The Legal Environment of Business and Online Commerce, 7e (Cheeseman)
Chapter 23 Consumer Protection
1) The U.S. Food and Drug Administration promotes the principle of caveat emptor in sale
transactions involving food and drugs.
2) The Consumer Product Safety Commission, created in 1972, has the authority to recall unsafe
toys.
3) The U.S. Department of Agriculture is the federal administrative agency that is primarily
responsible for regulating meat, poultry, and other food products.
4) The Consumer Product Safety Commission is the federal administrative agency empowered to
enforce the FDCA.
5) FDA approval is not mandatory for medical devices to be legally sold in the U.S.
6) A manufacturer can be held liable for deceptive labeling or packaging under the Health Care
Reform Act.
7) The NLEA applies to packaged foods and other foods regulated by the Food and Drug
Administration.
8) Sellers of raw fruits and vegetables can adopt a voluntary approach when it comes to labeling
requirements.
9) Section 4205 of the Patient Protection and Affordable Health Care Act of 2010 requires
restaurants and retail food establishments with 20 or more locations to disclose calorie counts of
their food items.
10) The Biosafety Protocol label is used to identify certain food products that have been
genetically modified.
11) The Drug Amendment to the FDCA gives the FDA broad powers to license new drugs in the
United States.
12) The FDA cannot withdraw approval of any previously licensed drug.
13) The FDA labels ordinary household soap as a cosmetic product.
14) The FDA cannot recall any cosmetics that contain unsubstantiated claims of preserving
youth or increasing virility from the market.
15) The FDA places a complete ban on the use of animal testing in the production of cosmetic
goods.
16) The FDA mandates a label of “NOT TESTED ON ANIMALS” on all cosmetic products.
17) The mislabeling of medicinal devices is prohibited under the Nutrition Labeling and
Education Act.
18) Kidney dialysis machines are scrutinized for attainment of quality standards under the Drug
Amendment to the FDCA.
19) The CPSC is an independent federal administrative agency empowered to regulate
potentially dangerous consumer products and issue product safety standards.
20) Under the Consumer Product Safety Act, a private party can sue for an injunction to prevent
violations of the act or of CPSC rules and regulations
21) If a model of a car has faulty airbag deployment, the Consumer Product Safety Commission
has the power to recall that model on receiving complaint.
22) Firearms represent an example of consumer products which do not come under the CPSC
rules.
23) The Family Smoking Prevention and Tobacco Control Act, which requires mandatory
warnings to be placed on cigarette packages, is enforced by the Health Care Reform Act.
24) The goal of the Health Reform Act is to increase the number of persons who have health care
insurance in the United States.
25) Under the Health Care Reform Act, persons who do not obtain health coverage will be
provided free health insurance by the government.
26) The Health Care Reform Act provides special subsidies to “Cadillac” health insurance
programs that provide health care benefits that cost above a certain level.
27) The Health Care Reform Act extends health care coverage to illegal immigrants.
28) The Health Care Reform Act prohibits insurers from establishing an annual spending cap for
benefit payments.
29) The FTC can sue in either the state or federal courts to obtain compensation on behalf of
consumers.
30) Proof of actual deception is required for an advertising to be considered false under Section 5
of the FTC.
31) Bait and switch is a type of deceptive advertising under Section 5 of the FTC Act.
32) In the bait and switch advertising model, the bait involves pressuring customers in a store
into buying unadvertised or more expensive products.
33) Sales made by door-to-door salespersons are not regulated by the FTC.
34) The consumer must send a required notice of cancellation to the seller of a door-to-door sales
contract within three days to rescind an order.
35) The Do-Not-Call Registry allows consumers to designate specific companies not to call
them.
36) The U.S. Supreme Court has deemed the Do-Not-Call Registry service as an unconstitutional
violation of commercial speech.
37) Regulation of mortgage lending comes under the purview of the Dodd-Frank Wall Street
Reform and Consumer Protection Act.
38) The Fair Credit Billing Act requires that creditors promptly acknowledge in writing
consumer billing complaints and investigate billing errors.
39) Casual leases between consumers are subject to the Consumer Leasing Act.
40) The Fair and Accurate Credit Transactions Act of 2003 permits credit reporting companies to
place fraud alerts in their credit files.
41) The Equal Credit Opportunity Act does not have provisions for consumers to recover
damages against the creditor.
42) ________ laws are federal and state statutes and regulations that promote product safety and
prohibit abusive, unfair, and deceptive business practices.
A) Profit-à-prendre
B) Canon
C) Consumer protection
D) Caveat emptor
43) The ________ is a federal administrative agency that is primarily responsible for regulating
the safety of meat, poultry, and other food products.
A) U.S. Department of Agriculture
B) Consumer Product Safety Commission
C) Food and Drug Administration
D) Federal Trade Commission
44) Jones & Hilton Co. owned a large cold storage warehouse where they stored and processed
meat and meat products. An insider revealed to the media that the cold storage failed to meet
numerous safety standards, encountered repeated rodent attacks, and sold potentially harmful and
infected meat in the market without notifying authorities. The ________ has the authority to
conduct inspections of the cold storage warehouse and initiate legal proceedings against the
owners for endangering the health of consumers.
A) Food and Drug Administration
B) Consumer Product Safety Commission
C) Federal Healthcare Commission
D) U.S. Department of Agriculture
45) In which of the following cases of consumer safety violations will the U.S. Department of
Agriculture be required to take action?
A) A new drug was released into the market without adequate testing and this lead to adverse
side effects among users.
B) A brand of soft toys for infants was produced with low grade foam and fabrics that are
harmful for children when ingested.
C) A batch of sausages and cold cuts from a particular vendor was found to have high levels of
salmonella and other pathogenic organisms.
D) A fleet of cars released into the market by famous company was found to have a defective
braking system which could prove fatal for owners.
46) The Food, Drug, and Cosmetic Act is a federal statute that ________.
A) covers all food products including poultry and processed meat
B) grants approval for food additives, drugs, cosmetics, and medicinal devices
C) implements the Federal Meat Inspection Act enacted in 1906
D) protects the public by providing greater medical coverage from food-related illnesses
47) Ajax, a pharmaceutical company, has designed a new medicine for morning sickness among
pregnant women. Testing at their R&D center showed the drug to be highly reliable. Ajax has to
approach a U.S. federal administrative agency called ________ for the drug to be deemed legal
for sale to the public.
A) Medicines and Healthcare products Regulatory Agency
B) Consumer Product Safety Commission
C) Federal Trade Commission
D) Food and Drug Administration
48) The Food and Drug Administration is empowered to ________.
A) recall unsafe toys, appliances, and other consumer products which are harmful to users
B) regulate the safety of meat, poultry, and other food products
C) prosecute violators directly by imposing fines and pronouncing sentences
D) obtain orders for the seizure, recall, and condemnation of harmful products
49) The ________ is a federal statute passed in 1990 that requires food manufacturers and
processors to provide nutrition information on many foods and prohibits them from making
scientifically unsubstantiated health claims.
A) Food, Drug, and Cosmetic Act
B) Health Care and Education Reconciliation Act
C) Nutrition Labeling and Education Act
D) Patient Protection and Affordable Care Act
50) The NLEA applies to packaged foods and other foods regulated by the ________.
A) U.S. Department of Agriculture
B) Consumer Product Safety Commission
C) Patient Protection and Affordable Care Act
D) Food and Drug Administration
51) Which of the following is true of the Nutrition Labeling and Education Act?
A) The NLEA is a state law and its implementation is not federally regulated.
B) The NLEA applies to packaged foods and other foods regulated by the Food and Drug
Administration.
C) The NLEA mandates compulsory labeling for all kinds of raw and processed food with any
exceptions.
D) The NLEA specifically eliminates the practice of providing point-of-purchase nutrition
information by sellers.
52) “Rapid Rise” is a health drink targeted at teenagers and advertised with the claim that regular
consumption of the drink over a two-month period leads to a four-inch rise in height. This claim
is not grounded in laboratory research and has not been seen in most of its users. This act of
making scientifically unsubstantiated health claims about one’s product is likely to be a violation
of the ________.
A) Health Care Reform Act
B) Nutrition Labeling and Education Act
C) Consumer Product Safety Act
D) Patient Protection and Affordable Care Act
53) If the food product is released with this new preservative, which of the following provisions
of the NLEA would help consumers identify the banned preservative prior to consumption?
A) condemnation of unfit food products
B) disclosure of information on food labels
C) inspection of the storage facilities
D) initiating legal proceedings against violators
54) The food product was released into the market with the banned preservative being one of the
ingredients. Which of the following agencies has the power to enact the statutes that govern such
a violation?
A) the Medicines and Healthcare products Regulatory Agency
B) the U.S. Department of Agriculture
C) the Federal Trade Commission
D) the Food and Drug Administration
55) The U.S. Department of Agriculture places mandatory and consistent labeling requirements
on ________.
A) ready-to-eat meals
B) raw fruits and vegetables
C) raw seafood
D) meat and poultry products
56) The ________ requires food manufacturers and processors to disclosure uniform information
about serving sizes and nutrients, and establishes standard definitions for the various terms like
“low fat,” “lean” or “organic” which are indiscriminately used by food processors.
A) Consumer Product Safety Act
B) Nutrition Labeling and Education Act
C) Patient Protection and Affordable Care Act
D) Health Care Reform Act
57) Section 4205 of the Patient Protection and Affordable Health Care Act requires restaurants
and retail food establishments with 20 or more locations to disclose calorie counts of their food
items and supply information on how many calories a healthy person should eat in a day. The
provisions of this legislation are enforced by the ________.
A) Federal Food and Drug Administration
B) United Nations
C) Federal Trade Commission
D) Consumer Product Safety Commission
58) Biosafety Protocol is a United Nations—sponsored protocol that requires signatory countries
to place the label ________ on all genetically engineered foods.
A) “Warning–unnatural food particles”
B) “May contain living modified organisms”
C) “FDA tested and approved food”
D) “WHO tested and approved food”
59) What is the importance of the Biosafety Protocol prescribed by the UN?
A) It dictates the terms and conditions for production of genetically modified food.
B) It prevents people from differentiating between normal and organic food.
C) It notifies people of the presence of genetically modified food in the market.
D) It assures people of the quality of the food by providing details of its testing process.
60) The ________ is a federal law that gives the FDA broad powers to license new drugs in the
United States.
A) Drug Amendment of the FDCA
B) Food Labeling and Education Act
C) Health Care Reform Act
D) Patient Protection and Affordable Health Care Act
61) Which of the following is true of the FDA’s role in the introduction of a new drug in the
market?
A) The FDA bases its approval of a new drug on the rule of caveat emptor.
B) The FDA limits itself to providing relevant suggestions to improve the drug.
C) The FDA possesses the power to implement a complete ban on a questionable drug.
D) The FDA prosecutes producers of questionable medicines directly by the powers vested in it
by the U.S. Department of Justice.
62) The new line of fairness-enhancing products marketed by Radiance has allegedly been
developed after using large-scale animal testing procedures. Insiders revealed that the high levels
of lead present in the cosmetics have proven to be fatal for many of the animals used in the
laboratories. Radiance is likely to be inspected for suspected criminal violations of the
________.
A) Food, Drug, and Cosmetic Act
B) Consumer Product Safety Act
C) Health Care Reform Act
D) Federal Trade Commission Act
63) In which of the following ways does the FDA regulate cosmetics?
A) by adding warnings for potential carcinogens
B) by regulating the sale of cosmetics through exclusive FDA-approved stores
C) by placing a complete ban on animal testing in the cosmetic industry
D) by autonomously undertaking criminal proceedings against nonconforming cosmetic
companies
64) Which of the following statements is true with regard to the FDA?
A) It places a complete ban on animal testing.
B) It allows animal testing for only certain kinds of cosmetics like household soaps.
C) It provides tax exemptions to companies that avoid animal testing.
D) It recommends animal testing only if it increases product safety.
65) Which of the following is true with regard to FDA regulations for cosmetics?
A) There is no law in the United States against animal testing for cosmetics.
B) All substances and preparations for cosmetic use are chemically proven to be free from
carcinogens before sale by the FDA.
C) Ordinary household soap is also evaluated in terms of its quality and safety as a cosmetic
good under the FDA.
D) New cosmetics are released in the market only if they have the “CRUELTY-FREE” label on
their package.