Bonus Chapter A – Working within the Legal Environment
Bonus Chapter A-61
212. You agree to sell your car to your neighbor for $5,000. You and your neighbor have
provided each other:
A. duress.
B. consideration.
C. an endorsement.
D. an expressed warranty.
Feedback: Consideration is something of value. A valid contract requires that both parties
give consideration.
213. Your 15-year-old brother comes home with the great news that he has decided to buy
his first car and has just agreed to give $10,000 to a complete stranger. He signed the
contract and just needs to pay the stranger and pick up the car. Your dad is upset and calls
the stranger to tell him your brother will not be buying the car. The stranger can:
A. sue your brother for breach of contract.
B. sue your dad for breach of contract.
C. sue your brother for specific performance.
D. do nothing.
Feedback: Minors are not considered to be competent to sign contracts, thus the stranger
cannot do anything if your brother backs out of the contract.
214.
Bonus Chapter A – Working within the Legal Environment
James advertises in the newspaper to sell his used car for $6,000. Eric test drove the car
and then offered James $5,400 for the car. In this case:
A. the two parties have created a legally enforceable contract.
B. Eric’s offer represents an acceptance of the original terms.
C. there is no agreement and no contract.
D. there is no agreement, but there is a valid contract.
Feedback: No agreement has been reached regarding price; therefore there is no voluntary
acceptance of James’ offer and no contract.
215. You and your boss agree to terminate your employment contract because you want to
devote more time to school. This breach of contract would likely be resolved by:
A. a specific performance requirement.
B. the payment of damages.
C. a judge.
D. a discharge of obligation.
Feedback: Discharging the contractual obligation means that since one party has failed to live
up to their end of the contract, the other party is not required to fulfill their obligation.
216. Which of the following prohibits monopolies, attempts to monopolize, and any
restraint of trade?
A. Clayton Act
B. Sherman Act
C. Robinson-Patman Act
D. Wheeler-Lea Amendment
Bonus Chapter A-66
224. Big Johnson Products charges Moe’s Meats a lower price for goods because Moe and
Johnson play golf together regularly. Big Johnson charges other firms similar to Moe’s
Meats more for the same products and this is beginning to hurt the business of the other
firms. In fact, Moe’s Meats is taking so much business away from the others due to its
lower prices that the other firms are in danger of going out of business. This is an example
of:
A. price discrimination.
B. price reversal.
C. price-cutting.
D. price maintenance.
Feedback: The Robinson-Patman Act of 1936 prohibits price discrimination. Price
discrimination is the charging of two different prices to two similar customers for the same
good or service resulting in a “substantial” weakening of competition.
225. A government policy aimed at reducing the purchase of a specific good through
increased taxes has been most often applied to:
A. beer.
B. sports cars.
C. white bread.
D. diet soft drinks.
226.
Bonus Chapter A – Working within the Legal Environment
Bonus Chapter A-67
Which of the following refers to a tax designed to reduce the consumption of a specific
good?
A. a control tax
B. a sin tax
C. a flat tax
D. a tax credit
227. Which of the following do school districts utilize to generate needed funding?
A. sin tax
B. sales tax
C. property tax
D. income tax
228. __________ often help to pay for highway construction or improvements.
A. Sin taxes
B. Property taxes
C. Income taxes
D. Facility taxes
229.
Bonus Chapter A – Working within the Legal Environment
Bonus Chapter A-68
__________ are the largest source of tax income received by the federal government.
A. Income taxes
B. Property taxes
C. Sales taxes
D. Excise taxes
230. The two main purposes of taxes are:
A. to raise money for taxpayers and to encourage foreign governments to behave in
certain ways.
B. to raise money for government funding and to encourage or discourage certain taxpayer
behaviors.
C. to encourage businesses to make a profit and encourage foreign governments to invest
in the U.S.
D. to strengthen monetary and fiscal policies.
Feedback: Traditionally, taxes have been used as a source of funding for government
operations and programs. They can also be used as a method of discouraging or encouraging
certain behaviors among taxpayers.
231.
Bonus Chapter A – Working within the Legal Environment
Some economists advocate a ____________ on the consumption of such products as
gasoline, liquor, cigarettes, and even soda pop, in the hope that consumers will think about
how their purchases are having negative impacts on themselves and their environment.
A. progressive tax
B. sin tax
C. flat tax
D. tax credit
Feedback: Sin taxes are government taxes imposed on products we buy and things we do that
are considered harmful, either to ourselves, to others, or to the environment. The idea is to
make these products and services more costly so that our buying behavior is discouraged.
232. Mark and Barry own the Warehouse Liquor Store in town. They are careful to pay all
of their taxes in full and on time. Recently the local government has decided to raise the
taxes imposed on the sale of cigarettes and liquor. Barry and Mark are upset about this
because:
A. they will certainly have to pay more taxes.
B. people will likely buy less cigarettes and liquor from them.
C. the government has increased the sales tax.
D. their personal property tax will now increase.
Feedback: Taxes can be used as a method of discouraging certain behaviors among taxpayers.
In this case the government wants to reduce consumer use of cigarettes and liquor so it passed
a sin tax on those products. The additional cost of the product from increased taxes will
perhaps discourage additional consumption of these products. This means people will likely
buy less from Barry and Mark.
Bonus Chapter A-70
233. ________ is the legal process by which a person, business, or government entity
unable to meet financial obligations is relieved of those debts.
A. Emancipation
B. Financial release
C. Negligence
D. Bankruptcy
234. The section of the Bankruptcy Code that allows a business to reorganize and pay only
a limited proportion of its debts is Chapter:
A. 7.
B. 11.
C. 13.
D. 17.
235. In which of the following does the creditor start legal procedures?
A. debtor initiatives
B. voluntary bankruptcy
C. involuntary bankruptcy
D. creditor restructuring
236.
Bonus Chapter A – Working within the Legal Environment
Bonus Chapter A-71
The number of personal bankruptcies has:
A. significantly decreased as a result of the Bankruptcy Reform Act.
B. increased.
C. nearly reached the level of business bankruptcies.
D. remained unchanged.
237. Which of the following is considered as a cause for the significant increase in
bankruptcies?
A. a decrease in the understanding of bankruptcy law
B. a decrease in the price to complete the process by bankruptcy lawyers
C. an increase in the number of involuntary bankruptcy cases initiated by creditors
D. an increase in the ease with which some consumers can get credit
Feedback: Bankruptcy attorneys attributed the increase in bankruptcy filings to a lessening of
the stigma of bankruptcy, the changing economy, an increase in understanding of bankruptcy
law and its protections, increased advertising by bankruptcy attorneys, and the ease with
which some consumers can get credit.
238.
Bonus Chapter A – Working within the Legal Environment
The financial claims of ________ are given priority when assets are distributed among
creditors in a bankruptcy case.
A. employees
B. customers
C. bankruptcy lawyers
D. stockholders
Feedback: Chapter 7 of the bankruptcy code stipulates the order in which the assets are to be
distributed among the creditors. First, creditors with secured claims receive the collateral for
their claims or repossess the claimed asset. Then the unsecured claims are paid starting with
the costs involved in the bankruptcy case.
239. Utilizing the bankruptcy laws, Yankee Distribution petitioned the court to reorganize
and continue operations while paying only a limited proportion of its current debts. This
represents an example of a Chapter ________ bankruptcy.
A. 7
B. 11
C. 13
D. 14
Feedback: Chapter 11 of the bankruptcy code allows a firm to reorganize and continue
operations. During this time period, the court appointed trustee monitors the firm’s activities
to protect the interests of creditors. While only some debts are paid, Chapter 11 is designed to
help both debtors and creditors.
240.