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Chapter 43
Administrative Agencies
N.B.: TYPE indicates that a question is new, modified, or unchanged, as follows.
N A question new to this edition of the Test Bank.
+ A question modified from the previous edition of the Test Bank.
= A question included in the previous edition of the Test Bank.
TRUE/FALSE QUESTIONS
B1. Like statutory law, administrative law is created by legislatures.
B2. Administrative agencies at various levels of government work together and
share the responsibility of enforcing particular regulations.
B3. Business has little incentive to try to influence the regulatory environment
through lobbying.
B4. Federal administrative agencies can exercise only those powers that a state
legislature has delegated to them in enabling legislation.
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B5. Legislative rules simply declare policy and do not affect legal rights or
obligations.
B6. A party seeking court review of an administrative action must first exhaust all of
his or her administrative remedies before seeking court review.
B7. An administrative rule may be arbitrary and capricious if the agency failed to
provide a rational explanation for its decision.
B8. All federal agencies must follow specific procedural requirements when fulfilling
their basic functions.
B9. Unlike statutes, administrative regulations do not have a binding effect.
B10. Anyone can submit comments on a proposed administrative rule.
B11. When the meaning of a statute’s language is unclear and an agency interprets
it, a court need not follow the interpretation even if it is reasonable.
B12. A party can be directly prosecuted for violating an administrative agency’s
interpretive rule or guidance document.
CHAPTER 43: ADMINISTRATIVE AGENCIES 3
B13. Few agency rules require considerable compliance reporting from regulated
entities.
B14. If a business firm refuses to comply with an agency’s request to inspect
facilities or business records, the agency must defer to the refusal.
B15. Warrants are required to conduct administrative searches in all highly regulated
industries.
B16. Administrative agencies generally have no discretion over the type of hearing
procedures that they use.
B17. There are no significant differences between a trial and an administrative
hearing.
B18. All federal government agencies must make their records available
electronically on the Internet and in other electronic formats.
B19. A federal administrative agency must alert small businesses—through
advertising in trade journals, for example—about forthcoming regulations.
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B20. Federal agencies must consider ways to reduce the economic impact of new
regulations on small businesses.
MULTIPLE CHOICE QUESTIONS
B1. Therapeutic Pharmaceutical Company is subject to regulations issued by the
Food and Drug Administration, which is a federal agency. These regulations
are part of the body of
a. administrative law.
b. legislative law.
c. executive law.
d. statutory law.
B2. State and federal transportation agencies may issue regulations that conflict.
When a state regulation conflicts with a federal regulation
a. the federal regulation takes precedence.
b. the state regulation takes precedence.
c. the regulations are mutually void.
d. the regulations are of equal effect.
ANSWER: A PAGE: 842 TYPE: N
B3. Information Security Inc. pays income and other taxes collected by the Internal
Revenue Service (IRS). Like other federal administrative agencies, the IRS
was created by
a. Congress, through enabling legislation.
b. the courts, through the adjudicatory process.
c. the U.S. Constitution, in Article I, Section 8.
d. the president, through an executive order.
CHAPTER 43: ADMINISTRATIVE AGENCIES 5
B4. Persons who favor the creation of a federal biotech agency to regulate the
production of genetically modified agricultural and animal products should con-
centrate their lobbying efforts on
a. Congress.
b. federal administrative agencies that oversee such products.
c. the United States Supreme Court.
d. the president of the United States.
B5. Congress enables the Environmental Protection Agency to regulate air and
water pollution. This congressional act is
a. divine right.
b. a delegation of legislative power.
c. a gap-filling power.
d. arbitrary and capricious.
B6. Maxi Retail Corporation is subject to a decision by the National Labor Relations
Board. Maxi Retail appeals the decision, arguing that it is arbitrary and
capricious. This could mean that the decision
a. followed a consideration of legally appropriate factors.
b. justifiably changed the agency’s prior policy.
c. was accompanied by a rational explanation.
d. was plainly contrary to the evidence.
B7. Grid Tools & Hardware Company is subject to a decision by the Consumer
Product Safety Commission. Opposed to the decision, Grid Tools wants a court
to review it. First, however, the firm must use all of the potential administrative
remedies. This is
a. an actual controversy at issue.
b. standing to sue.
c. the exhaustion doctrine.
d. the ripeness doctrine.
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B8. The functions of the National Transportation Safety Board, like those of other
federal administrative agencies, include
a. adjudication.
c. declaration.
b. enunciation.
d. pronunciation.
B9. The Securities and Exchange Commission decides to create a new rule
relating to the dissemination of material nonpublic information through
corporate Web sites. This process begins with
a. an on-site inspection.
b. the filing of a complaint against a charged party.
c. the publication of a notice of proposed rulemaking.
d. the solicitation of public comments.
B10. To notify the public of a proposed rule, the U.S. Office of Labor-Management
Standards, like other federal agencies, publishes the proposal in
a. the Administrative Procedure Act.
b. the Code of Federal Regulations.
c. the Federal Register.
d. the United States Code.
B11. In reviewing the actions of the U.S. Bureau of Land Management and other
federal agencies, the courts
a. are usually reluctant to review questions of fact.
b. rarely defer to the technical expertise of administrative agencies.
c. often rule on the merits of policy determinations.
d. never defer to an agency’s interpretation of law.
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B12. The U.S. Patent and Trademark Office (USPTO) wants to review certain
records of Omni App Corporation. The USPTO can legitimately gain access to
the records through
a. agency coercion.
b. infiltrating Omni App’s computers without the firm’s knowledge.
c. public comment.
d. Omni App’s voluntary compliance.
B13. Armando is a witness in a controversy involving the U.S. Bureau of Tobacco
and Firearms. Armando can be compelled to appear before an administrative
law judge if he is served with
a. an order for specific performance.
b. an executive order.
c. a subpoena.
d. a search warrant.
B14. The U.S. Food Safety and Inspection Service conducts searches of certain
businesses. This agency and other administrative agencies can conduct
warrantless searches in
a. all industries.
b. highly regulated industries.
c. no industries.
d. newly regulated industries only.
B15. The U.S. Fish and Wildlife Service discovers that Grosse Farm Fisheries, Inc.
has violated a federal regulation. If no negotiated settlement can be reached,
the agency will most likely
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a. issue a formal complaint against Grosse Farm.
b. do nothing.
c. file a petition with the U.S. Supreme Court.
d. impose immediate sanctions on Grosse Farm.
B16. The Occupational Safety and Health Administration (OSHA) discovers that
Petro Refinery, Inc., is violating an OSHAS regulation. If this situation is
resolved like most such disputes, the outcome will be
a. a negotiated settlement.
b. a trial and a fine.
c. a trial and an appeal to a higher authority.
d. a trial and the dissolution of the business.
B17. Personnel Employment, Inc., has been ordered to appear at a hearing before
an administrative law judge of the Social Security Administration. A significant
difference between a trial and an administrative hearing is that
a. attorneys are not allowed to attend administrative hearings.
b. clients are not allowed to communicate with their attorneys during
administrative hearings.
c. hearsay can be introduced as evidence in an administrative hearing.
d. the burden of proof is on the charged party to prove innocence.
B18. The U.S. Small Business Administration issues a new regulation that will have
a significant impact on a substantial number of small businesses. Under the
Regulatory Flexibility Act, the agency must do all of the following except
a. measure the cost that the rule will impose on small businesses.
b. consider less burdensome alternatives.
c. conduct a regulatory flexibility analysis.
d. adjust the rule to the satisfaction of the regulated businesses.
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B19. A failure of the U.S. Drug Enforcement Administration to comply with a request
under the Freedom of Information Act (FOIA) may be challenged in
a. a federal district court.
b. a hearing before the U.S. Freedom of Information Agency.
c. a meeting with Congress’s FOIA subcommittee.
d. a special conference with the president of the United States.
B20. Closed meetings of the National Security Agency and other federal
administrative agencies are permitted when
a. the subject of the meeting concerns accusing a person of a crime.
b. open meetings would frustrate the implementation of future actions.
c. the subject of the meeting involves matters relating to future litigation or
rulemaking.
d. all of the choices.
ESSAY QUESTIONS
B1. Guitar Maker, Inc., makes guitars. The Occupational Safety and Health
Administration (OSHA) proposes a safety rule governing the handling of wood
and its dust in the workplace, including the woods that Guitar Maker uses in its
operations. Guitar Maker contends that the rule will involve substantial
compliance costs without significantly increasing workplace safety. The firm
sends a letter to OSHA indicating its objections to the proposed rule and
enclosing research reports and other data supporting those objections. Does
OSHA have any obligation to consider these objections? What procedures
must OSHA follow when it makes new rules, such as this one?
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B2. Friend2Friend, Inc., a social network provider, is cited by an Internal Revenue
Service (IRS) representative for an underpayment of federal income tax.
Friend2Friend’s accountants believed that the agency overlooked some of the
firm’s legitimate tax deductions and credits. Erin, Friend2Friend’s chief
executive officer, wants to challenge the assessment. What are Erin and
Friend2Friend’s next steps?