101. (p. 580) When each party to a contract provides something of value to the other party, the principle of mutual
acceptance has been satisfied.
102. (p. 581) Requiring that both parties are competent for a contract to be legal protects those who might be
unable to protect themselves.
103. (p. 580) If I agree to sell you my bike for $50 and we are both competent individuals we have a contract.
104. (p. 580-581) If I agree to sing at your wedding for free and then don’t show up, you may sue me for breach of
contract.
105. (p. 580) If State University violates its housing contract with a student, the student is prohibited from suing
the university for damages because the contract was for the delivery of services rather than the delivery of
goods.
106. (p. 580) Mary Ann owns a rare Monet painting and she has agreed to a contract whereby she will sell it to the
Museum of Art for $5.3 million. At the last minute she decides she cannot bear to part with her painting and
will not sell it to the Museum. The Museum can sue Mary Ann for specific performance.
107. (p. 582) The Justice Department’s antitrust division serves as a watchdog for violations of the Uniform
Commercial Code.
108. (p. 582) The Sherman Antitrust Act was designed to prevent large businesses from stifling the competition of
smaller or newer firms.
109. (p. 582) The Sherman Antitrust Act forbids actual monopolies or attempts to monopolize any part of
commerce.
111. (p. 583) The Clayton Act of 1914 prohibits price discrimination.
112. (p. 583) “Exclusive dealing” means selling goods with the condition that the buyer will not buy goods from a
competitor.
113. (p. 583) A “tying contract” requires a buyer not to purchase goods from a competitor as a condition of buying
product from the seller.
114. (p. 583) An “interlocking directorate” occurs when a board of directors includes members of the board of
competing corporations.
115. (p. 583) The Clayton Act prohibits interlocking directorates.
116. (p. 583) The Federal Trade Commission Act prohibits unfair methods of competition.
117. (p. 583) The Federal Trade Commission deals with issues such as preventing companies from making
misleading “Made in the USA” claims.
118. (p. 583) The Federal Trade Commission Act of 1914 prohibits minors from entering into contracts.
120. (p. 583) The Robinson-Patman Act prohibits price discrimination in all transactions except
business-to-business transactions.
121. (p. 583) The Robinson-Patman Act applies only to business-to-business transactions.
122. (p. 583) The Robinson-Patman Act applies only to sellers who “knowingly” induce an unlawful
discrimination in price.
123. (p. 583) One purpose of the Robinson-Patman Act is to outlaw price differences that “substantially” weaken
competition.
124. (p. 583) The changing nature of U.S. business from manufacturing to knowledge technology has led to the
call for new levels of regulation from federal agencies.
125. (p. 584) Consumerism is a social movement that seeks to increase and to strengthen the rights and powers of
buyers in relation to sellers.
126. (p. 584) In the early 2000s the consumer movement took on a renewed strength primarily due to corporate
scandals.
127. (p. 584) The Sarbanes-Oxley Act requires CEOs to verify the accuracy of their firms’ financial statements to
the SEC.
128. (p. 584) President Theodore Roosevelt proposed four basic rights of consumers.
129. (p. 584) The right to be heard is one of the four basic rights of consumers.
130. (p. 585, figure A.4) Alcohol Labeling Legislation of 1988 provides for warning labels on liquor saying that
minors should not drink.
131. (p. 585, figure A.4) The Automobile Information Disclosure Act of 1958 requires auto manufacturers to put
suggested retail prices on all new passenger vehicles.
132. (p. 585, figure A.4) The Nutrition Labeling and Education Act of 1990 requires truthful and uniform nutritional
labeling on all food the FDA regulates.
133. (p. 583) Requiring a retailer to carry Performance Tires in order to sell Performance Batteries is prohibited by
the Robinson-Patman Act.
134. (p. 582) The intent of the Sherman Antitrust Act of 1890 was to encourage the growth of large business
organizations in the U.S. in order to compete with more established firms in Europe.
135. (p. 583) When a local restaurant offers a discount to senior citizens, they have violated the price
discrimination provisions of the Robinson-Patman Act.
136. (p. 583) An interlocking directorate occurs when a contract between a retailer and a wholesaler requires
misleading advertising.
137. (p. 584) The Sarbanes-Oxley Act was passed to help allay consumer fears concerning falsified corporate
financial statements.
138. (p. 584) Traditionally, taxes have been used as a source of funding for government operations and programs.
139. (p. 584) Taxes have been used as a method of encouraging or discouraging taxpayers from doing something.
140. (p. 584) The federal government can levy a sin tax in an effort to encourage businesses to hire new
employees.
141. (p. 584) A tax credit is a document that increases a tax bill.
143. (p. 586, figure A.5) Sales taxes are the largest source of tax income received by the federal government.
144. (p. 586, figure A.5) Another name for “sin tax” is “excise tax.”
146. (p. 586, figure A.5) Money collected from excise taxes goes toward a specific purpose.
147. (p. 584) The primary objective of a sin tax is to generate additional revenue for the government.
148. (p. 584) The primary objective of a tax credit is to encourage businesses to behave in certain ways. One
example is offering a tax credit to automobile manufacturers for the purchase of robotics used in the
manufacture of automobiles.
149. (p. 584) The European Union currently levies certain Internet taxes.
150. (p. 586, figure A.5) Carlos has had a very successful year. His small-business corporation earned over $500,000.
His company will have to pay part of its income to the federal government for income taxes.
151. (p. 586, figure A.5) Brian and Sondra own a very successful Cajun restaurant. They recently built their own
building and own all of the decorations in the restaurant, along with the equipment needed to run the business.
They will pay real property taxes on the building and land and personal property taxes on the decorations and
equipment.
152. (p. 585) Bankruptcy is the legal process by which a person, business, or government entity that is unable to
meet financial obligations is relieved of those debts by a court.
153. (p. 585) A bankruptcy allows creditors to get at least part of their money when there are assets available to
divide among the creditors.
154. (p. 586) The Constitution gives the judiciary the power to establish bankruptcy laws.
155. (p. 586) The Bankruptcy Reform Act of 2005 made it easier for individuals to eliminate most debts in a
bankruptcy.
156. (p. 586) The number of Americans filing for bankruptcy each year has increased since the late 1980s.
157. (p. 586) Though high-profile business bankruptcies such as Kmart and United Airlines dominate the news,
over 90 percent of bankruptcy filings each year are by individuals.
158. (p. 586) Once companies declare bankruptcy, they always go out of business.
159. (p. 586) In voluntary bankruptcy cases the creditors voluntarily start legal action against the debtor.
160. (p. 586-587) Most bankruptcies today are involuntary because creditors want to retrieve as much of their
money as possible.
161. (p. 587) Chapter 7 bankruptcy requires the sale of the nonexempt assets of debtors.
162. (p. 587) The most popular form of bankruptcy among individuals is Chapter 11.
163. (p. 587) Chapter 11 bankruptcy is a way for sick companies to recover and is designed to help both debtors
and creditors find the best solution.
164. (p. 587) Filing for bankruptcy under the Chapter 11 provisions allows a company to reorganize and continue
operations while paying only a proportion of its debts.
165. (p. 587) A company has to be insolvent before it can file for Chapter 11 bankruptcy.
166. (p. 587) Chapter 13 bankruptcy permits individuals and small-business owners to repay creditors over a
period of three to five years.
167. (p. 587) Chapter 13 proceedings are more complicated than Chapter 7 bankruptcy proceedings.
168. (p. 587) The bankruptcy legislation passed in 2005 means that more debtors will have to file bankruptcy
under Chapter 7.
169. (p. 586) The number of Americans filing for bankruptcy has decreased as a result of the Bankruptcy Reform
Act.
170. (p. 586) When Sam and Marie got married they wanted to travel, buy nice houses and cars, and enjoy the
good life. They used credit cards to finance their lifestyle, believing they would be fine as long as they could
make the minimum payments. One day they discovered that because of rising interest rates, even the minimum
payments were out of reach. They decided to declare Chapter 13 bankruptcy. Under this plan, they will have to
pay their creditors back over 3 to 5 years.
171. (p. 588) When United Airlines declared bankruptcy several years ago, it continued to operate as a business
while it worked out a plan for paying off its debts. United Airlines filed a Chapter 13 bankruptcy.
172. (p. 588) The purpose of governmental deregulation is to eliminate laws that seem to hinder competition.
173. (p. 588) Both the airline and telecommunications industries have been deregulated.
174. (p. 588) Deregulation has always benefited consumers.
175. (p. 588) It appears that some regulation of business is necessary to ensure fair and honest dealings with the
public.
176. (p. 588) Business and government do not need to work together to create a competitive environment that is
fair and open since global competition is increasing.
177. (p. 589) Many observers expect that, following the experience of Enron, the government will move toward a
further deregulation of business.
178. (p. 588) When the airline industry was deregulated in 1980 consumers benefited because airlines established
new routes and charged lower fares.
179. (p. 588) When the California electric power industry was deregulated in the late 1990s customers were able to
shop for electricity in a market packed with power suppliers competing for business.
180. (p. 574) The branch of the government responsible for overseeing the legal system is the:
D. administrative.
181. (p. 574) __________ refers to rules, statutes, codes, and regulations established to provide a legal framework
within which business may be conducted.
A. Common law
182. (p. 574) The regulation of marriages and payments for personal injuries is covered by:
D. legislative law.
183. (p. 574) __________ law establishes punishments, and regulates the investigation of people accused of
committing crimes.
D. Business law
184. (p. 574) The body of law created by court decisions rendered by judges is called __________ law.
A. precedent
185. (p. 574-575) Which of the following can review and, when necessary, overturn decisions made at the trial court
level?
D. statutory agencies
186. (p. 574) Common law relies on decisions made by judges in previous cases. These earlier decisions are
called:
D. statutory models.
187. (p. 574) While the government regulates business activities, businesses would prefer to set their own
standards of behavior. Which of the following is the most likely reason the government has intervened?
D. There has been an increase in the number of lawyers.
188. (p. 574) Which of the following is the most likely response to the corporate scandals of firms like Enron?
D. There will be a decrease in the number of lawyers nationwide.
D. negligence
190. (p. 575) The Environmental Protection Agency is an example of a(n):
A. common law agency.