BA 325 Final Exam Homework questions

The purpose of the Securities Act of 1933 is to regulate a security's investment price.

False

When the owner of a sole proprietorship dies, the business does not dissolve—it is automatically transferred to family members or other heirs.

False

Brea and Colin do business as Dig Excavators. In acting on the firm's behalf, Brea makes an honest error in underestimating the cost of a certain project. In this situation, to her firm, Brea is liable for a breach of the duty of

Not: Care accounting loyalty

Shareholders exercise ownership control through the power of their votes.

True

The power to control the market price of a product is market power.

True

When a shareholder commingles personal and corporate interests so that the firm has no separate identity, the shareholder may be held liable for the firm's debts.

True

Luis hires Mieko to act as his agent to buy Ngoc's Southeast Asian Café. Luis tells Mieko to reveal only that she is buying the restaurant on behalf of a third party, without telling Ngoc's seller who that third party is. Luis is

a partially disclosed principal.

Mountain Crest Inc. makes and distributes its branded products to authorized dealers. To prevent price-cutting by dealers in direct competition, the firm imposes limits on where each dealer can sell the products. This is

a territorial restriction.

eGames Inc. employs four hundred workers at three locations in three states. Workers who lose their jobs with eGames have a right to continued health-care coverage under the company's group plan unless they

are fired for gross misconduct

Furnaces & Filters Inc. is a public company whose shares are traded in the public securities markets. Under the Sarbanes-Oxley Act of 2002, to ensure that the firm's financial results are accurate and timely, its senior officers must set up and maintain

internal "disclosure controls and procedures."

Edibles Inc. and Food Stuff Corporation are competitors. Each firm has capital, surplus, and undivided profits in excess of $40 million and competitive sales of more than $5 million. Gina and Hal serve as directors on both firms' boards. Under the Clayton Act's restriction concerning interlocking directorates, Gina and Hal are

liable for failing to comply.

The goal of securities regulation is to

prohibit deceptive and manipulative practices in the securities markets.

Nevis and Olsen want to do business as a corporation—Pastries & Pies Inc. The procedure for forming this firm is prescribed by

state law.

Burgers & Brew Inc. prepares its articles of incorporation. The articles are likely to include

the corporation's name. the corporation's registered agent. the number of shares the corporation is authorized to issue.

Energy Company employs Fred to negotiate the purchase of mineral rights for future mining projects. Fred secretly buys some of the property and sells it to Energy at a profit. Fred has breached

the duty of loyalty.

Vim applies for a job at Welding Inc. She passes a test to determine which applicants are eligible for hiring, but Welding discards the results, and Vim is rejected. To successfully defend against a claim for discrimination under Title VII of the Civil Rights Act, the employer must show that

the practice in question was justified.

Lev, an agent for Mill Grains LLC, executes an unauthorized contract with National Grocers Inc. The deal is highly advantageous to Mill Grains, and the company ratifies the contract. The contract is

valid.

To succeed in a suit against a potential employer for discrimination under the Americans with Disabilities Act, a job applicant must show that he or she

was not hired solely because of a disability.

As presented in "Enron: The Smartest Guys in the Room," whose job was it to cover up that Enron was losing money?

Andy Fastow

A partner can be held liable for a partnership obligation only if he or she participated in, or knew about, whatever it was that gave rise to the obligation.

False

A truck driver who drives a company truck for weekend deliveries only is most likely an independent contractor.

False

Actual authority in an agency relationship arises from what a principal makes clear to a third party.

False

Agency relationships cannot exist outside an employment, so agency law has a narrower reach than employment law.

False

An undisclosed principal is one whose identity is totally unknown by an agent and a third party at the time a contract is made.

False

Antitrust legislation is based on a desire to limit economic competition.

False

Any agreement that results in enhanced market power violates the antitrust laws.

False

Any person who does business must create a separate business organization.

False

Both parties to an agency relationship have the power and the right to terminate the relationship at any time.

False

Disparate-impact discrimination occurs when a protected class is adversely affected by the practice or procedure of an employer who intended that result.

False

Even if a firm possesses monopoly power and engaged in anticompetitive conduct, it cannot be inferred that the firm acted with the intent to monopolize.

False

Generally, the law recognizes a partnership as an independent entity.

False

In a limited partnership, every partner has full responsibility for the management of the partnership.

False

In most states, in a dispute on a partnership matter, a third party cannot sue an individual partner but must file an action against the entire firm.

False

In states that require a minimum wage that is higher than the specified federal minimum wage, employees are entitled only to the lower federal amount.

False

Only a managing partner has the right to full and complete information concerning the conduct of all aspects of partnership business.

False

Requiring users of a social media site to agree to certain terms and conditions to use the site is most likely an antitrust violation.

False

To avoid sanctions under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, scienter must exist.

False

To pay for social insurance programs administered by the Social Security Administration, employers, employees, and the unemployed must contribute.

False

To receive benefits under a state workers' compensation law, an employee injured on the job must promptly sue the employer.

False

Under the Age Discrimination in Employment Act, the plaintiff must show that unlawful discrimination was only one of the reasons for an adverse employment action.

False

Who was the principal whistleblower in the Enron case?

Sherron Watkins

A Ponzi scheme is a fraudulent investment that pays returns from new capital invested with the fraudsters instead of from a legitimate investment.

True

A limited liability partnership allows professionals to avoid personal liability for the malpractice of other partners.

True

A plaintiff who sues on the basis of disparate-treatment discrimination in hiring must make out a prima facie case of illegal discrimination, and will win in the absence of a legally acceptable employer defense.

True

An eligible employee may take unpaid leave under the Family and Medical Leave Act for family or medical reasons, or in certain situations for military service.

True

An employer can avoid liability for sexual harassment by taking prompt remedial action.

True

An employer can avoid liability under Title VII by showing that the employer's standards for hiring and promoting have a substantial, demonstrable relationship to realistic qualifications for the job at issue.

True

Any agreement among competitors to artificially fix prices or restrict output is a per se violation of Section 1 of the Sherman Act.

True

Any person can be an agent, regardless of whether he or she has the capacity to contract.

True

Anyone who has access to or receives inside information of a nonpublic nature and trades on it for personal gain can be liable under SEC Rule 10b-5.

True

As in a partnership, a limited liability company may pay no taxes—profits can be passed through to the members, who pay personal taxes on the profits.

True

Because a close corporation is one whose shares are held by a relatively small group of persons, the firm often operates like a partnership.

True

Because a corporation may be liable for the misconduct of its employees, the firm needs to be careful about whom it hires and how much to monitor and supervise them.

True

Choosing a business organizational form that limits its owners' liability may lead to greater profits for the firm.

True

Corporate "outsiders" may be held liable for insider trading under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5.

True

Directors and officers whose failure to exercise due care results in harm to the corporation or the shareholders can be held liable for negligence unless the business judgment rule applies.

True

Every act of a partner concerning partnership business binds the firm.

True

In a sole proprietorship, the proprietor bears the burden of any liabilities incurred by the business enterprise.

True

In many instances, agency law governs the relationships among partners.

True

Individual state laws should be relied on to determine corporate law because, despite the existence and use of model corporation acts, there is considerable variation among the states.

True

Normally, an employer is liable for a supervisor's sexual harassment only if the supervisor took a tangible employment action against an employee.

True

Private employers are generally free to hire and fire workers at will.

True

Proving an antitrust violation requires showing a misuse of market power.

True

Section 2 of the Sherman Act essentially condemns the act of monopolizing, not the possession of monopoly power.

True

State securities laws apply mainly to intrastate transactions.

True

The Sarbanes-Oxley Act of 2002 attempts to increase corporate accountability by imposing strict disclosure requirements and harsh penalties for securities laws.

True

The Securities Exchange Act of 1934 provides for continuous periodic disclosures by certain publicly held companies.

True

The key to liability under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 is whether information omitted or misrepresented in connection with the purchase or sale of a security is material.

True

The legality of a tying arrangement depends in part on the agreement's likely effect on competition in the relevant markets.

True

The member of a limited liability company has the power to dissociate from the firm at any time, but may not have the right.

True

The proprietor pays only personal income taxes on a sole proprietorship's profits.

True

The rule of reason represents a more flexible economic analysis of agreements among competitors than the rigid application of a per se standard.

True

To avoid a conviction in a criminal prosecution under the securities laws, there must be at least a reasonable doubt that the defendant knew he or she was acting wrongfully.

True

To be eligible for unemployment compensation, a worker must be willing and able to work.

True

To protect a franchisor's reputation, a franchise contract may provide a degree of control over the franchisee's operation to the franchisor.

True

Under the principles of agency law, any sale of goods by a salesperson in a store to a customer can be binding on the owner of the store.

True

When an agent, acting within the scope of his or her authority, contracts with a third party, a disclosed principal is liable to the third party.

True

When it comes to managing a corporation, the corporation relies on its board of directors and officers.

True

Health Food Inc. coordinates the purchase, sale, and delivery of organic products. The stated corporate purpose is to make a profit and to have a material positive impact on society and the environment. Health Food is

a benefit corporation.

Pipeline Corporation requires its employees to have a high school diploma. In a suit against Pipeline under the Civil Rights Act, the employer shows a connection between a high school education and job performance. This is

a business necessity defense.

Market Data Corporation is required to file a registration statement with the Securities and Exchange Commission. This statement must contain

a description of securities being offered for sale.

Dig Inc. is the major wholesale distributor of heavy equipment in six states. Dig's closest competitor is Excavator Company. The two firms agree that Dig will operate in four of the states and Excavator in the other two. This is

a market division.

Bey indicates that he is acting as an agent on behalf of an unidentified client—Cuisine LLC—when he enters into a contract with Diners Bistro. Cuisine is

a partially disclosed principal.

A limited liability company that wants to distribute profits to its members could avoid "double taxation" by electing to be taxed as

a partnership.

Bio Med Corporation makes and sells Curative, the most prescribed name-brand pain-relief medication. Drugs Inc. has the potential to make a generic version of the same drug. Bio Med agrees to pay Drugs not to make or sell the generic. This agreement is most likely

a per se violation of the Sherman Act.

Kit hires Lanie to manage Kit's Cattle Ranch. Lanie agrees to act on Kit's behalf, subject to Kit's control, and Kit trusts Lanie to so act. Their relationship is

a principal and an agent.

Household Products Corporation wants to make an offering of securities to the public. The offering is not exempt from registration under the Securities Act of 1933. Before the firm sells its securities, it must provide investors with

a prospectus.

Without creating a separate business organization, Rey starts up Street Cruisers, a pre-owned auto sales enterprise. This enterprise is

a sole proprietorship.

Road Tires Inc. conditions the sale of its products to Service Stores on the buyer's agreement to buy Road's tire-repair kits. Under the Clayton Act, this deal is

a violation, depending on its purpose and the effect on competition.

Motor Parts Sales Inc. hires Nolly to work on its shipping dock, accepting deliveries, and dispatching trucks, and dealing with customers and drivers. With respect to Motor Parts, Nolly is most likely

an agent.

Nora works at Oil & Gas Inc. She is a sales representative who works with Oil & Gas customers. The company closely supervises its sales reps, and dictates their schedules. With respect to third parties, Nora is

an employee and agent.

Pump Makers Inc. makes pumps for fire trucks and conditions shipments of its products to Quality Motors Corporation—a maker of fire trucks—on Quality's agreement to buy additional pumps only from Pump Makers. This is

an exclusive-dealing contract.

Global Enterprises Inc. competes in many product, service, and geographic markets. Global's board consists of a large number of directors. The firm faces myriad complex business issues. To avoid its governance from becoming unwieldy, the company can delegate some of its functions to

an executive committee.

Rosario is a chef and caterer who hires out on a per-project basis to companies with on-location work sites, as well as to the hosts of banquets and other events. In this capacity, Rosario is

an independent contractor.

Pipe Inc.'s stated purpose is to install plumbing. Pipe contracts with Quality Contracting to pour a new building's foundation despite lacking the skill and license to do such work. This is most likely

an ultra vires act.

Under the Equal Pay Act, an employer can legitimately pay different wages to male and female employees on the basis of

any factor other than gender. the primary duties of the jobs. a seniority or merit system.

Reno, an engineer for Shale Corporation, learns that the firm will increase the dividend it pays to shareholders. Reno buys 10,000 shares of company stock. When the dividend is announced to the public and the price of the stock increases, he sells the shares for a profit. He would not be liable for insider trading if the information about the dividend was

available to the public before he bought the stock.

An antitrust action is brought against Carrier Freight Company, alleging that a certain act constitutes the offense of attempted monopolization. To qualify, the act must

be likely to succeed.

Liu, the owner of Mortgage Source, a sole proprietorship, wants to obtain additional business capital. For this enterprise, the opportunity is most likely limited to

borrowing funds.

Fabrication Corporation is a public company whose shares are traded in the public securities markets. Under the Securities Act of 1933, Fabrication is required to

disclose all essential information about the issuance of its securities.

Neva is a partner in Orchard Farm. Neva gives notice to quit the firm, which otherwise continues to do business. This is

dissociation.

Beri owns and operates City Delivery Service as a sole proprietorship. When she dies, the business will automatically

dissolve

Online Media Inc. bundles its products so that consumers are forced to pay for access to some sites that they do not want in order to obtain access to sites that they do want. A court will likely rule that the bundling does not violate the rule of reason if it

does not injure competition.

Health Clinic Inc. has no written employment manual or oral discharge policy, avoids abusive treatment of its staff, and acts to prevent illegal and unsafe activities. The clinic freely hires and fires its employees, who are similarly free to quit at any time. With respect to the employment-at-will doctrine, this is

exemplary of the doctrine.

Title VII of the Civil Rights Act applies to employers and labor unions with at least

fifteen employees or members.

Federal overtime provisions apply only after a covered employee works more than

forty hours in a week.

Antirust legislation is based on society's desire to

foster competition.

Federal employment discrimination laws restrict the ability of employers to discriminate against workers on the basis of

gender.

Oren believes that Plumbing Contractor discriminated against him on the basis of race. He files a suit against Plumbing under the Civil Rights Act. To establish a prima facie case of employment discrimination, Oren must show that

he is a member of a protected class.

Under a contract, Oil Shale Corporation forbids Petro Inc., a wholesale buyer of Oil Shale's products, to purchase products from the seller's competitors. This is prohibited

if its effect is to substantially lessen competition.

Equity Corporation, and its officers, directors, employees, and shareholders, buy and sell securities. Section 10(b) of the Securities Exchange Act of 1934 applies to the trading of securities

in almost any circumstances.

The purpose of state workers' compensation laws is to establish an administrative process for compensating workers for

injuries that arise in the course of employment, regardless of fault.

Cam, an accountant for Discount Inc., learns that the company's soon-to-be-announced quarterly sales figures exceed analysts' expectations. Cam tells Ed, who tells Frye, who buys 100 shares of the company's stock. Frye knows that Ed got the information from Cam. When Discount publicly announces the figures, Frye sells the stock for a profit. Under the Securities Exchange Act of 1934, Ed is most likely

liable for insider trading.

Emmett, an agent for Fridley, signs an agreement with Glover on Fridley's behalf but neglects to tell him that the agreement requires the payment of a certain tax. The government prosecutes Fridley for failing to pay the tax. He is

liable, because notice to Emmett is notice to Fridley.

Aircraft Corporation employs mechanics, programmers, outside salespersons, and professionals, including pilots. Employees exempt from the Fair Labor Standards Act's overtime provisions include all of the following except

mechanics.

Eli, an officer for Food Stores Inc., buys 10,000 shares of its stock. One week later, the company announces that it will merge with a competitor, Grocery Mart Corporation, and the price of Food Stores' stock increases. One month later, Eli sells his shares for a profit. Under Section 16(b) of the Securities Exchange Act of 1934, Eli would not be liable if, after buying the stock, he had waited

more than six months to sell it.

Devon takes temporary family leave from her job at Equipment Sales Company to care for a newborn baby. With respect to Devon's health-care coverage, during the leave, under the Family and Medical Leave Act, Equipment

must continue it.

As a director of InstaTalk Inc., Jim has a right of inspection. This right can be restricted by

none: an act of the board. the bylaws. the corporate articles.

Gil is an officer for HVAC Corporation. Due to Gil's choice of a certain supplier, HVAC's costs are somewhat higher than they might have been if a different supplier had been chosen. Gil is most likely liable for breach of

not: trust and confidence the business judgment rule. negligence or mismanagement.

To gain an advantage in a business deal, Masonry LLC engages in fraud. Nicol, a member of Masonry, significantly contributes to the firm's misconduct. For any resulting damages, a court is most likely to hold Nicol

personally liable

Expressly exempt from antitrust laws because it is not interstate commerce, according to the United Supreme Court, is

professional baseball.

Oversight Inc.'s board of directors votes to empower corporate officers to make decisions regarding ordinary, daily corporate affairs within well-defined guidelines. With respect to these affairs, Oversight's board

retains its responsibility.

Debt Equity Inc., and its officers, directors, and employees, buy and sell securities based on financial research and analysis. Section 16(b) of the Securities Exchange Act of 1934 covers purchases and sales of securities involving

short-swing profits.

Fertile Acres Inc., Growers Farm Co-op, and Harvest Orchards agree to exchange information, conduct an advertising campaign, and set certain regulatory standards to govern their operations. This association is

subject to analysis under the rule of reason.

Guy is a director of Healthcare Corporation. Guy attempts to use his best judgment in guiding corporate management but makes a few honest mistakes. His best defense against liability for these mistakes is

the business judgment rule.

Bern, a salesperson at a Carpet & Tile store, tells Dan, a customer, "Buy your flooring here, and I'll install it for less than the store would charge." Dan buys carpeting, which Bern installs for half the store's price. Bern keeps the money. With respect to the store, Bern has breached

the duty of loyalty.

Nora and Owen do business as Property & Profit, a real estate investment partnership. In acting on the firm's behalf, Nora takes advantage of an opportunity to make a secret profit. To her firm, Nora is liable for a breach of

the duty of loyalty.

Rena establishes and operates Sweet Homes, a construction-contracting outfit, as a sole proprietorship. In the course of doing business, the outfit fails to pay some of its debts. To satisfy the obligations, the firm's creditors can go after

the firm's assets and the owner's personal assets.

Dain is a limited partner in Eco Baits, a pest control service organized as a limited partnership, which cannot pay its debts. Dain is liable for the debts

to the extent of his capital contribution to the firm.