offer open for a reasonable time to allow the offeree to complete the performance.

True    False

 

5. Quasi-contracts are actual contracts.

True    False

 

6. If a quasi-contract is imposed, the amount of damages for a breach is based upon the fair market value of any service provided to the defendant.

True    False

 

7. In order to recover under quasi-contract, there is no requirement that enrichment be unjust.

True    False

 

8. If a contract is valid, then it is enforceable.

True    False

 

9. Any contract that is not a formal contract is an informal contract, also called a simple contract.

True    False

 

10. In the employer/employee context, the purpose of a covenant not to compete is to restrict what an employee may do after leaving a company.

True    False

 

11. Congress passed the Uniform Electronic Transactions Act (UETA).

True    False

 

12. A person who is intoxicated when signing a contract may not avoid the contract based on being intoxicated because being intoxicated is a voluntary condition.

True    False

 

 

Multiple Choice Questions

13. Which of the following is true regarding the type of marriage contract discussed in the text called the muta’a?

A. It is a type of premarital contract typical to the U.S. in which the parties agree ahead of time how property and assets should be divided in the event of divorce.

 

B. It is a contract by which the female agrees to a divorce if there are no children from the marriage within five years.

 

C. It is a contract by which the female agrees to a divorce if there are no children from the marriage within three years.

 

D. It is a temporary type of arrangement called a “responsibility marriage” in which the female is paid to care for the male’s elderly parents.

 

E. It is a temporary type of arrangement called a “pleasure marriage” in which the female is paid for sexual intimacy.

 

14. Which of the following was the result on appeal in Reisenfeld & Co. v. The Network Group Inc.; Builders Square Inc.; Kmart Corp., the case in the text involving whether the plaintiff could recover from BSI in the situation in which BSI contracted with Network Group to lease property, and Network Group contracted with the plaintiff agreeing to pay a certain commission for his work but then defaulted on the contract?

A. The court ruled that because it was a third-party beneficiary, BSI was required to pay the plaintiff the full amount of the commissions claimed.

 

B. The court ruled that because it was a third-party beneficiary, BSI was required to pay the plaintiff the reasonable value of the services rendered, not necessarily the contractual amount promised for commissions.

 

C. The court ruled that because a quasi-contract was involved, BSI was required to pay the plaintiff the full amount of the commissions claimed.

 

D. The court ruled that because a quasi-contract was involved, BSI was required to pay the plaintiff the reasonable value of the services rendered, not necessarily the contractual amount promised for commissions.

 

E. The court ruled that because the plaintiff did not have a contract with BSI, the plaintiff was entitled to no recovery from BSI.

 

15. Which of the following was the result in the Case Opener in which Hallmark claimed that an arbitration ruling against a former employee should be upheld?

A. The former employee was barred from proceeding in court because of the binding arbitration clause.

 

B. The former employee was barred from proceeding in court based on the statute of limitations which expired while she was pursuing her remedies in arbitration.

 

C. The former employee was allowed to proceed in court because she had exhausted her remedies in the arbitration arena.

 

D. The former employee could proceed with an action in court because there was no consideration for the arbitration agreement and, therefore, no valid agreement.

 

E. The former employee could proceed with an action in court because, as a matter of law, arbitration agreements are barred in the arbitration context.

 

16. A[n] ___________ is a promise or set of promises for the breach of which the law gives a remedy or the performance of which the law in some way recognizes a duty.

A. Contract

 

B. Offer

 

C. Consideration

 

D. Acceptance

 

E. Legal object

 

17. Which of the following consists of an offer by one party and an acceptance of the terms by another party?

A. Legal object

 

B. Agreement

 

C. Coherence

 

D. Alliance

 

E. Concurrence

 

18. The person who makes an offer is called a[n] ___________.

A. Offeree

 

B. Offeror

 

C. Agreeor

 

D. Agree

 

E. Inquirer

 

19. The person who agrees to the terms of an offer made by the other party is called the _________.

A. Offeree

 

B. Offeror

 

C. Agreeor

 

D. Agree

 

E. Inquirer

 

20. Which of the following is a definition for consideration?

A. Being cordial in the negotiation of contracts.

 

B. Refraining from unethical behavior in the negotiation of contracts.

 

C. Being cordial and refraining from unethical behavior in the negotiation of contracts.

 

D. The bargained-for exchange.

 

E. A contract negotiated in person as opposed to by telephone or e-mail.

 

21. Which of the following represents the legal ability to enter into a binding agreement?

A. Majority

 

B. Emancipation

 

C. Contractual knowledge

 

D. Contractual capacity

 

E. Informed consent

 

22. Which of the following references the requirement that a contract not be either illegal or against public policy?

A. Consideration

 

B. Capacity

 

C. Legal object

 

D. Illegal prohibition

 

E. Ethical requirement

 

23. Which of the following may represent a lack of genuine assent?

A. Acceptance secured through fraud, duress, or misrepresentation, but not acceptance through undue influence.

 

B. Acceptance secured through undue influence, misrepresentation, or duress, but not through fraud.

 

C. Acceptance secured through fraud or duress, but not through misrepresentation or undue influence.

 

D. Acceptance secured through fraud, dress, or undue influence, but not through misrepresentation.

 

E. Acceptance secured through fraud, duress, undue influence, or misrepresentation.

 

24. An attorney who says that a contract lacks “the proper form” is typically referencing which of the following?

A. The agreement lacked a proper offer.

 

B. The contract lacked a proper acceptance.

 

C. The contract lacked consideration.

 

D. The contract lacked a writing.

 

E. The contract lacked both an appropriate offer and an appropriate acceptance.

 

25. Contract law is said to be based on a[n] ___________ theory, meaning that the existence and interpretation of the contract is based on the outward manifestations of intent by the parties.

A. Subjective

 

B. Objective

 

C. Interpretive

 

D. Appearing

 

E. Unilateral

 

26. As a general rule, the ________ intent of the parties is not relevant when determining whether a contract exists; rather, what is relevant is how they represented their intent through their actions and words.

A. Objective

 

B. Subjective

 

C. Unilateral

 

D. Comprehensive

 

E. Considered

 

27. If a[n] _____________ misunderstanding between the parties exists, and as a result of that misunderstanding the parties do not really come to a meeting of the minds, there is no contract.

A. Mutual

 

B. Unilateral

 

C. Comprehensive

 

D. Subjective

 

E. Reasonable

 

28. In the U.S., which of the following are the two most important sources of contract law?

A. Case law and the Restatement of Law, Contracts.

 

B. Case law and the Uniform Commercial Code.

 

C. The Uniform Commercial Code and the Convention on Contracts for International Sales of Goods.

 

D. Case law and the Convention on Contracts for International Sales of Goods.

 

E. The Convention on Contracts for International Sales of Goods and the Restatement of the Law, Contracts.

 

29. Today’s law of contracts originated from judicial decisions in ______.

A. France

 

B. Italy

 

C. Spain

 

D. England

 

E. Switzerland

 

30. The law of contracts is primarily _______________ law.

A. Comprehensive

 

B. Statutory

 

C. Common

 

D. Restated

 

E. Modified

 

31. Which of the following was propounded by prominent legal scholars, recruited by the American Law Institute?

A. The Restatement of the Law Second, Contracts.

 

B. The Convention on Contracts for the National Sales of Goods.

 

C. Common law.

 

D. Common law and the Convention on Contracts for International Sales of Goods.

 

E. The Convention on Contracts for the National Sales of Goods and the Restatement of the Law Second, Contracts.

 

32. Which of the following is the reason the Uniform Commercial Code was drafted?

A. Different states had different laws governing contracts which did not result in a smooth flow of interstate commerce.

 

B. Some states had no law governing contracts.

 

C. Federal law governing contracts was difficult to apply.

 

D. The Uniform State Act on laws was not working.

 

E. The Restatement of the Law Second, Contracts was not being evenly and fairly applied.

 

33. Which of the following is the part of the Uniform Commercial code governing contracts for the sale of goods?

A. Article 2

 

B. Article 3

 

C. Article 4

 

D. Article 5

 

E. Article 7

 

34. All contracts can be categorized as either ___________ or __________.

A. Unilateral; complete

 

B. Unilateral; trilateral

 

C. Bilateral; trilateral

 

D. Unilateral; bilateral

 

E. Bilateral; complete

 

35. A[n] ______________ contract is commonly defined as a promise in exchange for a promise.

A. Unilateral

 

B. Trilateral

 

C. Complete

 

D. Bilateral

 

E. Classified

 

36. Harry and Frank are in agreement that Harry will pay Frank $2,000 for a used car. At what point is there a binding contract?

A. When the agreement is made.

 

B. When the money is paid.

 

C. When the car is delivered.

 

D. Ten days after the car is delivered and approved.

 

E. Twenty days after the car is delivered and approved.

 

37. In a[n] _____________ contract, the offeror wants a performance to form the contract.

A. Trilateral

 

B. Bilateral

 

C. Unilateral

 

D. Complete

 

E. Anticipatory

 

38. In which of the following does a contract arise not from words but from the conduct of the parties?

A. Implied contracts

 

B. Express contracts

 

C. Liquidated contracts

 

D. Bilateral contracts

 

E. Unilateral contracts

 

39. Which of the following is sometimes referred to as an implied-in-law contract?

A. Quasi-contracts

 

B. Express contracts

 

C. Implied-in-fact contracts

 

D. Express contracts and implied-in-fact contracts

 

E. Express contracts and quasi-contracts

 

40. Which of the following is the most likely measure of recovery when a quasi-contract is involved?

A. The amount set forth in the contract.

 

B. The fair market value of the matter involved.

 

C. The wholesale price of any good involved.

 

D. The amount sought by the plaintiff in the Complaint.

 

E. Damages will be computed the same way as they are computed for any other contract.

 

41. A[n] _____________ contract is one that contains all the legal elements of a contract.

A. Voidable

 

B. Executed

 

C. Formal

 

D. Valid

 

E. Approved

 

42. A valid contract may be valid but _____________ when there is some law that prohibits the courts from enforcing it.

A. Executed

 

B. Executory

 

C. Unenforceable

 

D. Novated

 

E. Condoned

 

43. Which of the following is in effect not a contract at all?

A. A voidable contract

 

B. An executory contract

 

C. An implied contract

 

D. An executed contract

 

E. A void contract

 

44. A contract is ______________ if one or both of the parties, without breaching the contract, have the ability to either withdraw from the contract or enforce it.

A. Voidable

 

B. Executory

 

C. Implied

 

D. Executed

 

E. Void

 

45. Which of the following contracts are usually voidable?

A. Contracts entered into as a result of fraud, but not duress or undue influence.

 

B. Contracts entered into as a result of duress or undue influence, but not fraud.

 

C. Contracts entered into as a result of undue influence or fraud, but not duress.

 

D. Contracts entered into as a result of fraud or duress, but not undue influence.

 

E. Contracts entered into as a result of fraud, duress, or undue influence.

 

46. Once all the terms of the contract have been fully performed, the contract is said to be ___________.

A. Executory

 

B. Executed

 

C. Anticipatory

 

D. Ended

 

E. Stopped

 

47. As long as some of the duties under a contract have not yet been performed, the contract is considered ________________.

A. Executory

 

B. Executed

 

C. Anticipatory

 

D. Ended

 

E. Stopped

 

48. Which of the following is an example of a formal contract?

A. Contracts under seal but not executed contracts or letters of credit.

 

B. Executed contracts but not contracts under sale or letters of credit.

 

C. Letters of credit and contracts under seal, but not executed contracts.

 

D. Contracts under seal letters of credit, but not executory contracts.

 

E. Contracts under seal, letters of credit, and also executed contracts.

 

49. The reference to __________________ comes from the days when the contract was literally sealed by a piece of soft wax into which an impression was made.

A. Implied-in-fact contracts

 

B. Implied-in-law contracts

 

C. Contracts under wax

 

D. Contracts under seal

 

E. Contracts under pressure

 

50. How many states still allow a contract without consideration to be enforced if it is under seal?

A. Five

 

B. Eight

 

C. Ten

 

D. Twenty

 

E. Thirty

 

51. A[n] _______________ arises when a person acknowledges in court that he or she will perform some specified act or will pay a price upon failure to do so.

A. Contract under seal

 

B. Voidable contract

 

C. Recognizance

 

D. Implied-in-fact

 

E. Informal contract

 

52. A ________________ is an agreement by the person who issues a letter to pay a sum of money on receipt of an invoice and other documents.

A. Letter of agreement

 

B. Letter of credit

 

C. Letter of acknowledgement

 

D. Negotiated credit instrument letter

 

E. Letter of simple contract

 

53. Which of the following are written documents signed by a party that makes an unconditional promise to pay a specific sum of money on demand or at a certain time to the holder of the instrument?

A. Negotiable instruments

 

B. Informal contracts

 

C. Simple contracts

 

D. Recognizances

 

E. Formal contracts

 

54. Which of the following states that if a writing, or term in question, appears to be plain and unambiguous on its face, its meaning must be determined from the four corners of the instrument without resort to outside evidence, with the words being given their ordinary meaning?

A. The Interpretation Rule

 

B. The Simple Rule

 

C. The Understandable Rule

 

D. The Plain Meaning Rule

 

E. The Comprehensive Rule

 

55. Which of the following was the result in In Re Zappos.com Inc., v. Customer Data Security Breach Litigation, the case in the text in which customers of Zappos claimed that they were not bound to an arbitration agreement contained in a contract with Zappos?

A. The court ruled for the plaintiffs for the following two reasons: (1) there was no contract because plaintiffs did not assent to it, and (2) even if a contract existed, the contract was illusory and unenforceable because Zappos could avoid promises at any time.

 

B. The court ruled for the plaintiffs only because of its finding that no contract existed based on the plaintiffs lack of assent.

 

C. The court ruled for the plaintiffs only because of its finding that the contract was illusory and unenforceable because Zappos could avoid promises at any time.

 

D. The court ruled in favor of Zappos on the basis that even though some provisions of the contract were unenforceable, because of the federal policy favoring arbitration agreements, the arbitration clause itself was enforceable.

 

E. The court ruled in favor of Zappos on the basis that the contract was properly entered into and was fully enforceable.

 

  “Book Sale.” Beverly offered to sell Rick a used business law book for $50. She told him that he could use it in his upcoming business law class the next semester. In fact, there was a problem with the book; it was several editions old. Rick was not aware of that fact, and neither was Beverly. When Rick took the book to class and realized the problem, he went back to Beverly requesting a refund. Beverly refused to return his money. She claimed that subjectively she thought that the book was correct, that she did not commit fraud, and that a binding contract existed. The book, however, is outdated and cannot be appropriately used in the class.

 

56. Which of the following would describe Beverly’s role in the transaction?

A. She was the offeror.

 

B. She was the offeree.

 

C. She was the assentor.

 

D. She was the assentee.

 

E. She was the offeree and the assentee.

 

57. Which of the following describes Rick’s role in the transaction?

A. He was the offeror.

 

B. He was the offeree.

 

C. He was the assentor.

 

D. He was the assentee.

 

E. He was the offeree and the assentee.

 

58. Which of the following is the term representing the $50 to be provided by Rick and the book to be provided by Beverly?

A. Encouragement

 

B. Material

 

C. Consideration

 

D. Inducement

 

E. Provisions

 

59. Which of the following is true regarding Beverly’s claim that she subjectively believed the book was an appropriate edition and that an enforceable contract, therefore, existed?

A. She is correct because contract law is based upon a subjective theory of contracts.

 

B. She is correct because her genuinely held belief establishes that she did not commit fraud.

 

C. She is correct because agreements for the sale of goods are based on a subjective theory.

 

D. She is incorrect because her subjective belief would not be the basis for a determination of whether the contract would be enforced in this case and also because fraud is not necessary in order to find a breach of contract.

 

E. She is correct but only if Rick subjectively believed the same as she did.

 

60. Which of the following would be the correct analysis of the effect of the discovery that Rick has a book that is not appropriate for the class?

A. Rick is stuck with the book because he objectively agreed to purchase it.

 

B. Rick is stuck with the book because Beverly did not commit fraud.

 

C. Rick is stuck with the book because Beverly subjectively thought it was the correct book, and Rick did not openly disagree before the contract was executed.

 

D. Because the parties had a mutual misunderstanding, the parties did not come to a meeting of the minds, and there is no contract.

 

E. Because both parties were mistaken, at Rick’s option he may return the book; but only half of the purchase price would be required as a refund from Beverly because she is not guilty of fraud.

 

  “Refusal to Pay.” Business law teacher Debby needed some yard work done. She told her class that she would give $50 to the first person who mowed her yard. She also entered into an agreement with Betty who agreed to trim some shrubbery for $40. Max went to mow Debby’s yard. Unfortunately, just as he finished mowing, a neighborhood dog bit him, and he had to go to the emergency room for a couple of stitches. Debby refused to pay Max because she said that he had angered the neighbors and their dog, and that he was more trouble than he was worth. Secretly, Debby was glad about the dog bite because she felt it gave her an excuse not to pay. Max refused to pay the emergency room because he said that they did not have a binding, bilateral contract. Betty refused to trim the shrubbery because she got a better offer and claimed that she was not bound on the contract until she started to perform.

 

61. Which of the following is correct regarding Betty’s statement that there was no contract?

A. Betty is correct. There was no contract because she had not started working.

 

B. Betty is incorrect because there was a bilateral, express agreement.

 

C. Betty is incorrect because there was a bilateral, implied agreement.

 

D. Betty is incorrect because there was a unilateral, express agreement.

 

E. Betty is incorrect because there was a unilateral, implied agreement.

 

62. Which of the following is an appropriate characterization of the agreement between Debby and Max?

A. They had a bilateral, express agreement.

 

B. They had a bilateral, implied agreement.

 

C. They had a bilateral and unilateral agreement.

 

D. They had a unilateral, express agreement.

 

E. They had a unilateral, implied agreement.

 

63. Which of the following is true regarding Max’s statement that he did not have to pay the emergency room charges?

A. He is correct.

 

B. He is incorrect because there was a bilateral, express contract.

 

C. He is incorrect because there was a unilateral, express contract.

 

D. He is partially correct in that because a quasi-contract existed, he would have to pay; but he would only have to pay fair market value, not what the hospital requested.

 

E. He is incorrect because there was a binding implied contract.

 

  “Wrong Deck.” Penny hires Jackson to paint her back deck. She agrees to pay him $200 for the job, and he accepts sight unseen. They enter into the agreement on Tuesday, and he is to paint the deck on Saturday. When Jackson arrives, neither Penny nor her neighbor is at home. He mistakenly paints the neighbor’s deck. Penny calls him the next day and asks him why he did not paint her deck. He informs her that he did paint the deck. It is then discovered that he mistakenly painted the neighbor’s deck. Penny tells him not to worry because the neighbor will be required to pay him. Jackson says that if the neighbor does not pay, then he expects all of his funds from Penny, because the contract is executed.

 

64. What was the status of the agreement between Jackson and Penny as of Tuesday when they agreed upon the price for the job?

A. The contract was executory.

 

B. The contract was executed.

 

C. The contract was novated.

 

D. The contract was formal.

 

E. The contract was a recognizance contract.

 

65. Which of the following is correct regarding Penny’s assertion that the neighbor will be required to pay Jackson?

A. She is correct. The neighbor will be required to pay Jackson under a theory of quasi-contract.

 

B. She is correct. The neighbor will be required to pay Jackson based upon an implied-in-fact contract.

 

C. She is correct. The neighbor will be required to pay Jackson based upon an implied-in-law contract.

 

D. She is correct. The neighbor will be required to pay Jackson based upon an express contract.

 

E. She is incorrect. The neighbor will not be required to pay Jackson.

 

66. Which of the following is true regarding Jackson’s assertion that Penny must pay him at this point if the neighbor fails to do so?

A. He is correct because an express contract existed, and he made an honest mistake for which Penny must accept the risk.

 

B. He is correct because an implied contract existed, and he made an honest mistake for which Penny must accept the risk.

 

C. He is correct because an implied-in-law contract existed.

 

D. He is correct because a valid contract existed; and, after his performance, it is considered executed.

 

E. He is incorrect unless he can somehow establish that Penny gave him poor directions or was otherwise at fault in informing him which deck to paint, and the contract remains executory.

 

 

Essay Questions

67. Identify and describe the four elements that are necessary for a contract to exist.

 

 

 

 

68. Define a bilateral contract and a unilateral contract, and give an example of each.

 

 

 

 

69. Define an express contract and an implied contract; set forth the three conditions that generally must be met for the courts to find an implied contract, and give an example of an express and implied contract.

 

 

 

 

70. Millie mows her own yard to save money. Her neighbor Paul, however, hires a lawn service to mow his yard. One day Millie is looking out of the window and sees Paul’s lawn service drive up. Surprisingly, they begin to mow her yard, not Paul’s yard. Millie thinks that is great and keeps her mouth shut while they mow the yard. Later, she gets a bill. She calls the owner of the lawn service and says that she does not have to pay because there was no contract where she agreed to have her yard mowed. The lawn service says that she is liable for the full amount of its contract. Discuss whether the lawn service is entitled to any recovery and why or why not.

 

 

 

 

71. Discuss the meaning of a void contract and a voidable contract, and the effect of a determination that a contract is either void or voidable.

 

 

 

 

Chapter 13 Introduction to Contracts Answer Key

True / False Questions

1.
(p. 306)
The term “consideration” in relation to contracts involves parties acting in an ethical manner.

FALSE

Consideration is the bargained-for exchange or what each party gets in exchange for his or her promise under the contract.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

2.
(p. 310)
The Restatement (Second) of the Law of Contracts is not actually the law itself.

TRUE

The Restatement (Second) is not actually the law itself, although judges frequently cite it because it is an authoritative statement of what the law is.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 13-02 What are the sources of contract law?
Topic: Sources of Contract Law
 

 

3.
(p. 311)
Whether a contract is bilateral or unilateral depends upon what response the offeror expects from the offeree.

TRUE

If the offeror wants a promise from the offeree to form a binding contract, the contract is a bilateral contract, commonly defined as a promise in exchange for a promise. In a unilateral contract, the offeror wants the offeree to do something, not to promise to do something.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

4.
(p. 312)
Today, courts hold that once an offeree begins performance on a unilateral contract, the offeror must hold the offer open for a reasonable time to allow the offeree to complete the performance.

TRUE

Today, the courts hold that once an offeree begins performance, the offeror must hold the offer open for a reasonable time to allow the offeree to complete it.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

5.
(p. 314)
Quasi-contracts are actual contracts.

FALSE

Quasi-contracts are sometimes called implied-in-law contracts, but they are not actually contracts.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

6.
(p. 314)
If a quasi-contract is imposed, the amount of damages for a breach is based upon the fair market value of any service provided to the defendant.

TRUE

When the court imposes a quasi-contract, the defendant is required to pay the fair market value of the benefit bestowed.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

7.
(p. 314)
In order to recover under quasi-contract, there is no requirement that enrichment be unjust.

FALSE

There are limits to the quasi contract doctrine; specifically, the enrichment must be unjust.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

8.
(p. 316)
If a contract is valid, then it is enforceable.

FALSE

Sometimes a contract may be valid yet unenforceable when a law prohibits the courts from enforcing it.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

9.
(p. 317)
Any contract that is not a formal contract is an informal contract, also called a simple contract.

TRUE

Any contract that is not a formal contract is an informal contract, also called a simple contract. Informal contracts may in fact be quite complex, but they are called “simple” because no formalities are required in making them.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

10.
(p. 306)
In the employer/employee context, the purpose of a covenant not to compete is to restrict what an employee may do after leaving a company.

TRUE

Covenants not to compete restrict what an employee may do after leaving a company.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

11.
(p. 308)
Congress passed the Uniform Electronic Transactions Act (UETA).

FALSE

Congress did not write or pass the Uniform Electronic Transactions Act (UETA). The National Conference of Commissioners on Uniform State Laws proposed this piece of legislation, which almost every state has adopted.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

12.
(p. 308)
A person who is intoxicated when signing a contract may not avoid the contract based on being intoxicated because being intoxicated is a voluntary condition.

FALSE

Intoxicated persons lack the capacity to enter into contracts.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

Multiple Choice Questions

13.
(p. 317)
Which of the following is true regarding the type of marriage contract discussed in the text called the muta’a?

A. It is a type of premarital contract typical to the U.S. in which the parties agree ahead of time how property and assets should be divided in the event of divorce.

 

B. It is a contract by which the female agrees to a divorce if there are no children from the marriage within five years.

 

C. It is a contract by which the female agrees to a divorce if there are no children from the marriage within three years.

 

D. It is a temporary type of arrangement called a “responsibility marriage” in which the female is paid to care for the male’s elderly parents.

 

E. It is a temporary type of arrangement called a “pleasure marriage” in which the female is paid for sexual intimacy.

In Iraq under the muta’a (“contract for a pleasure marriage”), a marriage can last anywhere from an hour to 10 years and is renewable. Under the contract, the male typically receives sexual intimacy, in exchange for which the woman receives money.

 

AACSB: Diversity
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

14.
(p. 315)
Which of the following was the result on appeal in Reisenfeld & Co. v. The Network Group Inc.; Builders Square Inc.; Kmart Corp., the case in the text involving whether the plaintiff could recover from BSI in the situation in which BSI contracted with Network Group to lease property, and Network Group contracted with the plaintiff agreeing to pay a certain commission for his work but then defaulted on the contract?

A. The court ruled that because it was a third-party beneficiary, BSI was required to pay the plaintiff the full amount of the commissions claimed.

 

B. The court ruled that because it was a third-party beneficiary, BSI was required to pay the plaintiff the reasonable value of the services rendered, not necessarily the contractual amount promised for commissions.

 

C. The court ruled that because a quasi-contract was involved, BSI was required to pay the plaintiff the full amount of the commissions claimed.

 

D. The court ruled that because a quasi-contract was involved, BSI was required to pay the plaintiff the reasonable value of the services rendered, not necessarily the contractual amount promised for commissions.

 

E. The court ruled that because the plaintiff did not have a contract with BSI, the plaintiff was entitled to no recovery from BSI.

The court ruled that the plaintiff could hold BSI accountable on a theory of quasi-contract for the benefits it provided to BSI, but that liability under quasi-contract is measured by the reasonable value of services Reisenfeld provided to BSI.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

15.
(p. 321)
Which of the following was the result in the Case Opener in which Hallmark claimed that an arbitration ruling against a former employee should be upheld?

A. The former employee was barred from proceeding in court because of the binding arbitration clause.

 

B. The former employee was barred from proceeding in court based on the statute of limitations which expired while she was pursuing her remedies in arbitration.

 

C. The former employee was allowed to proceed in court because she had exhausted her remedies in the arbitration arena.

 

D. The former employee could proceed with an action in court because there was no consideration for the arbitration agreement and, therefore, no valid agreement.

 

E. The former employee could proceed with an action in court because, as a matter of law, arbitration agreements are barred in the arbitration context.

According to the court, “because there was no consideration from Hallmark, there was no binding contract to submit disputes to arbitration.”

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 13-04 What are the rules that guide the interpretation of contracts?
Topic: Interpretation of Contracts
 

 

16.
(p. 306)
A[n] ___________ is a promise or set of promises for the breach of which the law gives a remedy or the performance of which the law in some way recognizes a duty.

A. Contract

 

B. Offer

 

C. Consideration

 

D. Acceptance

 

E. Legal object

The Restatement (Second) of Contracts defines a contract as “a promise or set of promises for the breach of which the law gives a remedy or the performance of which the law in some way recognizes a duty.”

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

17.
(p. 306)
Which of the following consists of an offer by one party and an acceptance of the terms by another party?

A. Legal object

 

B. Agreement

 

C. Coherence

 

D. Alliance

 

E. Concurrence

The agreement consists of an offer by one party, called the offeror, to enter into a contract, and an acceptance of the terms of the offer by the other party, called the offeree.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

18.
(p. 306)
The person who makes an offer is called a[n] ___________.

A. Offeree

 

B. Offeror

 

C. Agreeor

 

D. Agree

 

E. Inquirer

The agreement consists of an offer by one party, called the offeror, to enter into a contract and an acceptance of the terms of the offer by the other party, called the offeree.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

19.
(p. 306)
The person who agrees to the terms of an offer made by the other party is called the _________.

A. Offeree

 

B. Offeror

 

C. Agreeor

 

D. Agree

 

E. Inquirer

The agreement consists of an offer by one party, called the offeror, to enter into a contract and an acceptance of the terms of the offer by the other party, called the offeree.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

20.
(p. 306)
Which of the following is a definition for consideration?

A. Being cordial in the negotiation of contracts.

 

B. Refraining from unethical behavior in the negotiation of contracts.

 

C. Being cordial and refraining from unethical behavior in the negotiation of contracts.

 

D. The bargained-for exchange.

 

E. A contract negotiated in person as opposed to by telephone or e-mail.

Consideration is the bargained-for exchange or what each party gets in exchange for his or her promise under the contract.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

21.
(p. 308)
Which of the following represents the legal ability to enter into a binding agreement?

A. Majority

 

B. Emancipation

 

C. Contractual knowledge

 

D. Contractual capacity

 

E. Informed consent

Contractual capacity is the legal ability to enter into a binding agreement.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

22.
(p. 308)
Which of the following references the requirement that a contract not be either illegal or against public policy?

A. Consideration

 

B. Capacity

 

C. Legal object

 

D. Illegal prohibition

 

E. Ethical requirement

The term “legal object” means that to be enforceable, the contract cannot be either illegal or against public policy.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

23.
(p. 308)
Which of the following may represent a lack of genuine assent?

A. Acceptance secured through fraud, duress, or misrepresentation, but not acceptance through undue influence.

 

B. Acceptance secured through undue influence, misrepresentation, or duress, but not through fraud.

 

C. Acceptance secured through fraud or duress, but not through misrepresentation or undue influence.

 

D. Acceptance secured through fraud, dress, or undue influence, but not through misrepresentation.

 

E. Acceptance secured through fraud, duress, undue influence, or misrepresentation.

Sometimes the offeror (the party proposing the contract) secures acceptance of the agreement through improper means such as fraud, duress, undue influence, or misrepresentation. In these situations, there is no genuine assent to the contract, and the offeree (the person who agreed to or accepted the contract) may be able to raise that lack of genuine assent as a defense to enforcement of the agreement.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

24.
(p. 309)
An attorney who says that a contract lacks “the proper form” is typically referencing which of the following?

A. The agreement lacked a proper offer.

 

B. The contract lacked a proper acceptance.

 

C. The contract lacked consideration.

 

D. The contract lacked a writing.

 

E. The contract lacked both an appropriate offer and an appropriate acceptance.

The defense that a contract lacks the proper form typically means it lacks a writing.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

25.
(p. 309)
Contract law is said to be based on a[n] ___________ theory, meaning that the existence and interpretation of the contract is based on the outward manifestations of intent by the parties.

A. Subjective

 

B. Objective

 

C. Interpretive

 

D. Appearing

 

E. Unilateral

Contract law is based on an objective theory of contracts, which means we base the existence of a contract on the parties’ outward manifestations of intent and we base its interpretation on how a reasonable person would interpret it.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

26.
(p. 309)
As a general rule, the ________ intent of the parties is not relevant when determining whether a contract exists; rather, what is relevant is how they represented their intent through their actions and words.

A. Objective

 

B. Subjective

 

C. Unilateral

 

D. Comprehensive

 

E. Considered

The subjective intent of the parties is not usually relevant; what matters is how they represented their intent through their actions and words.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

27.
(p. 309)
If a[n] _____________ misunderstanding between the parties exists, and as a result of that misunderstanding the parties do not really come to a meeting of the minds, there is no contract.

A. Mutual

 

B. Unilateral

 

C. Comprehensive

 

D. Subjective

 

E. Reasonable

If a mutual misunderstanding between the parties exists, and if as a result they did not come to a meeting of the minds, there is no contract.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

28.
(p. 309)
In the U.S., which of the following are the two most important sources of contract law?

A. Case law and the Restatement of Law, Contracts.

 

B. Case law and the Uniform Commercial Code.

 

C. The Uniform Commercial Code and the Convention on Contracts for International Sales of Goods.

 

D. Case law and the Convention on Contracts for International Sales of Goods.

 

E. The Convention on Contracts for International Sales of Goods and the Restatement of the Law, Contracts.

The two most important sources of contract law are case law and the Uniform Commercial Code (UCC).

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-02 What are the sources of contract law?
Topic: Sources of Contract Law
 

 

29.
(p. 309)
Today’s law of contracts originated from judicial decisions in ______.

A. France

 

B. Italy

 

C. Spain

 

D. England

 

E. Switzerland

Today’s law of contracts actually originated in judicial decisions in England, later modified by early courts in the United States.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-02 What are the sources of contract law?
Topic: Sources of Contract Law
 

 

30.
(p. 309)
The law of contracts is primarily _______________ law.

A. Comprehensive

 

B. Statutory

 

C. Common

 

D. Restated

 

E. Modified

The law of contracts is primarily common law.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-02 What are the sources of contract law?
Topic: Sources of Contract Law
 

 

31.
(p. 310)
Which of the following was propounded by prominent legal scholars, recruited by the American Law Institute?

A. The Restatement of the Law Second, Contracts.

 

B. The Convention on Contracts for the National Sales of Goods.

 

C. Common law.

 

D. Common law and the Convention on Contracts for International Sales of Goods.

 

E. The Convention on Contracts for the National Sales of Goods and the Restatement of the Law Second, Contracts.

Prominent legal scholars, recruited by the American Law Institute, organized the principles of the common law of contracts into the original Restatement of the Law, Contracts. The compilation has been revised and published as Restatement of the Law Second, Contracts.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-02 What are the sources of contract law?
Topic: Sources of Contract Law
 

 

32.
(p. 310)
Which of the following is the reason the Uniform Commercial Code was drafted?

A. Different states had different laws governing contracts which did not result in a smooth flow of interstate commerce.

 

B. Some states had no law governing contracts.

 

C. Federal law governing contracts was difficult to apply.

 

D. The Uniform State Act on laws was not working.

 

E. The Restatement of the Law Second, Contracts was not being evenly and fairly applied.

To remedy some of the difficulties created by a patchwork of different laws governing commercial transactions, the National Conference of Commissioners on Uniform State Laws and the American Law Institute drafted a set of commercial laws, called the Uniform Commercial Code, that could be applicable to all states.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 13-02 What are the sources of contract law?
Topic: Sources of Contract Law
 

 

33.
(p. 310)
Which of the following is the part of the Uniform Commercial code governing contracts for the sale of goods?

A. Article 2

 

B. Article 3

 

C. Article 4

 

D. Article 5

 

E. Article 7

A part of the Uniform Commercial Code relevant to contracts is Article 2, which governs contracts for the sale (exchange for a price) of goods (tangible, movable objects).

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-02 What are the sources of contract law?
Topic: Sources of Contract Law
 

 

34.
(p. 310)
All contracts can be categorized as either ___________ or __________.

A. Unilateral; complete

 

B. Unilateral; trilateral

 

C. Bilateral; trilateral

 

D. Unilateral; bilateral

 

E. Bilateral; complete

All contracts are either unilateral or bilateral.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

35.
(p. 311)
A[n] ______________ contract is commonly defined as a promise in exchange for a promise.

A. Unilateral

 

B. Trilateral

 

C. Complete

 

D. Bilateral

 

E. Classified

A bilateral contract is commonly defined as a promise in exchange for a promise.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

36.
(p. 311)
Harry and Frank are in agreement that Harry will pay Frank $2,000 for a used car. At what point is there a binding contract?

A. When the agreement is made.

 

B. When the money is paid.

 

C. When the car is delivered.

 

D. Ten days after the car is delivered and approved.

 

E. Twenty days after the car is delivered and approved.

As soon as the promises are exchanged, a contract is formed, and the parties’ legal obligations arise.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

37.
(p. 312)
In a[n] _____________ contract, the offeror wants a performance to form the contract.

A. Trilateral

 

B. Bilateral

 

C. Unilateral

 

D. Complete

 

E. Anticipatory

In a unilateral contract, the offeror wants the offeree to do something, not to promise to do something.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

38.
(p. 313)
In which of the following does a contract arise not from words but from the conduct of the parties?

A. Implied contracts

 

B. Express contracts

 

C. Liquidated contracts

 

D. Bilateral contracts

 

E. Unilateral contracts

Implied contracts arise not from words but from the conduct of the parties.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

39.
(p. 314)
Which of the following is sometimes referred to as an implied-in-law contract?

A. Quasi-contracts

 

B. Express contracts

 

C. Implied-in-fact contracts

 

D. Express contracts and implied-in-fact contracts

 

E. Express contracts and quasi-contracts

Quasi-contracts are sometimes called implied-in-law contracts, but they are not actually contracts.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

40.
(p. 314)
Which of the following is the most likely measure of recovery when a quasi-contract is involved?

A. The amount set forth in the contract.

 

B. The fair market value of the matter involved.

 

C. The wholesale price of any good involved.

 

D. The amount sought by the plaintiff in the Complaint.

 

E. Damages will be computed the same way as they are computed for any other contract.

In situations in which the court imposes a quasi-contract, the amount awarded will probably be based on fair market value.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

41.
(p. 316)
A[n] _____________ contract is one that contains all the legal elements of a contract.

A. Voidable

 

B. Executed

 

C. Formal

 

D. Valid

 

E. Approved

A valid contract is one that contains all the legal elements of a contract.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

42.
(p. 316)
A valid contract may be valid but _____________ when there is some law that prohibits the courts from enforcing it.

A. Executed

 

B. Executory

 

C. Unenforceable

 

D. Novated

 

E. Condoned

Sometimes a contract may be valid yet unenforceable when a law prohibits the courts from enforcing it.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

43.
(p. 316)
Which of the following is in effect not a contract at all?

A. A voidable contract

 

B. An executory contract

 

C. An implied contract

 

D. An executed contract

 

E. A void contract

A void contract is in effect not a contract at all.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

44.
(p. 316)
A contract is ______________ if one or both of the parties, without breaching the contract, have the ability to either withdraw from the contract or enforce it.

A. Voidable

 

B. Executory

 

C. Implied

 

D. Executed

 

E. Void

A contract is voidable if one or both parties have the ability to either withdraw from the contract or enforce it.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

45.
(p. 316)
Which of the following contracts are usually voidable?

A. Contracts entered into as a result of fraud, but not duress or undue influence.

 

B. Contracts entered into as a result of duress or undue influence, but not fraud.

 

C. Contracts entered into as a result of undue influence or fraud, but not duress.

 

D. Contracts entered into as a result of fraud or duress, but not undue influence.

 

E. Contracts entered into as a result of fraud, duress, or undue influence.

Contracts entered into as a result of fraud, duress, or undue influence may be voided by the innocent party.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

46.
(p. 316)
Once all the terms of the contract have been fully performed, the contract is said to be ___________.

A. Executory

 

B. Executed

 

C. Anticipatory

 

D. Ended

 

E. Stopped

Once all the terms of the contract have been fully performed, the contract has been executed.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

47.
(p. 316)
As long as some of the duties under a contract have not yet been performed, the contract is considered ________________.

A. Executory

 

B. Executed

 

C. Anticipatory

 

D. Ended

 

E. Stopped

As long as some of the terms have not yet been performed, a contract is executory.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

48.
(p. 317)
Which of the following is an example of a formal contract?

A. Contracts under seal but not executed contracts or letters of credit.

 

B. Executed contracts but not contracts under sale or letters of credit.

 

C. Letters of credit and contracts under seal, but not executed contracts.

 

D. Contracts under seal letters of credit, but not executory contracts.

 

E. Contracts under seal, letters of credit, and also executed contracts.

The Restatement (Second) of Contracts identifies the following four types of formal contracts: (1) contracts under seal, (2) recognizances, (3) letters of credit, and (4) negotiable instruments.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

49.
(p. 317)
The reference to __________________ comes from the days when the contract was literally sealed by a piece of soft wax into which an impression was made.

A. Implied-in-fact contracts

 

B. Implied-in-law contracts

 

C. Contracts under wax

 

D. Contracts under seal

 

E. Contracts under pressure

When people hear the term formal contract, what often comes to mind is a contract under seal, named in the days when contracts were sealed with a piece of soft wax into which an impression was made.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

50.
(p. 317)
How many states still allow a contract without consideration to be enforced if it is under seal?

A. Five

 

B. Eight

 

C. Ten

 

D. Twenty

 

E. Thirty

Ten states still allow a contract without consideration to be enforced if it is under seal.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

51.
(p. 317)
A[n] _______________ arises when a person acknowledges in court that he or she will perform some specified act or will pay a price upon failure to do so.

A. Contract under seal

 

B. Voidable contract

 

C. Recognizance

 

D. Implied-in-fact

 

E. Informal contract

A recognizance arises when a person acknowledges in court that he or she will perform some specified act or pay a price upon failure to do so.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

52.
(p. 317)
A ________________ is an agreement by the person who issues a letter to pay a sum of money on receipt of an invoice and other documents.

A. Letter of agreement

 

B. Letter of credit

 

C. Letter of acknowledgement

 

D. Negotiated credit instrument letter

 

E. Letter of simple contract

A letter of credit is an agreement by the issuer to pay another party a sum of money on receipt of an invoice and other documents.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

53.
(p. 317)
Which of the following are written documents signed by a party that makes an unconditional promise to pay a specific sum of money on demand or at a certain time to the holder of the instrument?

A. Negotiable instruments

 

B. Informal contracts

 

C. Simple contracts

 

D. Recognizances

 

E. Formal contracts

Negotiable instruments are unconditional written promises to pay the holder a specific sum of money on demand or at a certain time.

 

AACSB: Communication
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

54.
(p. 318)
Which of the following states that if a writing, or term in question, appears to be plain and unambiguous on its face, its meaning must be determined from the four corners of the instrument without resort to outside evidence, with the words being given their ordinary meaning?

A. The Interpretation Rule

 

B. The Simple Rule

 

C. The Understandable Rule

 

D. The Plain Meaning Rule

 

E. The Comprehensive Rule

The plain-meaning rule states that if a writing, or a term in question, appears to be plain and unambiguous on its face, we must determine its meaning from just “the four corners” of the document, without resorting to outside evidence, and give the words their ordinary meaning.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-04 What are the rules that guide the interpretation of contracts?
Topic: Interpretation of Contracts
 

 

55.
(p. 312)
Which of the following was the result in In Re Zappos.com Inc., v. Customer Data Security Breach Litigation, the case in the text in which customers of Zappos claimed that they were not bound to an arbitration agreement contained in a contract with Zappos?

A. The court ruled for the plaintiffs for the following two reasons: (1) there was no contract because plaintiffs did not assent to it, and (2) even if a contract existed, the contract was illusory and unenforceable because Zappos could avoid promises at any time.

 

B. The court ruled for the plaintiffs only because of its finding that no contract existed based on the plaintiffs lack of assent.

 

C. The court ruled for the plaintiffs only because of its finding that the contract was illusory and unenforceable because Zappos could avoid promises at any time.

 

D. The court ruled in favor of Zappos on the basis that even though some provisions of the contract were unenforceable, because of the federal policy favoring arbitration agreements, the arbitration clause itself was enforceable.

 

E. The court ruled in favor of Zappos on the basis that the contract was properly entered into and was fully enforceable.

According to the court, “We therefore decline to enforce the arbitration provision on two grounds: there is no contract, and even if there was, it would be illusory and therefore unenforceable.”

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

  “Book Sale.” Beverly offered to sell Rick a used business law book for $50. She told him that he could use it in his upcoming business law class the next semester. In fact, there was a problem with the book; it was several editions old. Rick was not aware of that fact, and neither was Beverly. When Rick took the book to class and realized the problem, he went back to Beverly requesting a refund. Beverly refused to return his money. She claimed that subjectively she thought that the book was correct, that she did not commit fraud, and that a binding contract existed. The book, however, is outdated and cannot be appropriately used in the class.

 

56.
(p. 306)
Which of the following would describe Beverly’s role in the transaction?

A. She was the offeror.

 

B. She was the offeree.

 

C. She was the assentor.

 

D. She was the assentee.

 

E. She was the offeree and the assentee.

The agreement consists of an offer by one party, called the offeror, to enter into a contract and an acceptance of the terms of the offer by the other party, called the offeree.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

57.
(p. 306)
Which of the following describes Rick’s role in the transaction?

A. He was the offeror.

 

B. He was the offeree.

 

C. He was the assentor.

 

D. He was the assentee.

 

E. He was the offeree and the assentee.

The agreement consists of an offer by one party, to enter into a contract and an acceptance of the terms of the offer by the other party, called the offeree.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

58.
(p. 306)
Which of the following is the term representing the $50 to be provided by Rick and the book to be provided by Beverly?

A. Encouragement

 

B. Material

 

C. Consideration

 

D. Inducement

 

E. Provisions

Consideration is the bargained-for exchange or what each party gets in exchange for his or her promise under the contract.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

59.
(p. 309)
Which of the following is true regarding Beverly’s claim that she subjectively believed the book was an appropriate edition and that an enforceable contract, therefore, existed?

A. She is correct because contract law is based upon a subjective theory of contracts.

 

B. She is correct because her genuinely held belief establishes that she did not commit fraud.

 

C. She is correct because agreements for the sale of goods are based on a subjective theory.

 

D. She is incorrect because her subjective belief would not be the basis for a determination of whether the contract would be enforced in this case and also because fraud is not necessary in order to find a breach of contract.

 

E. She is correct but only if Rick subjectively believed the same as she did.

Contract law is based on an objective theory of contracts, which means we base the existence of a contract on the parties’ outward manifestations of intent and we base its interpretation on how a reasonable person would interpret it.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

60.
(p. 309)
Which of the following would be the correct analysis of the effect of the discovery that Rick has a book that is not appropriate for the class?

A. Rick is stuck with the book because he objectively agreed to purchase it.

 

B. Rick is stuck with the book because Beverly did not commit fraud.

 

C. Rick is stuck with the book because Beverly subjectively thought it was the correct book, and Rick did not openly disagree before the contract was executed.

 

D. Because the parties had a mutual misunderstanding, the parties did not come to a meeting of the minds, and there is no contract.

 

E. Because both parties were mistaken, at Rick’s option he may return the book; but only half of the purchase price would be required as a refund from Beverly because she is not guilty of fraud.

If a mutual misunderstanding between the parties exists, and if as a result they did not really come to a meeting of the minds, there is no contract.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

  “Refusal to Pay.” Business law teacher Debby needed some yard work done. She told her class that she would give $50 to the first person who mowed her yard. She also entered into an agreement with Betty who agreed to trim some shrubbery for $40. Max went to mow Debby’s yard. Unfortunately, just as he finished mowing, a neighborhood dog bit him, and he had to go to the emergency room for a couple of stitches. Debby refused to pay Max because she said that he had angered the neighbors and their dog, and that he was more trouble than he was worth. Secretly, Debby was glad about the dog bite because she felt it gave her an excuse not to pay. Max refused to pay the emergency room because he said that they did not have a binding, bilateral contract. Betty refused to trim the shrubbery because she got a better offer and claimed that she was not bound on the contract until she started to perform.

 

61.
(p. 311-313)
Which of the following is correct regarding Betty’s statement that there was no contract?

A. Betty is correct. There was no contract because she had not started working.

 

B. Betty is incorrect because there was a bilateral, express agreement.

 

C. Betty is incorrect because there was a bilateral, implied agreement.

 

D. Betty is incorrect because there was a unilateral, express agreement.

 

E. Betty is incorrect because there was a unilateral, implied agreement.

If the offeror wants a promise from the offeree to form a binding contract, the contract is a bilateral contract, commonly defined as a promise in exchange for a promise. The terms of express contracts are all clearly set forth in either written or spoken words.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

62.
(p. 311-313)
Which of the following is an appropriate characterization of the agreement between Debby and Max?

A. They had a bilateral, express agreement.

 

B. They had a bilateral, implied agreement.

 

C. They had a bilateral and unilateral agreement.

 

D. They had a unilateral, express agreement.

 

E. They had a unilateral, implied agreement.

In a unilateral contract, the offeror wants the offeree to do something, not to promise to do something. The terms of express contracts are all clearly set forth in either written or spoken words.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

63.
(p. 313)
Which of the following is true regarding Max’s statement that he did not have to pay the emergency room charges?

A. He is correct.

 

B. He is incorrect because there was a bilateral, express contract.

 

C. He is incorrect because there was a unilateral, express contract.

 

D. He is partially correct in that because a quasi-contract existed, he would have to pay; but he would only have to pay fair market value, not what the hospital requested.

 

E. He is incorrect because there was a binding implied contract.

Implied contracts arise not from words but from the conduct of the parties.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

  “Wrong Deck.” Penny hires Jackson to paint her back deck. She agrees to pay him $200 for the job, and he accepts sight unseen. They enter into the agreement on Tuesday, and he is to paint the deck on Saturday. When Jackson arrives, neither Penny nor her neighbor is at home. He mistakenly paints the neighbor’s deck. Penny calls him the next day and asks him why he did not paint her deck. He informs her that he did paint the deck. It is then discovered that he mistakenly painted the neighbor’s deck. Penny tells him not to worry because the neighbor will be required to pay him. Jackson says that if the neighbor does not pay, then he expects all of his funds from Penny, because the contract is executed.

 

64.
(p. 316)
What was the status of the agreement between Jackson and Penny as of Tuesday when they agreed upon the price for the job?

A. The contract was executory.

 

B. The contract was executed.

 

C. The contract was novated.

 

D. The contract was formal.

 

E. The contract was a recognizance contract.

As long as some of the terms of a contract have not yet been performed, the contract is executory.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

65.
(p. 314)
Which of the following is correct regarding Penny’s assertion that the neighbor will be required to pay Jackson?

A. She is correct. The neighbor will be required to pay Jackson under a theory of quasi-contract.

 

B. She is correct. The neighbor will be required to pay Jackson based upon an implied-in-fact contract.

 

C. She is correct. The neighbor will be required to pay Jackson based upon an implied-in-law contract.

 

D. She is correct. The neighbor will be required to pay Jackson based upon an express contract.

 

E. She is incorrect. The neighbor will not be required to pay Jackson.

There are limits to the doctrine quasi-contract; specifically, the enrichment must be unjust. Sometimes a benefit may be conferred on a party simply because of a mistake by the other party. In such a case the party that is enriched by the mistake of the other party need not make payments for the benefit received.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

66.
(p. 316)
Which of the following is true regarding Jackson’s assertion that Penny must pay him at this point if the neighbor fails to do so?

A. He is correct because an express contract existed, and he made an honest mistake for which Penny must accept the risk.

 

B. He is correct because an implied contract existed, and he made an honest mistake for which Penny must accept the risk.

 

C. He is correct because an implied-in-law contract existed.

 

D. He is correct because a valid contract existed; and, after his performance, it is considered executed.

 

E. He is incorrect unless he can somehow establish that Penny gave him poor directions or was otherwise at fault in informing him which deck to paint, and the contract remains executory.

Once all the terms of the contract have been fully performed, the contract has been executed. As long as some of the terms have not yet been performed, the contract is executory.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

Essay Questions

67.
(p. 306-308)
Identify and describe the four elements that are necessary for a contract to exist.

The four elements necessary for a contract are agreement, consideration, contractual capacity, and a legal object. The agreement consists of an offer by one party and an acceptance by another. Consideration is defined as a bargain-for exchange. Capacity is the legal ability to enter into a binding contract. Regarding the requirement of a legal object, the contract cannot be either illegal or against public policy.

 

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

68.
(p. 311-312)
Define a bilateral contract and a unilateral contract, and give an example of each.

A bilateral contract is commonly defined as a promise in exchange for a promise. In a unilateral contract, the offeror wants a performance to form the contract. Student responses will vary on examples. One example students may use on a unilateral contract is the reward example referenced in the text. An example on a bilateral contract would be a promise to pay a certain amount for an automobile or other article.

 

AACSB: Analytic
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

69.
(p. 313)
Define an express contract and an implied contract; set forth the three conditions that generally must be met for the courts to find an implied contract, and give an example of an express and implied contract.

Express contracts have all their terms clearly set forth in either written or spoken words. Implied contracts arise not from words, but from the conduct of the parties. For an implied contract to be found, first the plaintiff needs to have provided some property or service to the defendant. Second, the plaintiff should have expected to be paid for such property or service, and a reasonable person in the position of the defendant would have expected to pay for it. Third, the defendant should have had an opportunity to reject the property or service, but did not. An example of an express contract is when terms are clearly laid out and parties enter into an agreement such as to buy a vehicle. An example of an implied contract is going to the dentist’s office in an emergency. Although discussions are not held prior to treatment, payment is implied.

 

AACSB: Analytic
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

70.
(p. 314-316)
Millie mows her own yard to save money. Her neighbor Paul, however, hires a lawn service to mow his yard. One day Millie is looking out of the window and sees Paul’s lawn service drive up. Surprisingly, they begin to mow her yard, not Paul’s yard. Millie thinks that is great and keeps her mouth shut while they mow the yard. Later, she gets a bill. She calls the owner of the lawn service and says that she does not have to pay because there was no contract where she agreed to have her yard mowed. The lawn service says that she is liable for the full amount of its contract. Discuss whether the lawn service is entitled to any recovery and why or why not.

The lawn service will be entitled to recover under a theory of quasi-contract based upon Millie being unjustly enriched at the expense of the lawn service. The lawn service will be able to recover the reasonable value of its service, which might not be the amount of its contract with Paul.

 

AACSB: Reflective Thinking
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

71.
(p. 316)
Discuss the meaning of a void contract and a voidable contract, and the effect of a determination that a contract is either void or voidable.

A void contract is in effect not a contract at all. Either its object is illegal or it has some defect that is so serious that it is not a contract. A contract is voidable if one or both of the parties has the ability to either withdraw from the contract or enforce it. If the parties discover that the contract is voidable after one or both have partially performed, and one party chooses to have the contract terminated, both parties must return anything they have already exchanged under the agreement so that they will be returned to the condition they were in at the time that they entered into the agreement.

 

AACSB: Analytic
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

 

 

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