1. Private law provides the legal rules within which firms compete.
a.
True
b.
False
2. Managers can make their own “public” law.
a.
True
b.
False
False
1
Easy
3. Insurance policies may help firms manage risk.
a.
True
b.
False
True
1
Moderate
4. Researchers have determined that Fortune 500 firms convicted of illegal conduct earned significantly lower returns on
assets than firms that had not been convicted of wrongdoing.
a.
True
b.
False
True
1
Moderate
5. Lobbying legislators is one method by which managers can help shape the environment in which they do business.
False
1
Easy
a.
True
b.
False
6. Laws enacted in response to corporate misdeeds often impose fewer restrictions and costs on business than would have
been imposed had firms as a whole acted more responsibly at the outset.
a.
True
b.
False
False
1
Moderate
7. Promoting economic growth is one of the primary public policy objectives of laws and regulations applicable to
business.
a.
True
b.
False
True
1
Moderate
8. Worker protection is one major public policy concern underlying U.S. business law.
a.
True
b.
False
True
1
Easy
9. A firm’s illegal conduct has no bearing on the firm’s competitive advantage because it does not necessarily divert funds
True
1
Easy
form strategic investments or affect its image and reputation with its customers.
a.
True
b.
False
10. Researchers found a statistically significant inverse relationship between a country’s economic prosperity, as measured
by the per capita gross domestic product, and the country’s judicial independence.
a.
True
b.
False
False
1
Moderate
11. As used in the text, the term “legal astuteness” refers to the ability of a manager to avoid situations making
consultation with legal counsel necessary.
a.
True
b.
False
False
1
Moderate
12. The entering into of nondisclosure agreements is an unethical practice that should not be tolerated by a legally astute
manager.
a.
True
b.
False
False
1
Moderate
False
1
Easy
1-1b Effect of Law on the Competitive Environment and the Firm’s Resources
13. A legally astute manager would wait as long as possible to consult legal counsel once a problem arises in order to keep
legal fees to a minimum.
a.
True
b.
False
14. A legally astute manager understands that legal analysis is often ambiguous.
a.
True
b.
False
True
1
Easy
15. Each activity in regard to “law and the value chain” referenced in the text has legal aspects.
a.
True
b.
False
True
1
Easy
16. The European Union’s center of operations is in Brussels, Belgium.
a.
True
b.
False
True
1
Easy
17. According to the text, adequate protection of mminority shareholder rights increases investment in new ventures.
False
1
Moderate
a.
True
b.
False
18. Under the resource-based view of a business firm, a firm’s resources can be a source of sustained competitive
advantage if they are valuable, rare, and perfectly imitable by competitors.
a.
True
b.
False
False
1
Challenging
19. Self-regulation within the advertising industry has been largely successful in reducing the number of fast-food
commercials directed at children.
a.
True
b.
False
False
1
Moderate
20. The Systems Approach recognizes that law is dynamic, as opposed to static.
a.
True
b.
False
True
1
Easy
21. J.P. Morgan Chase’s “Sons and Daughters” hiring program, involving hiring children of China’s ruling elite, was
True
1
Moderate
approved by the United States Department of Justice and the Securities Exchange Commission.
a.
True
b.
False
22. Exhibit 1.5 indicates that the protection of private property rights is one way to promote economic growth within a
society.
a.
True
b.
False
False
1
True
United States – BUSPROG: – ANALYTIC
DISC: – AICPA: BB-Legal
1-1 Systems Approach to Business and Society
Blooms: Comprehension
23. Which of the following is NOT one of the four primary public policy objectives furthered by laws and regulations
applicable to U.S. business?
a.
Promoting economic growth
b.
Protecting workers
c.
Promoting consumer welfare
d.
Promoting governmental regulation
d
1
United States – AACSB: Analytic
24. Managers can make their own __________ law by entering into contracts and crafting certain governance structures.
a.
public
b.
primary
c.
cohesive
d.
private
d
1
Moderate
United States – BUSPROG: – ANALYTIC
DISC: – AICPA: BB-Legal
Introduction: Winning Legally
Blooms: Application
False
1
Challenging
DISC: – AICPA: BB-Legal
A Manager’s Dilemma: Putting It Into Practice
Blooms: Comprehension
25. The __________ approach recognizes that “business decisions consist of continuous, interrelated economic and moral
components.”
a.
procedural
b.
systems
c.
conciliatory
d.
mandated
26. The __________ theory recognizes that firms have relationships with many constituent groups which both affect and
are affected by the actions of the firm.
a.
stakeholder
b.
stockholder
c.
relational
d.
cohesive
a
1
Moderate
United States – BUSPROG: – ANALYTIC
DISC: – AICPA: BB-Legal
1-1 The Systems Approach to Business and Society
Blooms: Comprehension
27. The __________ was enacted after widespread abuses in the subprime mortgage market.
a.
Walsh-Healy Mortgage Reformation and Consumer Protection Act of 2009
b.
Mortgage Lending and Financial Reform Act of 2009
c.
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
d.
Financial Institution Regulatory Pronouncement and Consumer Revision Act of 2010
c
1
Moderate
United States – BUSPROG: – ANALYTIC
DISC: – AICPA: BB-Legal
1-1 The Systems Approach to Business and Society
Blooms: Comprehension
28. Legally astute management teams practicing strategic compliance management:
a.
view the cost of complying with government regulation is viewed as an investment, not an expense.
b.
view the cost of complying with government regulation is viewed as an expense which should be avoided until
legal action is threatened.
c.
do only the minimum necessary to comply with any applicable law should be done.
b
1
Moderate
United States – BUSPROG: – ANALYTIC
DISC: – AICPA: BB-Legal
1-1 The Systems Approach to Business and Society
Blooms: Comprehension
d.
view the cost of complying with government regulation as an expense which should be avoided until legal
action is threatened, while only engaging in the minimum efforts necessary to comply with any applicable law.
29. By __________, managers help shape the legal environment in which they do business.
a.
lobbying legislators
b.
forming coalitions
c.
refusing to follow laws viewed as unneeded by company officials
d.
lobbying legislators, forming coalitions, and but not by refusing to follow laws viewed as unneeded by
company officials
d
1
Moderate
United States – BUSPROG: – ANALYTIC
DISC: – AICPA: BB-Legal
1-1 The Systems Approach to Business and Society
Blooms: Application
30. __________ law is a type of law referencing formal rules embodied in constitutions and statutes enacted by
legislatures.
a.
Public
b.
Private
c.
Substantive
d.
Remedial
a
1
Moderate
United States – BUSPROG: – ANALYTIC
DISC: – AICPA: BB-Legal
1-1 Systems Approach to Business and Society
Blooms: COmprehension
31. Based on Exhibit 1.7, which of the following is NOT a way in which U.S. law promotes consumer welfare?
a.
Collect taxes and spend money
b.
Promote sale of safe products and services
c.
Facilitate innovative products and services
d.
Prevent deceptive practices
a
1
Moderate
a
1
Moderate
United States – BUSPROG: – ANALYTIC
1-1 The Systems Approach to Business and Society
Blooms: Application
32. Based on Exhibit 1.6, which of the following is NOT a way in which U.S. law protects workers?
a.
Through regulating certain terms and conditions of employment
b.
Through requiring the employer to provide certain benefits
c.
Through protecting civil rights in the workplace
d.
Through requiring the provision of educational opportunities to workers
d
1
United States – BUSPROG: – ANALYTIC
DISC: – AICPA: BB-Legal
1-1 The Systems Approach to Business and Society
Blooms: Application
33. The __________ is an advocacy group that has commended Disney’s new advertising and marketing guidelines for
children.
a.
Alliance to Ban Advertising Targeting Children
b.
Protect the Children Foundation
c.
Center for Science in the Public Interest
d.
Group for Ethical Marketing Practices
1
United States – BUSPROG: – ANALYTIC
DISC: – AICPA: BB-Legal
Inside Story: Obesity Epidemic
Blooms: Application
34. Which of the following is true regarding a comparison of the law of the United States and the law of the European
Union?
a.
Laws of the United States and the European Union differ in regard to consumer privacy and emissions
standards but are similar in regard to chemical usage and accounting standards.
b.
Laws of the United States and the European Union differ in regard to consumer privacy, emissions standards,
and chemical usage but are similar in regard to accounting standards.
c.
Laws of the United States and the European Union differ in regard to consumer privacy, emissions standards,
chemical usage, and accounting standards.
d.
Laws of the United States and the European Union are similar in all significant areas involving business
regulation and vary in only minor respects.
1
United States – BUSPROG: – ANALYTIC
DISC: – AICPA: BB-Legal
United States – BUSPROG: – ANALYTIC
DISC: – AICPA: BB-Legal
1-1 The Systems Approach to Business and Society
Blooms: Comprehension
35. According to Exhibit 1.6, which of the following is true regarding typical requirements placed on employers
mandating the provision of employee benefits?
a.
Employers are typically required to provide workers’ compensation, to pay unemployment insurance, and to
pay social security and Medicare taxes.
b.
Employers are typically required to pay unemployment insurance and to pay social security and Medicare
taxes, but employers are not required to pay workers’ compensation insurance.
c.
Employers are typically required to pay workers’ compensation insurance and to pay social security and
Medicare taxes, but employers are not required to pay unemployment insurance.
d.
Employers are typically required to provide workers’ compensation and to pay unemployment insurance, but
employers are not required to pay social security and Medicare taxes.
1
United States – BUSPROG: – ANALYTIC
DISC: – AICPA: BB-Legal
1-1 Systems Approach to Business and Society
Blooms: Comprehension
36. At its core, legal astuteness is the ability of a manager to:
a.
effectively communicate and solve problems with counsel.
b.
prevent deceptive trade practices and piracy.
c.
develop the firm’s brand and marketing strategy.
d.
encourage the sale of safe products at a fair price.
1
United States – BUSPROG: – ANALYTIC
DISC: – AICPA: BB-Legal
1-3 Legally Astute Manager
Blooms: Comprehension
37. The “systems approach” to business and society builds on which of the following stakeholder theory insights?
a.
That firms have relationships with many constituent groups, which both affect and are affected by the actions
of the firm.
b.
That firms have relationships with many constituent groups, and that these groups must be managed to best
promote value to stockholders.
c.
That although firms have relationships with many constituent groups, these groups have little impact on the
ongoing management of business firms.
d.
That firms have relationships with only a few groups, such as employees, that are directly connected with
business operations.
1
United States – BUSPROG: – ANALYTIC
Global View: Lobbying in the European Union
Blooms: Analysis
38. __________ is a term addressing the ability of a manager to communicate effectively with counsel and to work
together to solve complex problems.
a.
Legal astuteness
b.
Conciliatory interaction
c.
Mediation
d.
Arbitration
a
1
Easy
United States – BUSPROG: – ANALYTIC
DISC: – AICPA: BB-Legal
1-3 The Legally Astute Manager
Blooms: Comprehension
39. Which of the following has the responsibility for deciding which allocation of resources and rewards in a business
makes the most business sense?
a.
The general manager
b.
The in-house lawyer
c.
An independently retained lawyer
d.
An independently retained law firm, not just one lawyer
a
1
Easy
United States – BUSPROG: – ANALYTIC
DISC: – AICPA: BB-Legal
1-3 Legally Astute Manager
Blooms: Knowledge
40. Based on Exhibit 1.9, which of the following is NOT a component of legal astuteness as referenced in the text?
a.
A set of value-laden attitudes about the importance of law to the firm’s success
b.
A practice of leaving the resolution of legal issues to outside counsel
c.
The ability to exercise informed judgment when managing the legal aspects of business
d.
Context-specific knowledge of the law and the appropriate use of legal tools
b
1
Moderate
United States – BUSPROG: – ANALYTIC
DISC: – AICPA: BB-Legal
1-3 Legally Astute Manager
Blooms: Comprehension
41. Based on Exhibit 1.9, which of the following is listed in the text as a component of managing risk when assembling a
DISC: – AICPA: BB-Legal
1-3 Legally Astute Manager
Blooms: Comprehension
team in business development?
a.
Analyzing any covenants not to compete
b.
Purposefully refusing to address issues such as sexual harassment
c.
Informing employees that e-mail communications are not discoverable
d.
Ignoring whistleblower protection
42. The ____ approach to business and society introduced in the text is a descriptive framework that integrates legal and
societal considerations with mainstream theories of competitive advantage and social responsibility.
a.
Integrative
b.
Systems
c.
Proactive
d.
Economic
b
1
Moderate
United States – BUSPROG: – ANALYTIC
DISC: – AICPA: BB-Legal
Blooms: Comprehension
43. ________________ strategies for dealing with the interface between a firm’s business and the natural environment that
go beyond ___________ regulatory compliance have been associated with ________________.
a.
Proactive, environmental, sub-par financial performance.
b.
Legislative, environmental, improved financial performance.
c.
Proactive, environmental, improved financial performance.
d.
Defensive, environmental, peak financial performance.
44. According to the Systems Approach to Business and Society in Exhibit 1.1, the __________ is at the center of the
societal context.
a.
Competitive Environment
b.
Firm’s Resources
c.
Public Law
a
Challenging
United States – BUSPROG: – ANALYTIC
DISC: – AICPA: BB-Legal
1-3 Legally Astute Manager
Blooms: Keyword
d.
Top Management Team
45. Under the __________ view of the firm, resources can be a source of competitive advantage if they are __________.
a.
resource-based, rare
b.
systems-based, hard to copy
c.
resource-based, available to competitors
d.
systems-based, available to competitors
a
1
Moderate
United States – BUSPROG: – ANALYTIC
DISC: – AICPA: BB-Legal
1-1 Systems Approach to Business and Society
Blooms: Application
46. __________ is a type of relationship building lobbying that is prevalent in China.
a.
Xantu
b.
Olaying
c.
Guanxi
d.
Quinta
c
1
Easy
United States – AACSB: Diversity
DISC: – AICPA: BB-Legal
A Manager’s Dilemma
Blooms: Analysis
47. According to Exhibit 1.8, what is one of the ways U.S. law promotes public welfare.?
a.
Protecting fundamental rights
b.
Preventing deceptive practices
c.
Regulating terms and conditions of employment
d.
Allocating risks
a
1
Moderate
United States – BUSPROG: – ANALYTIC
DISC: – AICPA: BB-Legal
1-2 Law and Public Policy
d
1
Moderate
United States – BUSPROG: – ANALYTIC
DISC: – AICPA: BB-Legal
1-1 Systems Approach to Business and Society
Blooms: APplication
48. The European Union’s __________ rules are __________, so a former government official can begin exploiting his
connections __________.
a.
antitrust, strong, one day he after leaving office
b.
criminal, enforceable, one year after leaving office
c.
ethical, weak, one year after leaving office
d.
ethical, weak, the day he leaves office
d
1
United States – BUSPROG: – ANALYTIC
DISC: – AICPA: BB-Legal
Global View
Blooms: Application
49. Managers practicing __________ view the cost of compliance as a(n) __________.
a.
value-based compliance management, investment rather than an expense
b.
strategic compliance management, investment rather than an expense
c.
resource-based management, expense rather than an investment
d.
strategic-based risk management, investment rather than an expense
1
United States – BUSPROG: – ANALYTIC
DISC: – AICPA: BB-Legal
1-1 The Systems Approach to Business and Society
Blooms: Application
50. According to Exhibit 1.2, which of the following is NOT one of “Porter’s Five Forces” that affect the competitive
environment?
a.
Threat of Entry
b.
Direct Competition
c.
Logistics and Component Supply
d.
Buyer Power
1
United States – BUSPROG: – ANALYTIC
DISC: – AICPA: BB-Legal
1-1 Systems Approach to Business and Society
Blooms: Analysis
51. Which of the following was created by food advertisers in an attempt to halt government regulation aimed at stopping
marketing preying on children’s vulnerability?
a.
The Children’s Advertising Review Unit
Blooms: Knowledge
b.
The Minor’s Board Unit
c.
The Minor Protection Review Unit
d.
The Children’s Enhancement Board
Fact Pattern 1-1
Susan, the CEO of ABC Company, which was involved in the production and sale of hair care products, decided to hire
new employees to develop new product lines for a planned expansion into the dog shampoo arena. She was concerned,
however, that the employees specializing in canine products might leave at some point, taking company secrets with them
for use in competition with ABC. She, therefore, required that the employees sign contracts containing covenants not to
compete. Susan also consulted her in-house counsel, Sam, regarding the effect of some new regulations involving the use
of certain chemicals in shampoo and conditioner. Sam told her, however, to ignore the regulations until some type of
investigation of the company was started. Sam says that more than likely no one will ever check to see whether or not
ABC is in compliance. Susan disagrees with his advice and decides to seek other counsel.
52. Refer to Fact Pattern 1-1. The covenants not to compete involved which of the following types of law?
a.
Public
b.
Private
c.
Circumscribed
d.
Tangent
b
1
Challenging
United States – BUSPROG: – ANALYTIC
DISC: – AICPA: BB-Legal
1-1 Systems Approach to Business and Society
Blooms: Analysis
53. Refer to Fact Pattern 1-1. The use of covenants not to compete involves which of the following forces identified by
Michael Porter and referenced in the text?
a.
Supplier power
b.
Threat of entry
c.
Substitution
d.
Buyer power
c
Challenging
United States – BUSPROG: – ANALYTIC
DISC: – AICPA: BB-Legal
a
1
Moderate
United States – BUSPROG: – ANALYTIC
DISC: – AICPA: BB-Legal
Inside Story: Obesity Epidemic
Blooms: Application
54. Refer to Fact Pattern 1-1. The government regulations pertaining to the use of certain chemicals involved which of the
following types of law?
a.
Public
b.
Private
c.
Circumscribed
d.
Tangent
a
1
Moderate
United States – BUSPROG: – ANALYTIC
DISC: – AICPA: BB-Legal
1-1 Systems Approach to Business and Society
Blooms: Analysis
55. Refer to Fact Pattern 1-1. Assuming that Susan seeks to be a legally astute manager, which of the following is true
regarding the advice given by Sam to ignore the regulations pending an investigation?
a.
Sam is correct that it is unlikely that any investigation will ever occur and that the regulations may be safely
ignored.
b.
Sam is correct only if ABC has not had past investigations because if past investigations have occurred, it is
more likely that the company will be the target of future investigations.
c.
Sam is incorrect but only because safety regulations are concerned.
d.
Sam is incorrect because a legally astute manager will take a proactive approach to regulations.
d
1
Challenging
United States – BUSPROG: – ANALYTIC
DISC: – AICPA: BB-Legal
1-3 Legally Astute Manager
Blooms: Analysis
56. Molly, the CEO of a corporation owning a number of pet stores, calls you for advice. She tells you that she received
inside information that the stock of the company was going to go down because of reports that a number of dogs sold by
the store had become ill and that she, therefore, immediately sold all her stock in the company before the information
became public. She tells you that she has been advised that she is going to be charged with a securities violation involving
insider trading. Which of the following is true regarding her situation?
a.
Corporate executives may be fined but may not be sent to jail.
b.
Corporate executives may be sent to jail, but only for offenses endangering others.
c.
Corporate executives may be sent to jail, but only for fraud involving banks.
d.
Corporate executives may be sent to jail for violation of criminal laws.
1-1 Systems Approach to Business and Society
Blooms: Application
57. In CASE 1.1 Sorrell v. IMS Health Inc., drug manufacturers challenged as unconstitutional a Vermont statute
prohibiting pharmacies form selling prescriber-identifying information for marketing prescription drugs without the
consent of prescribers. The U.S. Supreme Court ruled that:
a.
although speech promoting marketing was not protected by the First Amendment, the law was unconstitutional
based on the due process clause.
b.
the statute regulated commercial speech which was evaluated under an “intermediate” standard and that the
law was, therefore, constitutional.
c.
the statute did not involve constitutional issues and was, therefore, a permissible type of regulation.
d.
the conduct prohibited by the law was protected by the First Amendment and that the law was
unconstitutional.
Challenging
United States – BUSPROG: – ANALYTIC
DISC: – AICPA: BB-Legal
1-2e Policy Conflicts
Blooms: Analysis
58. Under the resource-based view of a firm, when can a firm’s resources be a source of sustained competitive advantage?
When they are valuable, rare, and imperfectly imitable by competitors and have no
strategically equivalent substitutes.
Moderate
United States – BUSPROG: – ANALYTIC
DISC: – AICPA: BB-Legal
1-1 Systems Approach to Business and Society
Blooms: Comprehension
59. According to Exhibit 1.4, what are the four ways referenced in the text by which U.S. law promotes public welfare?
money, by protecting fundamental rights, and by protecting the environment.
Challenging
United States – BUSPROG: – ANALYTIC
DISC: – AICPA: BB-Legal
1-2 Law and Public Policy
Blooms: Comprehension
60. Assume that after paying a large fine, a company survives charges of illegal activity. In what ways does illegal
conduct put a company at a competitive disadvantage?
strategic investments, tarnishing the firm’s image with customers and other stakeholders,
raising capital costs, and reducing sales volume.
Challenging
1-1b Effect of Law on the Competitive Environment and the Firm’s Resources
Blooms: Analysis
61. Discuss ways in which laws and regulations promote economic growth.
1
Moderate
62. How does U.S. business law provide worker protection?
1
Moderate
63. Law is not just a static external force acting upon managers and their firms; rather law and organizations are
“endogenously coevolutionary.”
a.
True
b.
False
True
1
Moderate
1-1d Law is Dynamic
64. Legally astute management teams typically wait until later in the strategic development to bring counsel in and
evaluate legal considerations.
a.
True
b.
False
False
1
Moderate