Business & Society, 16e (Lawrence)
Chapter 14 Consumer Protection
1) Consumers make less rational choices when they have accurate information about a product.
2) Under the “right to be heard” protection, the consumer is guaranteed satisfactory quality and
service at fair prices.
3) The consumer’s “right to privacy” assures that information disclosed in the course of a
commercial transaction is not shared with others unless authorized.
4) In the “consumer self-help” approach to protecting consumer privacy rights, new government
regulations will protect the consumer online.
5) Industry “self-regulation” includes carrying out government mandated recalls.
6) The Latin phrase, caveat emptor, meaning “let the seller beware” has put sellers on alert to look
after their own interests.
7) Consumer advocacy groups in the United States actively promote and speak for the interests of
millions of consumers.
8) Deceptive advertising is still legal in most countries.
9) The Children’s Online Privacy Protection Act limits the collection of information online from
and about children under the age of 13.
10) The Department of Agriculture has authority over vitamins and some minerals that may affect
consumers.
11) The mission of the Consumer Financial Protection Bureau is to ensure that financial products
and services are fair, transparent, and competitive.
12) The doctrine of strict liability extends only to the retailer who is involved in selling the
product, not the manufacturer.
13) One reason for business efforts to reform product liability laws is the increasing cost of
insuring against liability suits.
14) Quality management emphasizes high quality and customer satisfaction through continuous
improvement of a company’s product or service at the final stages of the production process.
15) One problem with companies issuing product recalls is that the public is often unaware of
them.
16) A prime social responsibility of business is to safeguard consumers:
A) While continuing to supply them with goods and services they want.
B) While maintaining high profit margins.
C) By supplying consumers with products at the lowest possible cost.
D) By providing new technology.
17) Which of the following is (are) core rights of consumers?
A) The right to be represented.
B) The right to purchase.
C) The right to safety.
D) All of these answers are correct.
18) The “right to be heard” promises that consumers’ interests will:
A) Be protected against fraudulent or misleading information.
B) Receive full and sympathetic consideration.
C) Be assured satisfactory quality and service at a fair price.
D) Be given all the facts to make an informed choice.
19) Consumers have become more dependent on businesses for product quality because:
A) The complexity of products makes choices complicated for consumers.
B) Instructions for use or care of product are provided in clear and simple language.
C) Their technical competence allows them to inspect the products thoroughly.
D) Competition has forced manufacturers to market lower-quality goods.
20) A global organization headquartered in London that represents over 200 consumer groups in
more than 100 nations is called:
A) Consumers Union.
B) Consumers International.
C) Public Interest Research Group.
D) Public Citizen.
21) Which of the following statements is not true about the organization Consumer Reports?
A) It is involved in activities promoting the interests of consumers.
B) It conducts extensive tests on selected consumer products and services.
C) It is supported by the federal government.
D) It publishes the results of tests online, with ratings on a brand-name basis.
22) Which of the following describes why the consumer movement exists?
A) Services have become less specialized.
B) Some product advertising claims have been inflated.
C) Some businesses have violated the public’s privacy.
D) Both of these answers are correct: Some product advertising claims have been inflated; and
some businesses have violated the public’s privacy.
23) The act that requires lenders to inform borrowers of the annual rate of interest to be charged,
plus related fees and services charges is called:
A) The Consumer Protection Act.
B) The Product Safety Act.
C) The Predatory Mortgage Act.
D) The Truth in Lending Act.
24) This U.S. agency enforces the laws prohibiting deceptive advertising:
A) Congress.
B) Consumer Product Safety Commission.
C) Federal Trade Commission.
D) Department of Justice.
25) The law requiring that toys and infant products be tested before sale is called the:
A) Child Safety Act.
B) Strong Product Safety Bill.
C) Consumer Product Safety Improvement Act.
D) Uniform Safety Testing Bill.
26) Which of the following is not a goal of consumer protection laws?
A) Encourage competitive pricing.
B) Facilitate consumers’ getting extended credit when making purchases.
C) Provide consumers with better information when making purchases.
D) Protect consumers against possible hazards from products purchased.
27) Warning consumers about the possible side effects of pharmaceutical drugs is an example of
consumer protection against:
A) Predatory pricing.
B) Incomplete information disclosure.
C) Hazardous products.
D) Violations of individual privacy.
28) Rules in the United States that prohibit competitors from secretly dividing up the market
amongst themselves are called:
A) Antitrust laws.
B) Deceptive advertising.
C) Federal Trade Protection Doctrine.
D) The Right to Privacy.
29) Which of these is not a current consumer law that protects individual privacy?
A) Internet “do not track” rules.
B) The FTC’s “do not call” list to avoid unwanted telemarketing calls.
C) Unwanted calls to a person’s mobile phone.
D) Children’s Online Privacy Protection Action of 2000.
30) Which part of the Department of Justice protects the public from being charged excess fees
based on one’s race?
A) Consumer Product Safety Commission.
B) Civil Rights Division.
C) Consumer Financial Protection Bureau.
D) Federal Trade Commission.
31) The main responsibility of the National Highway Traffic Safety Administration is to:
A) Set a uniform national speed limit.
B) Set airline safety standards.
C) Set motor vehicle safety standards.
D) Safeguard consumers from altered odometers.
32) The primary goal(s) of the Food and Drug Administration include:
A) Ensuring the safety and effectiveness of a wide range of consumer products.
B) Prohibiting unfair or deceptive advertising.
C) Reviewing and approving new products before they are released to consumers.
D) Both of these answers are correct: Ensuring the safety and effectiveness of a wide range of
consumer products; and reviewing and approving new products before they are released to
consumers.
33) Consumers owe more money on their home loans (mortgages) than on any other kind of
household debt. After mortgages, what makes up the largest portion of household debt?
A) Credit card debt.
B) Medical debt.
C) Car loans.
D) Student loans.
34) The major federal consumer protection agencies are authorized by law to:
A) Intervene directly into the very center of free market activities, if that is considered necessary to
protect consumers.
B) Substitute government-mandated standards for decision making by private buyers and sellers.
C) Substitute private manufacturing standards for government-mandated standards.
D) Both of these answers are correct: Intervene directly into the very center of free market
activities, if that is considered necessary to protect consumers; and substitute
government-mandated standards for decision making by private buyers and sellers.
35) An identifying marker placed on a user’s computer hard drive used to build profiles of their
behavior over time is called a:
A) Web beacon.
B) Deep packet.
C) Cookie.
D) Firewall.
36) Groups that collect and combine data from various sources into individual profiles that are sold
to retailers and advertisers are called:
A) Flash cookies.
B) Data aggregators.
C) Internet marketers.
D) 360-degree viewers.
37) The risk online shoppers take when their web profile negatively impacts their credit is known
as:
A) Internet credit reporting.
B) Weblining.
C) Dark money.
D) Crisis management.
38) One particularly negative aspect of behavioral advertising is:
A) Consumers receive too many coupons for products they purchase regularly.
B) Sellers collect so much data about purchasers they can’t use most of it.
C) Shoppers cannot keep up with all the new online sales.
D) Online users may be vulnerable to the spread of misinformation tailored to their beliefs.
39) The EU’s 2018 General Data Protection Regulation applies to:
A) Individuals anywhere in the world.
B) Only companies headquartered in the European Union.
C) Companies anywhere who provide services to European customers.
D) Only corporations that provide financial services.
40) When businesses adopt voluntary policies for protecting the privacy of individuals’
information disclosed during electronic transactions, this is an example of:
A) Industry self-regulation.
B) Privacy legislation.
C) Consumer self-help.
D) Business privacy regulation.
41) Under what legal doctrine does a firm bear legal responsibility for injuries caused by
something it made or sold, whether or not it was negligent or breached a warranty?
A) Strict liability.
B) Product liability.
C) Consumer liability.
D) Supplier liability.
42) Many companies have argued that the evolution of strict liability has:
A) Unfairly burdened them with excess costs.
B) Decreased liability insurance rates.
C) Increased corporate revenues and dividends.
D) Changed top management’s attitude about the consumer.
43) Which of these statements is true regarding the Class Action Fairness Act of 2005?
A) Lawyers were restricted from shopping for friendly venues to try interstate cases.
B) Excessive attorney compensation was limited.
C) The burden of proof was shifted to government.
D) Both of these answers are correct: Lawyers were restricted from shopping for friendly venues to
try interstate cases; and excessive attorney compensation was limited.
44) Consumer groups have generally opposed the idea of product liability reform using which
argument?
A) Punitive damages should be limited.
B) Strict liability should be retained.
C) The burden of proof should be shifted to consumers.
D) Losers should be made to pay some of the other side’s legal bills.
45) One alternative to product liability lawsuits is called:
A) Limited resolution.
B) Punitive damages reform.
C) Alternative dispute resolution.
D) Consumerism.
46) In some cases, businesses have banded together to agree on how they will treat their customers.
This is called:
A) Code of regulation.
B) Consumer affairs doctrine.
C) Voluntary industry codes of conduct.
D) Industry action standards.
47) Businesses can take a number of measures to respond voluntarily to consumer demands.
Which of the following is an example of such a measure?
A) Product liability law reform.
B) Customer call centers.
C) Consumer advocacy groups.
D) Alternative dispute resolution policies.
48) Which major consumer right was violated according to the discussion case Volkswagen’s
“Clean Diesel” Campaign?
A) Right to choose.
B) Right to privacy.
C) Right to be heard.
D) Right to be informed.
49) Consumer advocates argue that consumers are entitled to five core rights. What are they?
Explain each.
50) The consumer movement exists because consumers want to be treated fairly and honestly in
the marketplace. Outline and explain the additional reasons for the existence of the consumer
movement.
51) Outline some of the major government agencies responsible for consumer-related issues. What
is the major mission of each?
52) How do new technologies increasingly enable businesses to collect and use vast amounts of
personal data about their customers and potential customers? Explain. Do you think these trends
benefit consumers or not, and why?
53) In your opinion, do U.S. product liability laws need to be changed? If so, how? If not, why not?
Investigate proposed changes in product liability laws over the last several years and evaluate
them.
54) Because of the movement towards quality management, companies are now focusing on the
customer. How does this occur? How could a specific industry be even more socially responsible
to its customers? Explain.