1. In general, consumer protection law at the state level is more stringent than federal law.
a.
True
b.
False
2. Executive branch regulatory agencies are located in cabinet departments.
a.
True
b.
False
True
1
Easy
17-1 Commissions and Agencies
3. In 2014, the FDA proposed a rule that would extend its authority to e-cigarettes.
a.
True
b.
False
False
1
Moderate
17–3e Tobacco and E-Cigarettes
4. The U.S. Department of Agriculture inspects facilities engaged in egg production.
a.
True
b.
False
True
1
Moderate
5. In the Thompson v. W. States Medical Center case referenced in the text, the U.S. Supreme Court ruled that
True
1
Moderate
17–9b Other Sales Practices
compounded drugs are illegal.
a.
True
b.
False
6. The labeling of medical devices is under the jurisdiction of the Food and Drug Administration.
a.
True
b.
False
True
1
Moderate
17–3b FDA Approval of Medical Devices
7. State laws regulating genetically modified food are typically declared unconstitutional on the basis that they are
preempted by federal law.
a.
True
b.
False
False
1
Moderate
17-2 Food Safety and Labeling
8. The Wool Products Labeling Act is an example of a federal law regulating the labeling of clothing.
a.
True
b.
False
True
1
Moderate
9. The Federal Commerce Commission has adopted guidelines specifying when manufacturers and marketers can label
False
1
Moderate
17–3a FDA Standards for Drug Approval
their products “Made in USA.”
a.
True
b.
False
10. Courts usually consider advertisements to be only an offer to deal.
a.
True
b.
False
True
1
Challenging
17–9a Deceptive Advertising and Warranties
11. Congress has made it a federal crime to engage in the extortionate extension of credit.
a.
True
b.
False
1
Moderate
17–11e Extortionate Credit Transactions
12. If a used car is sold without a warranty, the label must state that the car is being sold “as is.”
a.
True
b.
False
True
1
17–9b Other Sales Practices
17–9b Other Sales Practices
13. State may regulate odometer tampering, but there is no federal law that does so.
a.
True
b.
False
False
1
Easy
14. The Truth-in-Lending Act (TILA) is intended to assure a truthful loan application by the consumer.
a.
True
b.
False
False
1
Moderate
17–11c Truth in Lending Act
15. In CASE 17.1 Federal Communications Commission v. Fox Television Stations, Inc. (2012), the U.S. Supreme Court
held that the FCC had given adequate notice to broadcasters required by the Fifth Amendment concerning fleeting
expletives and brief nudity.
a.
True
b.
False
False
1
Challenging
17–5a Broadasting
16. The Fair Credit Reporting Act does not give consumers a right to have corrected copies of their credit reports sent to
creditors.
a.
True
b.
False
False
1
Moderate
17-11g Fair Credit Reporting Act
17. Under the Electronic Funds Transfer Act, credit card companies such as VISA are liable for the first $100 charged to a
customer’s account without her knowledge.
a.
True
False
1
Moderate
17–9b Other Sales Practices
b.
False
18. Generic drugs can be approved for use on a showing that they are identical to approved brand-name drugs.
a.
True
b.
False
19. The Fair Debt Collection Practices Act applies only to third-party debt collectors.
a.
True
b.
False
True
1
Moderate
17-11g Fair Credit Reporting Act
Blooms:Comprehension
20. Unsolicited merchandise sent by U.S. mail may be kept by the recipient without incurring any obligation to the sender.
a.
True
b.
False
True
1
Moderate
17–9b Other Sales Practices
21. Under the Magnuson-Moss Warranty Act, a seller who offers a written warranty on goods must provide a full
warranty.
a.
True
b.
False
False
1
Moderate
17–11j Electronic Fund Transfer Act: Debit Cards and Preauthorized Fund Transfers
22. A car loan is an example of a closed-end credit transaction.
a.
True
b.
False
True
1
Challenging
United States – BUSBROG: – Analytic
DISC: – AICPA: BB-Legal
17–9a Deceptive Advertising and Warranties
Blooms: Comprehension
23. The Truth-in-Lending Act limits credit card liability to $50 per card for unauthorized charges made before a card
issuer is notified of a lost or stolen card.
a.
True
b.
False
True
Challenging
United States – BUSPROG: – ANALYTIC
DISC: – AICPA: BB-Legal
17–11c Truth in Lending Act
Blooms: Comprehension
24. The Federal Trade Commission has _____ commissioners who serve for _____-year terms.
a.
seven; four
b.
ten; five
c.
six; six
d.
five; seven
d
1
Easy
United States – BUSBROG: – Analytic
DISC: – AICPA: BB-Legal
17-1 Commissions and Agencies
Blooms: Knowledge
25. Before implementing a mandatory safety standard, the Consumer Product Safety Commission must find that
__________ are inadequate.
False
1
Moderate
United States – BUSBROG: – Analytic
DISC: – AICPA: BB-Legal
17–9a Deceptive Advertising and Warranties
Blooms: Comprehension
a.
voluntary standards
b.
safety guidelines
c.
product designs
d.
warnings
26. The Food and Drug Administration shares with the __________ the responsibility for regulating pesticide residues on
food.
a.
Department of Agriculture
b.
Department of Insecticide
c.
Federal Trade Commission
d.
Environmental Protection Agency
d
1
Moderate
United States – BUSBROG: – Analytic
DISC: – AICPA: BB-Legal
17–2d Pesticides and Human-Made Bugs
Blooms: comprehension
27. Caveat emptor means:
a.
“let the buyer beware.”
b.
“let the buyer prevail.”
c.
“let the market decide.”
d.
“let the seller beware.”
a
1
Moderate
United States – BUSBROG: – Analytic
DISC: – AICPA: BB-Legal
Introduction
Blooms: Knowledge
28. Caveat venditor means:
a.
“let the buyer beware.”
b.
“le the buyer prevail.”
c.
“let the market decide.”
d.
“let the seller beware.”
d
1
a
1
Moderate
United States – BUSBROG: – Analytic
DISC: – AICPA: BB-Legal
17-6 The Consumer Product Safety Commission
Blooms: Comprehension
29. In relation to food, which of the following is considered an additive?
a.
Pesticide residue
b.
Unintended environmental contaminants
c.
Substances unavoidably added from packaging
d.
Pesticide residue, unintended environmental contaminants, and substances unavoidably added from packaging
d
1
United States – BUSBROG: – Analytic
DISC: – AICPA: BB-Legal
17–2b FDA Standards for Food Condemnation
Blooms: Comprehension
30. Which of the following is true regarding the 2011 Food Safety Modernization Act?
a.
It developed an electronic tracking system to follow food from the farm to the dinner table.
b.
It is one of several major overhauls of the FDA in the last several years.
c.
It recognizes that importers are not required to verify food safety in regard to food from other countries.
d.
It is one of several major overhauls of the FDA in the last several years, and it recognizes that importers are
not required to verify food safety in regard to food from other countries.
1
United States – BUSBROG: – Analytic
DISC: – AICPA: BB-Legal
17–2b FDA Standards for Food Condemnation
Blooms: Comprehension
31. Which of the following categories of drugs cannot be approved by the Food and Drug Administration?
a.
Schedule 1
b.
Schedule C
c.
Schedule 2
d.
Schedule D
United States – BUSBROG: – Analytic
DISC: – AICPA: BB-Legal
Blooms: Knowledge
32. The __________ has the primary responsibility for regulating the packaging and labeling of commodities other than
food, drugs, medical devices, and cosmetics.
a.
Federal Commerce Commission
b.
Federal Interstate Regulating Commission
c.
Federal Trade Commission
d.
Uniform Commodity Commission
33. Which of the following is true regarding bioengineered insects and pathogens?
a.
They are outlawed.
b.
The Environmental Protection agency issues permits for bioengineered insects but bioengineered pathogens
are outlawed.
c.
The Environmental Protection agency issues permits for bioengineered pathogens but bioengineered insects
are outlawed.
d.
The Environmental Protection Agency issues permits for the use of bioengineered insects and pathogens.
d
1
United States – BUSBROG: – Analytic
DISC: – AICPA: BB-Legal
17–2e Genetically Modified Food Crops
Blooms: Comprehension
34. In the Monsanto Co. v. Geertson Seed Farms case discussed in the text, plaintiff-farmers sought a court order
declaring that Monsanto was negligent in manufacturing Roundup Ready Alfalfa (RRA), an alfalfa plant genetically
engineered to be tolerant of the active ingredient in Roundup. On appeal, how did the court rule?
a.
That the plaintiffs lacked standing to sue and that the case was subject to dismissal on that ground alone.
b.
That the district court properly issued a permanent injunction prohibiting the deregulation of RRA in whole or
in part.
c.
That the plaintiffs had standing but that the district court improperly issued an injunction prohibiting any
deregulation whatsoever of RRA.
d.
That the plaintiffs lacked standing and that the district court properly issued a permanent injunction
prohibiting the deregulation of RRA in whole or in part.
1
United States – BUSBROG: – Analytic
35. In a __________, the seller offers the buyer a commission, rebate, or discount for furnishing the seller with a list of
additional prospective customers.
a.
pyramid sale
b.
referral sale
c.
commission sale
1
United States – BUSBROG: – Analytic
DISC: – AICPA: BB-Legal
17–3a FDA Standards for Drug Approval
Blooms: Comprehension
d.
rebate sale
36. Under the FTC’s __________, “all or virtually all” of the product must be made in the fifty states, the District
of Columbia, or the U.S. territories and possessions.
a.
Made in USA policy
b.
Made within USA policy
c.
Wood Products Labeling Act
d.
Labeling Preemption Act
a
1
Easy
United States – BUSPROG: – ANALYTIC
DISC: – AICPA: BB-Legal
17–4c “Made in USA”
Blooms: Comprehension
37. Which of the following is true regarding the use of genetically modified foods internationally?
a.
The European Parliament refused to approve legislation requiring the labeling of genetically modified foods.
b.
Australia requires the labeling of genetically modified food, but New Zealand does not.
c.
New Zealand requires the labeling of genetically modified food, but Australia does not.
d.
The European Parliament required the labeling of genetically modified foods, and Australia and New Zealand
also require the labeling of genetically modified foods.
d
1
Moderate
United States – AACSB: Diversity
DISC: – AICPA: BB-Legal
International Spotlight
Blooms: Comprehension
38. The Truth-in-Lending Act provides consumers a right of __________ whenever their home is used as collateral for
credit except for original construction or acquisition.
a.
rescission
b.
redemption
c.
new mortgage
d.
refinance
a
1
Challenging
b
1
Moderate
United States – BUSBROG: – Analytic
DISC: – AICPA: BB-Legal
17–9b Other Sales Practices
Blooms: Comprehension
39. The Equal Credit Opportunity Act originally intended to prevent discrimination against __________ in the
advancement of credit.
a.
religion
b.
age
c.
women
d.
color
c
1
Moderate
United States – BUSBROG: – Analytic
DISC – AICPA: BB-Legal
17-11h Equal Credit Opportunity Act
Blooms: Comprehension
40. The Consumer Credit Protection Act limits the garnishment of wages to the lesser of _____ of the debtor’s disposable
earnings for the week or the amount by which disposable earnings for the week exceed _____ times the current federal
minimum hourly wage.
a.
10%; 30
b.
25%; 30
c.
30%; 25
d.
35%; 40
b
1
Moderate
United States – BUSBROG: – Analytic
DISC: – AICPA: BB-Legal
Exhibit 17.2
Blooms: Comprehension
41. Which of the following is true regarding the use of irradiated foods in the U.S.?
a.
Irradiated foods are outlawed.
b.
Irradiation is allowed only for fruits and vegetables, and no notice is required.
c.
Irradiation is allowed for fresh and frozen red meat, and no notice is required.
d.
Irradiation is allowed for fresh and frozen red meat, but notice must be required.
d
1
Moderate
United States – BUSBROG: – Analytic
DISC: – AICPA: BB-Legal
17–2g Irradiated Foods
United States – BUSBROG: – Analytic
DISC: – AICPA: BB-Legal
17–11c Truth in Lending Act
Blooms: Comprehension
42. Which of the following is true regarding USDA standards for organic food?
a.
Neither pesticides, genetic engineering, growth hormones, nor irradiation may be used.
b.
Pesticides may be used, but genetic engineering and the use of growth hormones is disallowed.
c.
Pesticides and irradiation may not be used, but genetic engineering and the use of growth hormones is
allowed.
d.
The USDA has no standards for organic food.
1
United States – BUSBROG: – Analytic
DISC: – AICPA: BB-Legal
17–2h Organic Foods
Blooms: Comprehension
43. Which of the following is true regarding the labeling of food imported into the U.S.?
a.
Labeling of food imports is not required on the part of grocery stores or restaurants.
b.
All grocery stores must label certain products, including unprocessed beef and pork, with the country of
origin; but restaurants are exempt.
c.
Grocery stores and restaurants, with no exceptions, must inform customers of the country of origin of certain
products including beef and pork.
d.
Grocery stores must label certain products, including unprocessed beef and pork, with the country of origin;
but restaurants and some retail grocery stores with sales under a certain amount are exempt.
d
1
United States – BUSBROG: – Analytic
DISC: – AICPA: BB-Legal
International Snapshot
Blooms: Comprehension
44. The FTC now requires used car sellers to affix a __________ to the cars that they sell.
a.
fixed price
b.
buyer’s guide
c.
base price
d.
discount price
b
1
United States – BUSBROG: – Analytic
DISC – AICPA: BB-Legal
17–9b Other Sales Practices
Blooms: Comprehension
45. The __________ has primary responsibility for regulating the labeling of food
a.
Federal Trade Commission
Blooms: comprehension
b.
Food and Drug Administration
c.
The Consumer Product Safety Commission
d.
The Federal Trade Commission
46. The first step in the FDA approval process for new drugs is their classification by the __________ based on currently
accepted medical use and potential for abuse.
a.
National Institute of Health
b.
The Consumer Product Safety Commission
c.
Drug Enforcement Administration
d.
Congress
47. In CASE 17.2 Stokely-Van Camp, Inc. v. Coca-Cola Co. (2009), the court analyzed whether a(n) __________ for a
sports drink marketed by Coca-Cola constituted a(n) __________ in violation of the __________.
a.
advertisement, false and misleading advertising, Federal Trade Commission Act
b.
trade Secret, theft of intellectual property, Lanham Act
c.
advertisement, false and misleading advertising, Lanham Act
d.
formula, theft of intellectual property, Trade Secret Espionage Act
c
1
Challenging
United States – BUSPROG: – ANALYTIC
DISC: – AICPA: BB-Legal
17-9 Unfairness, Deception, and Fraud
Blooms: Analysis
48. Which of the following is true regarding the placement of health claims for foods on labels?
a.
The FDA permits health food claims on labels without FDA approval as a new drug or the risk of sanctions for
issuing a misbranded product, as long as the claim has been certified by the FDA as being supported by
significant scientific agreement.
b.
The FDA disallows health food claims on labels unless the food has been approved by the FDA as a type of
new drug for the health concern involved.
c.
The FDA allows health food claims on labels so long as the claim has not been certified by the FDA as false
and misleading.
b
1
Moderate
United States – BUSBROG: – Analytic
DISC: – AICPA: BB-Legal
17–2j Other Food Labeling Requirements
Blooms: Comprehension
d.
The FDA allows health food claims on labels without prior approval of the FDA only for organically grown
foods.
49. In general, when will the FDA require prescription use of a drug?
a.
If the drug is toxic, requires a physician‘s supervision for safe use, or is addictive.
b.
Only if the drug is toxic.
c.
Only if the drug is either toxic or requires a physician’s supervision for safe use.
d.
Only if the drug is addictive or requires a physician’s supervision for safe use.
50. Which of the following is true regarding FDA approval of drug labels in relation to state law claims for failure to
warn?
a.
FDA approval of the label on a brand-name prescription drug does not preempt state failure-to-warn claims
arising out of injuries caused by the drug nor does FDA approval of the label preempt state failure-to-warn
claims related to approved generic drugs bearing the FDA-mandated label.
b.
FDA approval of the label on a brand-name prescription drug preempts state failure-to–warn claims arising out
of injuries caused by the drug, and federal law also preempts state failure-to-warn claims related to approved
generic drugs as long as they bear the FDA-mandated label.
c.
FDA approval of the label on a brand-name prescription drug preempts state failure-to–warn claims arising out
of injuries caused by the drug, but federal law does not preempt state failure-to-warn claims related to
approved generic drugs bearing the FDA-mandated label.
d.
FDA approval of the label on a brand-name prescription drug does not preempt state failure-to-warn claims
arising out of injuries caused by the drug, but federal law preempts state failure-to-warn claims related to
approved generic drugs as long as they bear the FDA-mandated label.
d
1
Challenging
United States – BUSBROG: – Analytic
DISC: – AICPA: BB-Legal
17-3 Drugs and Medical Devices
Blooms: Comprehension
51. The __________ controls the disclosure of credit terms so that the consumer will be able to compare more readily the
various credit terms available and avoid the uninformed use of credit.
a.
Fair Credit Billing Act
a
1
Moderate
United States – BUSBROG: – Analytic
17-2 Food Safety and Labeling
Blooms: Comprehension
b.
Equal Credit Opportunity Act
c.
Fair Credit Reporting Act
d.
Truth-in-Lending Act
52. __________ is the legal procedure by which a creditor may collect a debt by attaching a portion of a debtor’s weekly
wages.
a.
Rescission
b.
Garnishment
c.
Joinder
d.
Attachment
b
1
Moderate
United States – BUSBROG: – Analytic
DISC: – AICPA: BB-Legal
17–11f Restrictions on Garnishment
Blooms: Comprehension
53. In 2014, the __________ announced it considered __________ a __________ virtual currency.
a.
Wall Street Protection Group, ETF funds, non-negotiable
b.
Consumer Financial Protection Bureau, Bitcoin, convertible
c.
Internal Revenue Service, Bitcoin, convertible
d.
Internal Revenue Service, Gold, non-negotiable
c
1
Moderate
United States – BUSPROG: – ANALYTIC
DISC: – AICPA: BB-Legal
17–12 Regulation of Virtual Currencies
Blooms: Application
54. Which of the following is true regarding environmental standards in the European Union?
a.
America is increasingly replacing the European Union as the leader in environmental development.
b.
European Union policy requires significant producer accountability, placing the burden of environmental
responsibility on the manufacturer.
c.
American firms are not required to conform to European Union product rules in order to sell their products in
Europe.
d.
The European Union applies the prevention principle by which uncertainty is a reason to forego environmental
protections.
d
1
Moderate
United States – BUSBROG: – Analytic
DISC: – AICPA: BB-Legal
17–11c Truth in Lending Act
Blooms: Comprehension
55. Bobby develops a way to clone catfish. He finds that this is a very economical way to run his fish business. He begins
selling the catfish to grocers in the area. Other fish producers, who do not know how to clone the fish, are very annoyed
with Bobby and start to complain. They tell Bobby that he is violating federal law by not placing a label on his fish
notifying consumes that the fish are cloned. Is Bobby in violation of the law?
a.
Bobby is not in violation of federal law, but he should check to see if his state has such a requirement because
labeling legislation has been introduce in some states.
b.
Bobby is not in violation of federal law nor have any states made any effort to require notification of cloned
products.
c.
Bobby is in violation of federal law by not notifying consumers through labeling of the cloning.
d.
Bobby is in violation of federal law by not notifying consumers through labeling of the cloning only if there is
evidence that the nutritional value of the fish is less than that of noncloned fish.
a
1
Moderate
United States – BUSBROG: – Analytic
DISC: – AICPA: BB-Legal
17–2f Cloned Meat and Milk
Blooms: Comprehension
56. Which of the following are protected categories under the Equal Credit Opportunity Act?
a.
Gender, race, color, religion, and national origin
b.
Gender, race, color, religion, national origin, and age
c.
Gender, marital status, race, color, religion, national origin, and age
d.
Gender, marital status, race, color, religion, national origin, age, and residents of disadvantaged neighborhoods
c
1
Moderate
United States – BUSBROG: – Analytic
DISC: – AICPA: BB-Legal
17-11h Equal Credit Opportunity Act
Blooms: Comprehension
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.
b
1
Challenging
United States – AACSB: Diversity
DISC: – AICPA: BB-Legal
Global View: International Product Safety and the Precautionary Principle
Blooms: Comprehension
57. Refer to Fact Pattern 17–1. Which of the following is the appropriate term for Dr. Glover’s prescribing of Cream X for
the elimination of wrinkles and cellulite?
a.
Compounding use
b.
Non-acknowledged use
c.
Derivative use
d.
Off-label use
58. 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.
Fact Pattern 17-2
Janie is a pharmacist in Small City. At the direction of several physicians in Small City, she begins mixing up a treatment
for indigestion that is prescribed by the physicians. She advertises the mixture, and she and prescribing physicians see a
large increase in business. Other pharmacists who do not want to bother with mixing begin to complain. Janie takes the
position that it is a free country, and she can do as she pleases since there is no evidence that the mixture is harmful; and it
is particularly helpful for those individuals who have had reactions to other indigestion medication.
59. Refer to Fact Pattern 17–2. Which of the following is the term that best describes the process Janie uses in preparing
the drug?
a.
Combining
b.
Compounding
c.
Integrating
d.
Servicing
d
1
Moderate
United States – BUSBROG: – Analytic
DISC: – AICPA: BB-Legal
17–3a FDA Standards for Drug Approval
Blooms: Comprehension
60. Refer to Fact Pattern 17–2. Is it legal for her to advertise the product?
a.
No.
b.
Only if it has been approved by the Food and Drug Administration.
c.
Only if it is sold for under $50.
d.
Yes.
61. Set forth the four main provisions of the CAN-SPAM Act.
the subject line.
1
Challenging
United States – BUSBROG: – Analytic
DISC: – AICPA: BB-Legal
17-8 Protecting Privacy and Canning Spam
Blooms: Comprehension
62. Discuss the purpose of the purpose of the Consumer Product Safety Commission and the process by which it sets
mandatory safety standards. Discuss fully.
standard is subject to notice and comment by interested persons.
Moderate
United States – BUSBROG: – Analytic
DISC: – AICPA: BB-Legal
17–3a FDA Standards for Drug Approval
Blooms: Comprehension
63. What is the purpose of the Truth-in-Lending Act? What does it provide regarding the liability of credit cardholders for
unauthorized charges when a card is lost or stolen?
64. Drug Company X has a prescription drug that will make people look younger and lose weight. The problem is that it
causes significant stomach problems. Ann, an executive of Drug Company X, wants to advertise the drug’s benefits on
television and radio but leave out the stomach problems. Her secretary, Bob, tells her that she could run into problems,
and that he is not sure the drug can even be advertised. Ann disagrees stating that it is up to physicians to warn patients of
possible complications. She tells Bob that she will not provide any information regarding contacting Company X so that
no one at Company X will be annoyed by receiving numerous inquiries about obtaining the drug’s benefits. What would
an FDA representative likely say in regard to Ann’s plan? Set forth your response in detail.
65. Set forth the definitions used for determining whether an item is a food or a drug for purposes of FDA categorization.
66. When does an advertiser violate the Federal Trade Commission bait and switch advertising rules?