The Legal Environment of Business, 8e (Kubasek)
Chapter 18 The Law of Administrative Agencies
1) Any rule that affects, directly or indirectly, agencies such as the Environmental Protection
Agency or the Federal Trade Commission is called a(n) ________ law.
A) executive
B) administrative
C) governing
D) presidential
2) A rule that governs the internal processes of an administrative agency is called a(n) ________.
A) substantive rule
B) internal law
C) procedural rule
D) executive law
3) Which of the following is true of a substantive rule?
A) It has an impact on the internal processes by which an agency functions.
B) It defines the rights of parties involved in an agency hearing.
C) It prescribes methods of enforcing rights.
D) It controls the method by which jurisdiction is balanced between federal and state agencies.
4) Which of the following is an example of a procedural rule in operation?
A) a Social Security recipient being entitled to receive a check for a large amount
B) a Medicare recipient contacting a member of Congress to complain about the confusing health
care system in the United States
C) the Internal Revenue Service giving notice to all parties involved in an agency hearing
D) the U.S. Department of Health and Human Services referring a client to a state agency better
suited to handle his or her problem
5) A rule that creates, defines, or regulates the legal rights of administrative agencies and the
parties they regulate is called a(n) ________.
A) substantive rule
B) procedural rule
C) internal law
D) executive law
6) An agency whose appointed heads and members serve for fixed terms and cannot be removed
by the U.S. president except for reasons defined by Congress is called a(n) ________
administrative agency.
A) independent
B) executive
C) congressional
D) permanent
7) An administrative agency ________.
A) does not have the judicial power to adjudicate individual cases
B) does not have the executive power to investigate corporate misconduct
C) includes public utilities commissions and building authorities at the state level
D) is situated wholly in the legislative branch of government
8) Which of the following is a difference between independent administrative agencies and
executive administrative agencies?
A) Independent administrative agencies are created by private stockholders, whereas executive
administrative agencies are created by the legislative branch of government.
B) The heads of independent administrative agencies cannot be removed by the president,
whereas the heads of executive administrative agencies can be removed by the president.
C) Independent administrative agencies are headed by people with prior experience in private
enterprises, whereas executive administrative agencies are headed by a board of commissioners.
D) The heads and members of the board have no fixed term of office in independent
administrative agencies, whereas the heads and members are appointed for a specific term of
years in executive administrative agencies.
9) Which of the following is an example of an independent federal administrative agency?
A) Federal Deposit Insurance Corporation (FDIC)
B) General Services Administration (GSA)
C) Securities and Exchange Commission (SEC)
D) International Development Corporation Agency (IDCA)
10) Which of the following is an example of an independent federal administrative agency?
A) National Aeronautics and Space Administration (NASA)
B) Nuclear Regulatory Commission (NRC)
C) National Science Foundation (NSF)
D) Occupational Safety and Health Administration (OSHA)
11) Which of the following is an example of an independent federal administrative agency?
A) National Transportation Safety Board (NTSB)
B) Office of Personnel Management (OPM)
C) Small Business Administration (SBA)
D) Veterans Administration (VA)
12) The Department of Homeland Security (DHS) is an example of a(n) ________
administrative agency.
A) independent
B) executive
C) quasi-
D) sua sponte
13) The Commodity Futures Trading Commission (CFTC) is an example of a(n) ________
administrative agency.
A) independent
B) executive
C) quasi-
D) sua sponte
14) Which of the following is a reason for the growth of administrative agencies?
A) Administrative agency hearings are governed by strict rules of evidence.
B) The staff of each of the agencies has technical expertise in a wide range of areas.
C) Administrative agency hearings reduce the burden on the state and federal court systems.
D) Administrative agencies promote deregulation in all industries.
15) A substantive rule generally has an impact on the internal processes by which administrative
agencies function or prescribes methods of enforcing rights.
16) Administrative agencies are generally classified as independent or executive.
17) A commissioner of an independent administrative agency can be removed before serving out
a full term at the whim of the president.
18) The Securities and Exchange Commission was intended to be a “watchdog” agency that
would ensure full disclosure of material information to the investing public.
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19) An administrative agency can issue rules that carry civil penalties but not criminal penalties.
20) In 1995, the House of Representatives and the Senate overwhelmingly passed a bill that
required all administrative agencies to do a cost-benefit analysis of any proposed regulation that
would cost the economy less than $25 million.
21) Since the Office of Management and Budget recommends annual budgets to the U.S.
Congress for each administrative agency, it has influence over all rulemaking.
22) Explain the reasons for the rapid growth of administrative agencies in the United States.
23) Statutes that allow the U.S. Congress to create federal administrative agencies are called
________.
A) enabling legislation
B) substantive rules
C) procedural rules
D) ex post facto laws
24) Which of the following refers to the power delegated by the U.S. Congress to an
administrative agency to make rules that must be adhered to by individuals and businesses
regulated by the agency?
A) fiduciary power
B) executive power
C) legislative power
D) judicial power
25) Which of the following refers to the power delegated by the U.S. Congress to an
administrative agency to investigate whether the rules enacted by the agency have been properly
followed by businesses and individuals?
A) executive power
B) fiduciary power
C) legislative power
D) judicial power
26) Which of the following refers to the power delegated by the U.S. Congress to an
administrative agency to adjudicate cases through an administrative proceeding?
A) executive power
B) fiduciary power
C) legislative power
D) judicial power
27) The Securities and Exchange Commission (SEC), using its mandate under the 1933 and 1934
Securities Acts, can both fine and criminally prosecute individuals involved in insider trading.
This is an example the SEC’s ________ power.
A) veto
B) judicial
C) executive
D) legislative
28) The wide-ranging investigative powers of Securities and Exchange Commission (SEC) staff
is an example of the SEC’s ________ power.
A) judicial
B) legislative
C) executive
D) fiat
29) The Securities and Exchange Commission (SEC), using its congressional mandate under the
1933 and 1934 Securities Acts, has prescribed rules governing the issuance of, and trading in,
securities by businesses as well as by brokers and underwriters. This is an example of the SEC’s
________ power.
A) legislative
B) judicial
C) veto
D) executive
30) Critics go so far as to claim that administrative agencies constitute a “________ branch of
government” because of the powers delegated to them by enabling statutes.
A) first
B) second
C) third
D) fourth
31) In 1995, the U.S. Congress overwhelmingly passed a bill that required all administrative
agencies (both executive and independent) to do a cost-benefit analysis of any proposed
regulation that would cost the economy more than $________ million.
A) 10
B) 15
C) 20
D) 25
32) Which of the following is true of administrative agencies?
A) An enabling statute delegates congressional executive powers to them for the purpose of
serving the public interest.
B) An enabling statute delegates legislative powers to them in order to settle or adjudicate
disputes with businesses.
C) All their proposed rules, whether major or minor, are subject to the review of the Office of
Management and Budget.
D) They have to identify possible alternatives to a proposed regulation that would require no
government action.
33) The U.S. Congress creates federal administrative agencies through statutes called regulatory
legislation.
34) In general, an enabling statute delegates to an administrative agency congressional executive
power for the purpose of serving the “public interest, convenience, and necessity.”
35) An enabling statute delegates judicial power to an administrative agency to investigate
potential violations of rules or statutes.
36) An enabling statute delegates legislative power to an administrative agency to settle or
adjudicate any disputes it may have with businesses or individuals.
37) Explain the legislative, executive, and judicial powers delegated to administrative agencies
through enabling legislation.
38) Functions of administrative agencies include all but which of the following?
A) rulemaking
B) mediation of private disputes
C) informal advising of individual businesses and consumers
D) issuance of guidelines for the business community and others as to what activities are legal in
the eyes of agency staff
39) Which of the following rulemaking models is most often used by administrative agencies
because it is efficient in terms of time and cost?
A) formal rulemaking
B) informal rulemaking
C) hybrid rulemaking
D) independent rulemaking
40) Which of the following laws establishes the standards and procedures federal administrative
agencies must follow in their rulemaking and adjudicative functions?
A) Federal Procedure Act
B) Administrative Procedure Act
C) Congressional Review Act
D) Small Business Regulatory Enforcement Fairness Act
41) In what decade did the Administrative Procedure Act become law?
A) 1920s
B) 1930s
C) 1940s
D) 1960s
42) The procedure for formal rulemaking provides for ________.
A) an agency notice of proposed rulemaking to the public in the Federal Register
B) an opportunity for all interested parties to submit written comments to the agency
C) a hearing at which experts give their opinions on a rule proposed by the agency
D) the appointment of counsel for persons unable to afford representation at the formal hearing
43) A formal rulemaking by an administrative agency is appropriate when an agency’s enabling
legislation ________.
A) or other congressional directives do not require another form
B) states that all rules must be enacted by the agency as part of a formal hearing process that
includes a complete transcript
C) or other congressional directives state that the agency must promulgate regulations
D) provides an opportunity for all interested parties to submit written comments
44) Informal rulemaking under the Administrative Procedure Act is appropriate when an
agency’s enabling legislation ________.
A) or other congressional directives do not require another form
B) states that all rules must be enacted by the agency as part of a formal hearing process that
includes a complete transcript
C) or other congressional directives do not state that the agency must promulgate regulations
D) does not allow the submission of written comments by parties
45) Which of the following is required of an agency under informal rulemaking?
A) filing the notice of proposed rulemaking in an appellate court
B) providing an opportunity for all interested parties to submit written comments to the agency
C) scheduling a hearing at which experts give their opinions on a rule proposed by the agency
D) appointing a counsel for persons unable to afford representation at the formal hearing
46) Which of the following is the final step in an informal rulemaking process?
A) Proposed rules are published in the Federal Register.
B) Interested parties file written comments on the written draft within a 30-day period from
publication in the Federal Register.
C) Agency receives feedback from interested parties during a stipulated period of time and
makes a decision on whether the final draft should be rewritten.
D) Final draft of a rule is published in the Federal Register 30 days before it takes effect.
47) ________ rulemaking combines some of the aspects of formal and informal rulemaking.
A) Hybrid
B) Conglomerate
C) Congruent
D) Economies-of-scale
48) Which of the following is true of hybrid rulemaking?
A) It allows agencies to adopt regulations without inputs from the public.
B) It allows agencies to set a period for public comments and to hold a public hearing.
C) It balances the needs of federal agencies with the needs of state agencies whose jurisdictions
overlap.
D) It allows agencies to adopt regulations without having to publish these regulations in the
Federal Register.
49) Section 553 of the Administrative Procedure Act (APA) allows administrative agencies to
decide whether there will be public participation in rulemaking proceedings relating to “military
or foreign affairs” and “agency management or personnel,” as well as in proceedings relating to
“public property, loans, grants, benefits, or contracts” of an agency. This is known as ________
rulemaking.
A) informal
B) exempted
C) formal
D) hybrid
50) Public notice and comments are not required when an administrative agency is making
interpretive rules or general statements of policy. This is known as ________ rulemaking.
A) formal
B) hybrid
C) exempted
D) informal
51) Which of the following is the first step in an informal rulemaking process?
A) Proposed rules are published in the Federal Register.
B) Interested parties file written comments on the written draft within a 30-day period from
publication in the Federal Register.
C) Agency drafts rules in consultation with interested parties.
D) Agency receives feedback from interested parties and makes a decision on whether the final
draft should be rewritten.
52) The Department of Homeland Security (DHS) of the U.S. government promulgates a rule
that allows its officials to search a private or commercial property at any time without its owner’s
permission and without an administrative search warrant. This rule is in violation of the
________ Amendment.
A) First
B) Second
C) Third
D) Fourth
53) Which of the following is the first step pursued by an administrative agency in carrying out
its adjudicative function in individual cases?
A) The agency against whom the complaint is made submits themselves to a hearing and
decision by the administrative law judge.
B) The agency files a complaint against the party with an administrative law judge (ALJ).
C) The agency notifies the party against whom the complaint is made and conducts an
investigation into the merits of the complaint.
D) The agency negotiates with the party against whom the complaint is made to see if it can get
the party to voluntarily stop the violation.
54) In order to carry out its adjudicative function in individual cases, an administrative agency is
subject to guidelines stipulated by ________.
A) the administrative law judge hearing the case
B) a special committee set up by Congress and headed by the U.S. Secretary of State
C) the Federal Tort Claims Act
D) case law arising out of appeals of agency decisions to the U.S. Supreme Court