Chapter 24b Common law judicial decisions that serve to protect the interests of consumers

Document Type
Test Prep
Book Title
The Legal Environment of Business: Text and Cases: Ethical-- Regulatory-- Global-- and Corporate Issues 8th Edition
Frank B. Cross, Roger LeRoy Miller
1. Common law judicial decisions that serve to protect the interests of
consumers are not classified as consumer law.
1. State laws often provide more sweeping and significant protections for
the consumer than federal laws.
1. Puffery constitutes deceptive advertising.
1. Bait-and-switch advertising occurs when an ad appears to be based on
factual evidence but in fact is not reasonably supported by evidence.
1. All adsboth online and offlinemust be truthful.
1. A sanction known as counteradvertising requires a company to focus its
marketing on point-of-sale displays.
1. Labels must be accurate.
1. Food labels are not required to provide standard nutrition facts.
1. Labels on vegetables and fruits are not required to indicate where the
food originated.
1. Credit provisions associated with sales contracts are not regulated by
any federal agency.
1. A consumer who receives unsolicited merchandise must return it within
three business days.
1. Merchants must issue a refund within a specified period of time when a
consumer cancels an order.
1. Credit can be denied solely on the basis of national origin.
1. A credit-card company is not required to provide advance notice to
consumers before changing credit-card terms.
1. Creditors are required to provide consumers with copies of records that
can help the consumer prove that an account or transaction is
1. A debt-collection agency is someone who regularly attempts to collect
debts on behalf of someone else, usually for a percentage of the
amount owed.
1. Debt collectors who use a prohibited debt-collection tactic are exempt
from liability if they can show that the debtor used misrepresentation in
assuming the debt.
1. Due to the increasing number of protections afforded debtors, creditors
are without means of securing payment on debts.
1. There is no distinction between regulating the information dispensed
about a product and regulating the actual content of the product.
1. Manufacturers are required to report on any products intended for
sale if the products have proved to be hazardous.
1. Through careless manufacturing practices, Insta-Market Company makes
and sells unsafe products to Jess and other consumers. This may be
subject to sanctions under
a. federal and state law.
b. federal law only.
c. no law, according to the principles of freedom to contract.
d. state law only.
1. Orange Company makes computers. The company’s ad states that “if
you aren’t eatin’ an Orange, you aren’t gettin’ any ‘C.’ The Federal
Trade Commission would consider this ad
a. false and misleading.
b. impermissibly vague and general.
c. a deceptive half-truth.
d. none of the choices.
1. Precise GPS Company’s ad states that its product is “the finest that
money can buy.” Because of this ad, the Federal Trade Commission is
most likely to issue
a. a cease-and-desist order.
b. a counteradvertising order.
c. a multiple product order.
d. none of the choices.
1. Cleaners & Solvents, Inc. (CSI), engages in deceptive advertising when
it markets its product Dirt Remover as able to kill germs over long
periods of time. In an action against CSI regarding Dirt Remover, the
firm is ordered to stop its false advertising of Dirt Remover and other
products. This is
a. a counteradvertising order.
b. a multiple product order.
c. a “cooling-off” law.
d. a validation notice.
1. GR8 Fashion, Inc., complains to the Federal Trade Commission (FTC)
about an ad broadcast by Hy-Time Clothes Company, GR8’s
competitor. The FTC investigates and concludes that the ad is
deceptive. The FTC’s next step is to
a. conduct negotiations between the competitors.
b. draft a formal complaint.
c. issue a cease-and-desist order.
d. permit GR8 to broadcast similarly deceptive counteradvertising.
1. Travel Tours Company faxes ads to Samantha and other individual
consumers without the recipients’ permission. This is subject to
a. a cease-and-desist order by the Federal Trade Commission.
b. no sanctions.
c. possible fines by the Federal Communications Commission.
d. rescission on the order of the Federal Reserve Board.
1. Like other manufacturers and sellers, Real-Built Tools Company
packages its products with labels. Under federal law, such labels must
a. accurate and use easily understood words.
b. bright and feature eye-catching colors.
c. graphically distinctive and well-designed.
d. interesting and revealing to the average consumer.
1. Ron signs a contract with Sam, a door-to-door salesperson for Tutors,
Inc., to buy a foreign-language course. To cancel the contract, Ron has
up to
a. three days.
b. thirty days.
c. sixty days.
d. ninety days.
1. Creditworthy Loan Company extends credit in the ordinary course of its
business. Under the Truth-in-Lending Act, which is the key federal
statute regulating the credit and credit-card industries, Creditworthy must
inform potential borrowers of
a. credit terms offered by other lenders.
b. comparative prices for goods to be bought with the borrowed
c. Creditworthy’s credit terms.
d. the borrowers’ credit scores.
1. Brad borrows $20,000 from City Bank to repair his home and to buy a
car. Brad buys a stereo from Discount Store in a transaction financed
by the seller. If these parties are subject to the Truth-in-Lending Act,
Regulation Z applies to
a. the car loan only.
b. the home repair loan only.
c. the retail installment sale only.
d. the car loan, the home repair loan, and the retail installment
1. Owen signs an installment contract with Pixel Video Store to finance
the purchase of a new Quotient-brand 3D HD-TV for $4,999. This
transaction is subject to
a. no federal law.
b. the Fair Credit Reporting Act.
c. the Telecommunications Act.
d. the Truth-in-Lending Act.
1. Eva borrows $10,000 from First National Bank to remodel a room in
her home. This transaction is subject to
a. the Consumer Leasing Act.
b. the Magnuson-Moss Warranty Act.
c. the Truth-in-Lending Act.
d. the Uniform Commercial Code.
1. Consumer Finance Corporation (CFC) extends credit to consumers.
CFC is subject to the Equal Credit Opportunity Act, which prohibits
credit discrimination based on
a. disability.
b. education.
c. income.
d. race.
1. Kirk receives an unsolicited credit card in the mail and tosses it on
his desk. Without Kirk’s permission, his roommate Leif uses the card to
buy a new personal computer for $1,000. Kirk is
a. liable for $1,000.
b. liable for $500.
c. liable for $50.
d. not liable for any amount.
1. In the ordinary course of business, EZ Funds Corporation offers credit
to Fay and other consumers and reports on the loans to credit
agencies. To save time and money, EZ generally does not correct or
update its reported information. This is most likely to result in
a. a levy of a nominal fine.
b. an assessment of damages.
c. an order of rescission of the loan contracts.
d. no sanctions.
1. Quik Collection Agency calls Pat several times a day, and sometimes
in the middle of the night, about an overdue bill that Regal Sporting
Goods turned over to Quik for collection. This is a violation of
a. no federal law.
b. the Fair and Accurate Credit Transactions Act.
c. the Fair Debt Collection Practices Act.
d. the Truth-in-Lending Act.
1. Furniture Depot sells Gail a bedroom suite on credit. Gail fails to make
the scheduled payments for six months. Furniture Depot sends her a
letter, asking for immediate payment. This is a violation of
a. no federal law.
b. the Fair and Accurate Credit Transactions Act.
c. the Fair Debt Collection Practices Act.
d. the Truth-in-Lending Act.
1. The credit department of Mega-Mart calls Nora at work about an
overdue bill. Nora’s employer objects. Mega-Mart continues to call Nora
at work. This is a violation of
a. no federal law.
b. the Fair and Accurate Credit Transactions Act.
c. the Fair Debt Collection Practices Act.
d. the Truth-in-Lending Act.
1. Corner Market sells groceries. Delite Food & Drug Store sells groceries
and fills prescriptions. The party with the chief responsibility to prevent
unsafe food and drugs from being sold is
a. Corner Market and Delite Food & Drug Store.
b. Delite Food & Drug Store only.
c. the Federal Trade Commission.
d. the Food and Drug Administration.
1. Dog ‘n Cat Company makes and sells pet supplies, including toys and
chew items. One of the chew items is believed to be hazardous. The
appropriate government agency may require Dog ‘n Cat to
a. export the item and sell it only abroad.
b. increase the price to cover the cost of any injuries or damage.
c. reduce the price to indicate the hazard to consumers.
d. remove the item from the market.
1. Power Up Corporation makes batteries for motor vehicles. The Federal
Trade Commission (FTC) learns that Quantum Automotive Stores, a
retail company that sells Power Up’s batteries, engages in deceptive
advertising practices. What actions can the FTC take against Quantum?
1. Mouth-Waterin’ Eats Company wants to sell its candy in a normal-sized
package labeled “Gigantic Size.” NuFabrics, Inc., wants to advertise its
sweaters as having “That Wool Feel,” but does not want to specify on labels
that the sweaters are 100 percent polyester. What stops these firms from
marketing their products as they would like?

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