Chapter 15: Consumer Protection
1. A breach of warranty is not a breach of contract.
2. New drugs cannot be marketed in this country without FDA approval.
3. Caveat emptor means “let the seller beware.”
4. If a retailer discovers that a product being sold is unsafe that information must be reported to the Consumer
Preventative Safety Council.
5. A warranty is a statement about a product’s qualities or performance and therefore is not governed by the
UCC.
6. The federal Magnuson-Moss Warranty Act applies only to written warranties on certain products sold to
consumers.
7. Puffing and warranties are both statements of fact.
8. A warranty against infringement basically requires that the goods be fit for the ordinary purposes for which
such goods are used.
9. Merchantability requires that any warranty protection that is customary in the trade be extended to all buyers.
10. Corrective advertising may be ordered by the FTC as a sanction for false and misleading advertising.
11. A voluntary, court-enforceable agreement that stops an illegal or questionable practice is _______________
C. a class action.
D. a restitution order.
12. The Consumer Product Safety Commission (CPSC) receives reports about product failure from
_______________
A. the distributor.
B. the manufacturer.
13. Violations of the weights and measures laws are punishable by _____________
A. fine.
B. imprisonment.
14. Purchasers in a home solicitation sale have ______________ day(s) to cancel such contracts.
C. 5
D. 7
15. A consumer is an individual who acquired goods that he or she intends for _______________
A. business use.
B. business or family use.
16. A product liability suit may be based on _______________
A. breach of warranty.
B. torts of fraud, negligence, or strict liability.
17. An assurance of quality or promise of performance explicitly made by the seller is _________
C. a warranty of title.
D. a warranty against infringement.
18. An implied warranty of fitness for a particular purpose arises when the buyer _____________
C. both a and b.
D. none of these.
19. Implied warranties given only by merchants include _______________
A. warranty of merchantability.
B. warranty against infringement.
20. The warranty that requires that the goods be fit for the ordinary purposes for which such goods are used is
_______________
C. the warranty of applicability.
D. none of these.
21. Which of the following statements regarding disclaimers is true?
C. they are necessary for all expressed warranties
D. both b and c
22. When contracting parties enter into a legally binding agreement, their relationship is known as
_______________
C. an implied warranty.
D. strict liability.
23. If a person is injured as a result of an unreasonably dangerous or defective product, how will he or she most
likely recover damages for the injury?
A. hold the retailer of the product strictly liable
B. hold the wholesaler strictly liable
C. The law requires that warranties on consumer products costing more than $15 must meet certain standards.
D. Warranties must be written in simple and readily understandable language.
25. A _______________ is a type of confidence game where extremely large returns on money invested are
paid not out of the returns on legitimate investment, such as the buying and selling of stocks, but out of new
investments
A. bait and switch
B. pyramid investment scheme
26. Implicit warranty obligations imposed by law on all sellers are known as _______________
A. trade warranties.
B. expressed warranties.
27. Hilda enjoys taking her children to the local ice cream parlor. The implied assurance that the ice cream she
purchases is wholesome and fit for human consumption is an example of a(n) _______________
A. express warranty.
B. strict liability.
28. When a governmental agency acts on behalf of an injured consumer, it may utilize which of the following to
correct the situation?
A. a cease-and-desist order
B. an order for restitution
29. Which of the following would not be an unfair method of competition?
A. failing to provide written warranties even though required
B. using improper methods to figure finance charges
30. Which agency at the federal level has the main responsibility for preventing false and misleading
advertising?
C. Consumer Products Solicitation Commission
D. National Better Business Bureau
31. Low Cost Store places an advertisement in its local newspaper which reads “Tiny-Tot Tricycles only
$29.95. This offer available only on Friday, July 13, when our store will open early at 8 a.m.” Jill drives to Low
Cost at 6 a.m. and is among the first three people to enter the store to purchase the advertised tricycle only to
learn that the item is already “sold out.” A sales clerk then redirects her to a better tricycle that costs $36.45.
Low Cost has used a type of improper advertising tactic known as ____________________.
32. The cheerleaders at Ben’s high school decide to raffle off an MP3 player to earn money to go to the
upcoming competition. Each ticket costs $5 and the winner receives $100 as determined by a drawing. When
Ben buys three tickets he is participating in the commission of a felony called an illegal
____________________.
33. When Derrick purchased several used fax machines for his business, the seller required him to sign this
statement. “I understand the machines I purchased are secondhand. I further agree to take the equipment ‘as is’
thereby relinquishing the seller’s liability for repairs under any warranty expressed or implied.” This document
is an example of a(n) ____________________.
34. Backyard Fun Inc. purchases swing sets and slides from manufacturer Swing City at wholesale cost and
then resells them to consumers like Bruce. Once Bruce pays for the swing set and slide and they are delivered,
Swing City can not take it from Bruce’s backyard because Backyard Fun failed to pay its manufacturer’s
invoice. This implied seller’s warranty that assures Bruce that the merchandise is free of third party claims is
known as the warranty against ____________________.
35. The Latin phrase that means “let the buyer beware” is ____________________.
36. Exaggerated sales talk such as “best on the market” or “incredible quality” is called
____________________.
37. A merchant makes an implied warranty that the goods in which she or he normally deals shall be delivered
to a buyer free of any third party’s claims for patent, copyright, or trademark ____________________.
38. The ____________________ determines which drugs are prescription and which may be sold
“over-the-counter.”
39. A chain letter is an example of the type of confidence game known as a(n) ____________________ sales
scheme.
40. The ____________________ receives reports from the nation’s hospitals on product-caused injuries.
41. When she responded to an ad offering new computers at bargain prices, the salesperson at the electronics
discount center convinced Cindy that if there was ever a problem with the computer that she was about to
purchase, all she had to do was return it and they would give her another new one, no questions asked. He even
pointed out a customer who was leaving the store with a brand new computer because she had just returned her
recently purchased computer claiming a slight problem, and they completely replaced it. Two months later
Cindy realized that the computer she had bought had been previously returned by another customer. Is there a
law against this practice? What should Cindy do? Explain your answer.
42. Mack and Sharon pay to enter a regional amusement park. While inside the park they choose to ride “El
Sombrero.” The ride is several years old, but park personnel have properly maintained the ride according to
manufacturer’s specifications. Unfortunately, while riding on “El Sombrero,” the ride malfunctions due to a
defect in the motor and gear mechanism. Sharon is thrown from the ride and permanently injures her neck and
back. Explain what recourse, if any, Sharon has. Against whom?
Answers may vary. There does not appear to be any negligence on the amusement park’s part. However, under