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Chapter 6 - Consumers
1. The case of MacPherson v. Buick Motor Car in 1916 changed product liability law. As a result of it, the courts
a.
expanded the liability of manufacturers for injuries caused by defective products.
b.
adopted the principle of caveat emptor.
c.
permitted consumers to sue the retailer from whom they had purchased the product.
d.
adopted the principle of strict liability.
2. According to the legal doctrine of strict product liability,
a.
the producer of a product is responsible for any injury the consumer suffers.
b.
consumers must assume all risk whenever they buy a product.
c.
product liability presupposes negligence by more than one party.
d.
a manufacturer need not be negligent to be held liable for a defective product.
3. Which statement is accurate in its description of consumer protection?
a.
The Consumer Product Safety Commission has the power to order recalls, public warnings, and refunds.
b.
Statistics show that, in fact, safety regulations rarely succeed in increasing safety.
c.
Critics exaggerate the cost of safety regulations and product recalls.
d.
Safety regulations permit people to choose to save money by purchasing riskier (but less expensive) products.
4. Legal paternalism is the doctrine that the law
a.
may justifiably be used to restrict the freedom of individuals for their own good.
b.
may justifiably forbid lawsuits against those who act paternalistically.
c.
should encourage business to develop a paternal sense of responsibility for consumers.
d.
should only restrict people's freedom in order to protect other people.
5. "Puffery" is an example of which of the following deceptive or misleading advertising techniques?
a.
ambiguity
b.
exaggeration
c.
psychological appeals
d.
concealment of facts
6. For years Bayer aspirin advertised that it contained "the ingredient doctors recommend most." This is an example of:
a.
ambiguity.
b.
psychological appeals.
c.
exaggeration.
d.
concealment of facts.
7. The case of FTC v. Standard Education was important in the legal transition
a.
toward the principle of caveat emptor.
b.
away from the reasonable-person standard.
c.
toward the reasonable-person standard.
d.
that removed power from the Federal Trade Commission (FTC).
8. In deciding whether an ad is deceptive, today the FTC basically follows
a.
the reasonable consumer standard.
b.
the gullible consumer standard.
c.
the "modified" gullible-consumer standard.
d.
none of the above.
9. Harvard business professor Theodore Levitt has
a.
drawn an analogy between advertising and art.
b.
proven the possibility of effective subliminal advertising.
c.
argued that the process of production today creates the very wants it then satisfies.
d.
invented the concept of "puffery".
10. According to Galbraith's "dependence effect",
a.
production depends upon wants.
b.
advertising depends on the wants of the consumer.
c.
consumer demand tends to be shaped by the production process.
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Chapter 6 - Consumers
d.
advertising depends on consumerism.
11. Advertising
a.
makes the market more efficient.
b.
maximizes consumer well-being (thanks to the invisible hand).
c.
can't be restricted without violating the moral rights of advertisers.
d.
subsidizes the media.
12. Critics of advertising contend that
a.
advertising rarely gives consumers much useful information.
b.
brand loyalty increases price competition.
c.
restrictions on advertising violate the moral rights of advertisers.
d.
advertising can only influence us if we want it to.
13. Which of the following consumer goods is responsible for the greatest number of individual social ills?
a.
alcohol
b.
cars
c.
cigarettes
d.
handguns
14. Before the case of MacPherson v. Buick Motor Car in 1916, the law based a manufacturer's liability for injuries due to
a defective product on
a.
the principle of strict liability.
b.
the contractual relationship between the producer and the consumer.
c.
the principle of the reasonable person.
d.
whether or not the manufacturer exercised due care.
15. Due care is
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Chapter 6 - Consumers
a.
based on the principle of caveat emptor.
b.
based on the principle "let the buyer beware".
c.
the idea that consumers and sellers do not meet as equals and that consumer's interests are particularly
vulnerable to being harmed by the manufacturer.
d.
based on the principle of absolute liability.
16. Which statement is true from an ethical perspective?
a.
The argument for strict liability is basically utilitarian.
b.
Strict liability is identical with absolute liability.
c.
The concept of due care is identical with that of caveat emptor.
d.
The argument for due care is basically Kantian.
17. In 1972 Congress created one of the most important agencies for regulating product safety. This agency is the
a.
Securities and Exchange Commission.
b.
Federal Drug Administration Agency.
c.
Fair Packaging and Labeling Commission.
d.
Consumer Product Safety Commission.
18. To properly protect consumers,
a.
tests of a product can safely assume that the product will be used in just the way that the manufacturer intends
it to be used.
b.
accidents occur exclusively as a result of product misuse.
c.
if a product poses a potential, serious threat, a company may need to take extraordinary measures to ensure
continued safe use of it.
d.
only new products, not established products, need to be tested.
19. People generally speak of two kinds of warranties. What are these two kinds of warranties?
a.
express and implied
b.
positive and negative
c.
limited and unlimited
d.
legal and moral
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Chapter 6 - Consumers
20. Which of the following is an example of price gouging?
a.
selling World Series Tickets for $300
b.
a New York hotel tripling its room prices after 9/11
c.
having to pay above the seller's original asking price for a home
d.
increasing the price of lawn movers in the spring and summer
21. The consumer’s main source of product information is
a.
testimonials of other customers.
b.
billboards.
c.
word of mouth.
d.
the label and package.
22. Advertising is best known for
a.
the persuasion to purchase the product.
b.
the information about goods and services.
c.
the information about prices.
d.
the objectivity of the view of the product.
23. Terms like “can be,” “as much as,” and “help,” are examples of
a.
concealment of facts.
b.
truth in advertising.
c.
ambiguity.
d.
consumer confidence.
24. The terms “best, finest, and most” are examples of
a.
puffery.
b.
psychological appeals.
c.
truth in advertising.
d.
trust building statements.
25. The media with the greatest advertising influence over children is
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Chapter 6 - Consumers
a.
radio.
b.
television.
c.
Internet.
d.
magazines.
26. Statistics indicate that the faith consumers place in manufacturers is often misplaced.
a.
True
b.
False
27. Strict product liability is the doctrine that the seller of a product has legal responsibilities to compensate the user of
that product for injuries suffered due to a defective aspect of the product, even though the seller has not been negligent in
permitting that defect to occur.
a.
True
b.
False
28. In the 1960 case Henningsen v. Bloomfield Motors and the 1963 case Greenman v. Yuba PowerProducts, injured
consumers were awarded damages based on their proving that the manufacturers of the defective products were negligent.
a.
True
b.
False
29. In his books The Affluent Society and The New Industrial State, John Kenneth Galbraith argues that consumer wants
determine what gets produced.
a.
True
b.
False
30. Defenders of advertising claim that, despite criticisms, advertising enjoys protection under the first Amendment as a
form of speech.
a.
True
b.
False
31. The doctrine of caveat emptor means that the law may be justifiably used to restrict the freedom of individuals for
their own good.
a.
True
b.
False
32. The Fair Packaging and Labeling Act of 1966 empowers representative agencies to rank and list all ingredients in the
order of decreasing percentage of total contents.
a.
True
b.
False
33. The Federal Trade Commission (FTC) was established over seventy-five years ago to protect consumers against
deceptive advertising.
a.
True
b.
False
34. Subliminal advertising is advertising that supposedly communicates at a level beneath our conscious awareness.
a.
True
b.
False
35. Anti-paternalism gains plausibility from the view that individuals know their own interests better than anyone else and
that they are fully informed and able to advance those interests.
a.
True
b.
False
36. Economists favor legal paternalism because it prevents individuals from balancing safety against price.
a.
True
b.
False
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Chapter 6 - Consumers
37. When advertisers conceal facts, they suppress information that is favorable to their products.
a.
True
b.
False
38. A psychological appeal is one that aims to persuade by appealing primarily to reason and not to human emotional
needs.
a.
True
b.
False
39. The FTC now follows the reasonable-person standard in matters of advertising, sales and marketing.
a.
True
b.
False
40. Due care is the idea that consumers and sellers do not meet as equals and that the consumer's interests are particularly
vulnerable to being harmed by the manufacturer, who has knowledge and expertise the consumer does not have.
a.
True
b.
False
41. Before the case of MacPherson v. Buick Motor Car in 1916, injured consumers could only recover damages from the
retailer of the defective product.
a.
True
b.
False
42. Legal paternalism is the doctrine that the law should not be used to restrict the freedom of individuals for their own
good.
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Chapter 6 - Consumers
a.
True
b.
False
43. One decisive case in the legal transition away from the reasonable-person standard in matters of advertising, sales and
marketing was FTC v. Standard Education.
a.
True
b.
False
44. The FTC now follows the "modified" ignorant consumer standard and protects only those cases of foolishness that are
committed by significant numbers of people.
a.
True
b.
False
45. Business's responsibility for understanding and providing for consumer needs derives from the fact that citizen-
consumers are dependent on business to satisfy their needs.
a.
True
b.
False
46. Congress has now outlawed puffery.
a.
True
b.
False
47. Strict liability is the same thing as absolute liability.
a.
True
b.
False
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Chapter 6 - Consumers
48. The controversy over legal paternalism pits the values of individual freedom and autonomy against social welfare.
a.
True
b.
False
49. Business is right to insist that accidents occur exclusively as a result of product misuse and that it is thereby absolved
of all responsibility.
a.
True
b.
False
50. "Weasel words" are words used to evade or retreat from a direct or forthright statement.
a.
True
b.
False
51. What is the importance of the 1916 case of MacPherson v. Buick Motor Car?
52. What is due care?
53. What is the doctrine of caveat emptor?
54. What is the importance of Henningsen v. Bloomfield Motors and Greenman v. Yuba Power Products?
55. What is the argument for strict products liability?
56. Regulations are often effect at safeguarding consumers, but there are exceptions. Give an example of one.
57. Give an example of manipulative pricing.
58. Give an example of labeling or packaging that is deceptive or misleading.
59. Give an example of deceptive ambiguity in advertising.
60. What is subliminal advertising?
61. Defend the position that advertisers must be use imagination, symbolism, and artistic content to address human needs.
62. Defend the position that advertising manipulates human needs and can create artificial ones.
63. If we accept the principle of “caveat emptor” - “let the buyer beware,” why then is there concern about the ethics of
advertising. If the consumer is responsible to make the decision, is there anything to justify restricting the
advertiser? Explain your view.
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Chapter 6 - Consumers
64. Can advertisers create a need that is not really present? Does advertising have the power to drive consumption
up? Provide your explanation of your position.
65. What would the world be without advertising? Would companies be able to maintain sales or would they go under
because of lack of business without advertising? What role would “word of mouth” have if there were no advertising?
