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BUS 415 Final Exam 2nd Set 42 Questions with Answers
1) The doctrine of stare decisis concerns
A. staring at the facts of a case for a long time to make sure the correct decision is made.
B. following precedents so that legal principles announced in a case are used to determine later cases
C. making sure to do adequate research before making a legal decision
D. using constitutional law to render a decision
2) Which clause in the U.S. Constitution is most used in terms of regulating business activities?
A. The Bill of Rights
B. The Supremacy Clause
C. The First Amendment
D. The Commerce Clause
3) The Federal Trade Commission is an example of
A. a temporary commission created by executive order that has become permanent
B. a federal agency created by the federal government
C. a corporation subsidized by the federal government
D. a branch of the U.S. Supreme Court
4) Which of the following is correct with regard to the relationship between law and ethics?
A. Although much of law is based on ethical standards, not all ethical standards have been enacted as law.
B. The rule of law and the golden rule of ethics demand the same response.
C. The law may not permit something that would be ethically wrong.
D. Lawful conduct is always ethical conduct.
5) Which of the following statements is true regarding the relationship of law and ethics?
A. Depending on the circumstances, the law can require a higher, lower, or the same standard of conduct as ethics
demands.
B. The legal requirements will almost alwaysbe the same as the ethical requirement because the law is based on
ethical standards.
C. In some cases, ethics will require a higher standard of conduct than the law, but never vice versa.
D. In some cases, the law will require a high standard of conduct than ethics, but never vice versa.
6) The Federal False Claims Act is also known as
A. The Statute of Limitations
B. The Sarbanes-Oxley Act
C. The Whistleblower Statute
D. The Statute of Frauds
7) A defendant fails to answer a civil lawsuit, what is likely to happen?
A. The court will order that the defendant go to jail until he or she agrees to answer.
B. A court will contact the defendant and ask him to answer the lawsuit.
C. The court will grant a default judgment against the defendant.
D. The court will dismiss the case.
8) The legal authority of a court to make orders that are binding upon the parties is called
A. Enumerated jurisdiction

2. B. In Rem jurisdiction
C. Personal jurisdiction
D. Quasi-in-Rem jurisdiction
9) What facts justify a state court’s exercising personal jurisdiction over an out-of-state defendant?
A. The state is most convenient for the plaintiff.
B. The plaintiff lives in that state.
C. The defendant has sufficient contacts with the state such that the state’s exercise of personal jurisdiction of him in
not unfair.
D. The defendant lives within 100 miles of that state.
10) What is the definition of a tort?
A. Any civil wrong that allows the injured person to recover damages
B. Any violation of an ethical duty
C. Any crime or misdemeanor
D. Any action done in violation of a prior agreement, which allows the victim to recover damages
11) Damages intended to punish a defendant and deter the defendant and others from engaging in the same tortious
conduct in the future are called
A. nominal damages
B. penalty damages
C. retribution damages
D. punitive damages
12) Persons who sell abnormally dangerous products such as poisons or power tools
A. are liable to persons they injure even if they are not negligent
B. are liable only if they intended to cause a particular injury
C. are generally not liable for the injuries they cause because otherwise no one would undertake these activities
D. are liable only if all elements of negligence are proven against them
13) Ray and Nikki are in fifth grade together. Ray gets a new skateboard for his birthday and offers to sell Nikki his
old one for $15. Nikki pays the money, and Ray gives her the old skateboard. Is this a valid contract?
A. This is an unenforceable contract because Ray and Nikki can not file a lawsuit.
B. This is a void contract because the parties to the contract were minors.restraint of trade.
C. This is a voidable contract because the parties to the contract were minors.
D. This is a valid contract. There was a fair consideration paid for the skateboard, and both parties got what they
wanted.
14) Which of the following best describes how e-mail contracts are viewed under the law?
A. E-mail contracts are generally treated similarly to contracts negotiated by other means.
B. E-mail contract are valid only for contract less than $500.
C. E-mail contracts are valid so long as both parties sign a written copy printed out from the e-mail.
D. E-mail contracts for goods can be valid, but not email contracts for services.
22) Which of the following is true when a general partnership is converted to an LLC?
A. The members will retain unlimited personal liability for obligations incurred while the business was a partnership.
B. The profit and loss sharing terms must remain the same as they were in the partnership.
C. The conversion can be made retroactive for up to two years.
D. The property must be sold to a third party who then immediately sells it to the LLC.
23) Which of the following is true of a limited liability company?
A. Limited liability companies are automatically taxed like corporations.

3. B. Documents do not have to be filed with the state to create one.
C. Limited liability companies have limited duration.
D. Limited liability companies are managed by members or managers.
24) Which is true of a limited partnership?
A. A partnership is limited to doing business in the state of incorporation.
B. At least one of the partners must be a general partner with unlimited personal liability.
C. The liability of all owners is unlimited.
D. The liability of all owners is limited to the amount of their contribution to the business.
25) Rita is the sole shareholder of an auto repair shop that is incorporated. She is at work one day when her sister
comes in and tells her she needs $100 for schoolbooks. Rita looks in her wallet, and seeing that it contains no
money, opens the cash register and takes out $100, which she hands to her sister. The sister looks worried, but Rita
tells her, “Don’t worry; I take money out of the cash register all the time for my personal expenses. It’s my business,
so I can take money out whenever I want.” Her customer, who is waiting to pick up his car, tells Rita that she is
risking the piercing of the corporate veil. Is the customer correct?
A. Yes, Rita is co-mingling personal assets with corporate assets.
B. No, the customer is wrong.
C. Yes, Rita is not the board of directors.
D. No, Rita is the only shareholder and can do what she wants.
26) A corporation is required to maintain a separate identity because
A. if they do not maintain the separate identity, they become alien corporations
B. corporations are entities created by statute to limit the personal liability of investors
C. corporations can act only through officers
D. corporations have perpetual existence
27) Fred wants to start an adult daycare business, but is worried about potential liability. He hires an attorney to
incorporate his business, but does not want to keep paying the attorney, so he dismisses the attorney as soon as the
incorporation is accomplished. What else must Fred do to make sure he holds on to his protection from personal
liability?
A. He must hire an independent contractor to take over the care of the patients.
B. He must maintain the corporate formalities and records.
C. He must buy malpractice insurance.
D. He must post a disclaimer, advising persons who visit the property that the management is not responsible for
injuries to guests.
28) If a corporation is properly incorporated in one state and wants to do business in second state, the corporation
A. may be required to obtain a certificate of authority from the second state
B. must incorporate in the second state
C. must do nothing because being incorporated in one state entitles the corporation to do business in all states
D. must register with the Interstate Commerce Commission
29) Rover Corporation is a regular corporation that has not elected S corporation status. In 1992, Rover earned
$100,000; in 1993, Rover distributes $50,000 to its shareholders. Which of the following best describes the tax
consequences to rover and its shareholders?
A. Rover is taxed on $100,000 in 1992; the shareholders are taxed on $50,000 in 1993.
B. The shareholders are taxed on $100,000 in 1992; Rover is not subject to tax.
C. Rover is taxed on $100,000 in 1992; the shareholders are not subject to tax.
D. Rover is taxed on $100,000 in 1992; the shareholders are taxed on $50,000 in 1992.

4. 30) What types of business can be converted to an LLC?
A. Corporations, general partnerships, and limited partnerships
B. General partnerships only
C. General partnerships and limited partnerships only
D. Corporations and limited partnerships only
31) What is the primary purpose of the Occupational Safety and Health Act?
A. Its purpose is to promote the provision of healthcare benefits by employers having more than 15 employees.
B. Its purpose is to protect the safety of workers and the safety of those who purchase the employer’s products or
services.
C. Its purpose is to reduce the application of industry standards to workplace conditions.
D. Its purpose is to compel employers to provide a work environment that is free from recognized hazards that could
cause death or serious injury.
32) Which of the following best describes the status of the employment at will doctrine in the United States today?
A. It still applies today, but only to employees who are expressly told that they are an at-will employee when they are
hired.
B. It applies in most states to most employment relationships, but there are many exceptions that limit its application.
C. It applies more today than in the last century, and the quantity of corporate layoffs is evidence of this.
D. It today applies only to the employer, although in the past it applied to both the employee and employer.
33) Which of the following rejected applicants may have a valid claim for discriminatory hiring practices?
A. A university did not hire a 22-year-old woman to be a director of faculty because she was too young.
B. A public health service did not hire a registered nurse because his shaking hands prevented him from
administering injections.
C. A Catholic school did not hire a teacher because he was not Catholic.
D. A trucking company did not hire a truck driver because she was pregnant.
34) Which of the following statements best describes the workers’ compensation rules?
A. The employee has the choice to sue or proceed under the workers’ compensation statute.
B. The employer can avoid liability if the injured employee was contributory negligent.
C. The employer is liable for employment related injuries only if negligent.
D. The employee will collect for all work-related injuries, and will not need to prove negligence on the part of the
employer.
35) Which of the following is a correct statement of the requirements for a bona fide occupational qualification?
A. Rationally based and evenly applied
B. Job related and cost effective
C. Job related and nondiscriminatory
D. Job related and a business necessity
36) What is generally the effect when an exception to the employment at will doctrine applies?
A. Employees can be prohibited from quitting a job.
B. There is some sort of limitation on at least one party’s ability to terminate the employment relationship.
C. The Fair Labor Standards Act will set the terms, such as pay, for the employment relationship.
D. The employer is required to hire a certain employee.
37) In general, trademark protection is granted based on whether the trademark is
A. distinctive
B. the original creation of the trademark registrant
C. understandable to the general public

5. D. novel and useful
38) What federal legal protection is there with respect to trade secrets?
A. Trade secrets are protected under the Economic Espionage Act of 1996.
B. Trade secrets are protected under the federal copyright laws.
C. Trade secrets are protected under the Trade Secret Protection Act of 1952.
D. Trade secrets are protected under the federal patent laws.
39) The Biosafety Protocol provides as follows:
A. Employees must wash hands when preparing food.
B. Medical waste must be safely disposed.
C. Vaccinations must contain live virus.
D. Genetically engineered food must state that it may contain modifications.
40) Patricia owns a Mexican restaurant, famous for home-made tortillas. The tortillas are made by several women,
who make the tortillas in their homes and sell them to the restaurant. Some of the women have been making tortillas
for Patricia for years, while others have just started. Patricia pays for the tortillas by the dozen. What is the nature of
the employment relationship between the women and Patricia?
A. The women are agents of the restaurant.
B. The women are part-time employees of the restaurant.
C. The women are independent contractors.
D. The women are employees of the restaurant.
41) Rachel and Roy are married. Phillip is a private investigator, who is following Rachel at Roy’s request, to see if
she is involved in another relationship. At one point, Rachel enters a “women only” gym, where Phillip cannot follow.
Phillip calls his friend Sue and tells her that if she will enter the gym and observe Rachel, Roy will pay her $25 an
hour for her services. Sue goes to the gym and observes Rachel for 3 hours, after which she bills Roy for $75. Must
Roy pay Sue’s bill?
A. No, because Sue is not a licensed private investigator
B. Yes, because Sue is entitled to collect on a quasi-contract basis
C. No, because Roy is not liable for contracts entered into by Phillip
D. Yes, because Phillip was acting as Roy’s agent when he hired Sue
42) Barbara owns a dairy farm. One of her pastures needs cutting, so she hires Jed to do the work for $150. While
oiling his riding mower, Jed hurts his arm, so he hires Bill to cut the pasture for $130. Bill takes his own mowing
machine to Barbara’s pasture. During the mowing, Bill damages the fence, and some of the dairy cattle are later able
to pass directly to a neighbor’s corn field, where they eat some of the corn, and trample the crop, causing the crop to
be almost a total loss. Who is responsible for the damages caused by the cattle?
A. Bill is responsible, because he is an independent contractor.
B. Jed is responsible, because Bill is Jed’s employee.
C. Barbara is responsible, because Jed is an independent contractor.
D. Barbara is responsible, because they are her cattle.