For purposes of diversity jurisdiction in federal court, which of the following is true
regarding a person’s citizenship?
a. A person is a citizen of the state where that person has his or her legal residence or
domicile, and there is no limit to the number of states in which a person may be a
citizen so long as the person has a house in every state in which citizenship is claimed.
b. A person is a citizen of the state where that person has his or her legal residence or
domicile, and a person may be a citizen of only one state.
c. A person is a citizen of the state where that person has his or her legal residence or
domicile, and a person may be a citizen in a maximum of two states.
d. A person is considered a citizen of the state in which a lawsuit is brought because the
person automatically becomes subject to that state’s laws.
Answer:
Which of the following are generally NOT subject to the employment-at-will rule?
a. Public employees
b. Employees who have express employment contracts for a fixed term and public
employees
c. Public employees and union employees
d. Public employees, employees who have express employment contracts for a fixed
term, and union employees
Answer:
Which of the following is NOT a duty of an agent to a principal?
a. Loyalty
b. Due care
c. Maximizing profits
d. Obedience
Answer:
One simple way of addressing foreign tax risks is a(n) __________, whereby the local
licensee is obligated to pay all taxes other than those specifically allocated to the
foreign partner.
a. gross-up clause
b. tax shift clause
c. local commitment clause
d. overseas investment clause
Answer:
Fact Pattern 17-1
Cream X has been approved by the Food and Drug Administration for the treatment of
eczema. Dr. Glover discovers, however, that it is also great for a number of other things
including the removal of wrinkles and cellulite. The cream is applied to the skin, not
ingested. He starts prescribing it for those purposes and has a great increase in patients.
Dr. Smith starts to lose a number of patients to Dr. Glover and becomes grumpy when
she hears why Dr. Glover is gaining in popularity. Dr. Smith decides to complain about
the practice but does not know quite what to do about it.
Refer to Fact Pattern 17-1. Which of the following is true regarding the legality of Dr.
Glover prescribing Cream X for the elimination of wrinkles and cellulite?
a. It is legal, and the Food and Drug Administration would take no action against him.
b. It is legal only because the cream is not ingested.
c. It is legal only because Dr. Glover is using it for cosmetic reasons.
d. It is illegal.
Answer:
In the simplest type of ownership, property is owned by a partnership.
a. True
b. False
Answer:
The Securities Act of 1933 is also referred to as the “blue sky” law.
a. True
b. False
Answer:
In the Junger v. Daleycase referenced in the text, a professor challenged regulations
involving the posting to a website of human readable source code of an encryption
software program. The court held that:
a. computer source code is not protected by the First Amendment.
b. computer source code is protected by the First Amendment and that restrictions
involving restrictions to such code are reviewed under a rational basis standard.
c. computer source code is protected by the First Amendment and that restrictions
involving restrictions to such code are reviewed under the substantially related test.
d. computer source code is protected by the First Amendment and that restrictions
involving restrictions to such code are reviewed under a strict scrutiny standard.
Answer:
Which of the following is NOT an example of St. Thomas Aquinas’ requirements for a
law to be just?
a. The law must be within the power of individuals to fulfill it.
b. The law must be consonant with a reasoned determination of the universal good.
c. The law must be formed to promote a private benefit to the majority.
d. The law must be widely promulgated.
Answer:
A(n) __________ has features of a customs union but goes a step further by eliminating
barriers that restrict the movement of labor, capital, and technology among member
nations.
a. valuation market.
b. common market.
c. import relief consortium.
d. nontarrif consortium.
Answer:
According to the Delaware Supreme Court, when does the role of a director shift from
being a “protector of the corporate bastion” to being an “auctioneer” charged with
obtaining the highest realizable short-term value for the shareholders?
a. Only when the breakup of the corporation or a change of control has become
inevitable
b. Whenever a yearly loss is reflected
c. At the point that a yearly loss has been reflected for three straight years
d. When the CEO and the board of directors are in disagreement, and there has also
been a yearly loss reflected for three straight years
Answer:
Strict liability in tort applies only to products, not to services.
a. True
b. False
Answer:
Which of the following is true regarding remedies available under Rule 10b-5?
a. The measure of damages is typically out-of-pocket loss, or an investor may elect to
rescind the transaction; and the court may award prejudgment interest; but punitive
damages are unavailable.
b. The measure of damages is typically out-of-pocket loss with no right on the part of
an investor to elect to rescind the transaction, and the court may award prejudgment
interest; but punitive damages are unavailable.
c. The measure of damages is typically out-of-pocket loss, or an investor may elect to
rescind the transaction; the court may award prejudgment interest; and punitive
damages are available in appropriate cases.
d. The measure of damages is typically out-of-pocket loss with no right on the part of
an investor to elect to rescind the transaction, the court may award prejudgment interest,
and punitive damages are available in appropriate cases.
Answer:
Senator Smith is tired of all the imports of televisions coming into this country. He
proposes a bill by which all foreign-made televisions will be taxed an additional $100
before being allowed into the country. He receives a great deal of support for his bill,
but one senator questions whether such an arrangement is illegal since it will
discriminate against imported goods. Which of the following is correct?
a. There is no problem with the additional tax because the U.S. is a sovereign nation.
b. There is no problem with the tax so long as it can be shown that American jobs are
being lost due to the number of televisions being imported.
c. Under the principle of national treatment, the U.S., as a member of the World Trade
Organization, may not discriminate against imported goods and may not apply the tax
unless it is also applied equally to domestic products.
d. The tax may not be imposed under the Uniform Trade Initiative.
Answer:
Under the __________ defense, a manufacturer is not liable to a sophisticated user of
its product for failure to wan of a risk harm, or danger if the sophisticated user knew or
should have known of the risk, harm, or danger.
a. excused warning
b. unnecessary warning
c. sophisticated user
d. absolute user
Answer:
Following several injuries, a manufacturer of a chain saw installed an additional safety
guard. In a lawsuit based on products liability, which of the following is the company’s
best position in opposition to a plaintiff’s efforts to introduce evidence of the
modification?
a. That the modification was just recently designed.
b. That the modification involved a subsequent remedial measure.
c. That the company was not negligent.
d. There is no best position because it is well established that the evidence would be
admitted.
Answer:
__________ is the process by which a country asserts a right to regulate activities that
occur beyond its borders.
a. Internationalization
b. Nationalization
c. Extraterritoriality
d. Appropriation
Answer:
Which of the following provides whistleblower protection for employees who provide
information of illegality to the SEC?
a. The Employee Retirement and Protection Income Security Act
b. The Dodd-Frank Wall Street Reform and Consumer Protection Act
c. The Wagner Act
d. The SEC Accountability and Reform Act to Protect Consumer Investors
Answer:
Fact Pattern 5-1
Candy owns a nail and hair salon. She reaches an agreement with Todd, an independent
contractor, allowing him to do nails in her salon three days per week. Todd has a sign
on his desk informing his customers that he is an independent contractor of the shop.
After working for a month, Todd asks Candy if she has been paying appropriate social
security taxes for him. He also informs Candy that Phyllis, a customer, is preparing to
sue both Todd and Candy based upon a nasty nail fungus she developed after having her
nails done by Todd.
Refer to Fact Pattern 5-1. Which of the following is true regarding the duty of Candy, if
any, to pay social security taxes for Todd?
a. Candy must pay all of Todd’s social security taxes.
b. Candy is responsible for 50% of Todd’s social security taxes, and he is responsible
for 50%.
c. Candy is responsible for all of Todd’s social security taxes only if he works at least 30
hours per week; otherwise, Todd is responsible for all of the taxes.
d. Candy is not responsible for any of Todd’s social security taxes.
Answer:
An equipment lease that serves the purpose of financing is known as a(n) __________
lease.
a. credit
b. finance
c. unterminal
d. revokable
Answer:
.Whether a contract is a bilateral or unilateral contract depends upon whether the sale of
goods is involved.
a. True
b. False
Answer:
Title VII provides that an employer may lawfully hire an individual on the basis of
religion, sex, or national origin if religion, sex, or national origin is a bona fide
occupational qualification.
a. True
b. False
Answer:
Which of the following is true in regard to the business judgment rule if one or more
individual directors have a personal interest in a transaction being considered by the
board?
a. The decision may be entitled to the protection of the business judgment rule if the
transaction is approved by a majority of the inside directors.
b. The decision may be entitled to the protection of the business judgment rule if the
transaction is approved by a majority of the disinterested directors.
c. The decision is not entitled to the protection of the business judgment rule resulting
in a higher level of proof regarding the reasonableness of the transaction being required
from the board of directors.
d. The decision is not entitled to the protection of the business judgment rule leading to
a legally established conclusion of illegality on the part of the board of directors.
Answer:
In order to hold a media defendant liable for statements made about a public figure, the
plaintiff must show the media defendant acted with:
a. actual malice.
b. negligence.
c. only inaccuracy.
d. intent to inflict monetary harm.
Answer:
CASE 4 Escott v. BarChris Construction Corp. (1968) dealt with the issue of due
diligence as a defense in the offering process.
a. True
b. False
Answer:
The fact that leased workers are on the payroll of an employment agency does not
preclude them from being considered employees of the company at which they are
actually working on a joint employer theory.
a. True
b. False
Answer:
The term “customary authority” refers to authority that agents must have by law.
a. True
b. False
Answer:
Which of the following federal laws governs most employer-sponsored retirement plans
as well as many other types of employer-sponsored employee benefit plans?
a. The Consolidated Omnibus Budget Reconciliation Act
b. The Employee Retirement Security Act
c. The National Labor Relations Act
d. The Fair Labor Standards Act
Answer:
The Equal Credit Opportunity Act originally intended to prevent discrimination against
__________ in the advancement of credit.
a. religion
b. age
c. women
d. color
Answer:
Fact Pattern 11-2
Professor Peter enjoys using a small manual containing information on employment
laws in his business law class. The manual costs $100 and is published by We Publish
book publishers. Because Professor Peter wants to save his students some money, he
copies the manual and has ABC Copy Store make copies for students. Students are
required to purchase the copies directly from the copy store. Professor Prudence, who
dislikes Peter because she believes he blocked her tenure application, hears about the
deal and notifies the publishing company. The publishing company demands that the
process be stopped and prepares to seek damages.
Refer to Fact Pattern 11-2. Can Copy Store be found guilty of copyright infringement?
a. No, because the use was for education and would be considered a fair use.
b. No, because Professor Peter ordered the copying, and the store was simply following
directions.
c. Yes, copy stores can be found liable for copyright infringement for copying without
obtaining permission.
d. Yes, but only if the store failed to have Professor Peter agree to indemnify it for any
alleged copyright infringement.
Answer:
The Bill of Rights consists of which of the following?
a. The first ten amendments to the U.S. Constitution.
b. The first five amendments to the U.S. Constitution.
c. All amendments to the U.S. Constitution.
d. All amendments to the U.S. Constitution after the first ten amendments were passed.
Answer: