Chapter 4 MC

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The university computer lab is having difficulty controlling its costs. Analysis showed that a key issue is the cost of printer supplies (ink, paper, and machine repair). Which strategy is likely to reduce costs the most, if typical student use is 200 copies per month? A) Plan A: requiring students to pay 12 cents per copy B) Plan B: charging a fee of $20 for the first 100 copies per month, then 10 cents per copy thereafter C) Plan C: charging a fee of $10 for the first 50 copies per month, then 15 cents per copy thereafter D) Plan D: adding a flat lab fee of $30 per academic term E) All of the choices are correct

A) Plan A: requiring students to pay 12 cents per copy

Merv is a bulldozer operator. He was hired by Carla to fill in swampland on her property and they signed a contract for him to do it on March 1st. On February 28th, Merv is informed by a city official that the swampland Carla wanted filled in is protected wetlands and it would violate environmental law to do the job. If Merv then calls Carla telling her the deal is off and Carla threatens to sue for breach of contract, what result? A) The contract is void, Carla loses. B) The contract is voidable, Carla loses. C) The contract is valid as it was bilateral, Carla wins. D) The contract is valid as there was an offer and acceptance, Carla wins.

A) The contract is void, Carla loses.

Which of the following is not true of the establishment of a principal-agent relationship? A) The law requires a formal expression of an agency relationship between parties. B) Courts use an objective standard for agency relationships in determining the relationship between parties. C) Conduct alone can form the basis for an agency relationship. D) Parties to an agency relationship must have an understanding that the principal is in control.

A) The law requires a formal expression of an agency relationship between parties.

Which of the following is the expression of a willingness to enter into a contract by promising to perform certain obligations in exchange for an offeree's counter promise to perform? A) an offer B) a counter C) an acceptance D) a mutual acceptance

A) an offer

Frosty and Sunny agreed to an agency agreement where Frosty would work for Sunny from January 1 until April 1. On April 1, the agency will be terminated by A) expiration B) revocation C) operation of law D) destruction of the essential subject matter

A) expiration

Which of the following is not true about Stewardship Theory: A) Assumes that principles and agents feel a strong duty to the firm. B) Assumes that individuals act in their own self-interest to maximize utility. C) Assumes that principles and agents inherently seek to do a good job, maximize company profits and bring good returns to stockholders. D) Assumes a sense of worth, altruism, a good reputation, a job well done, a feeling of satisfaction, and a sense of purpose. E) Assumes that given a choice between self-serving behavior and pro-organizational behavior, a steward will place a higher value on cooperation than defection.

B) Assumes that individuals act in their own self-interest to maximize utility.

Which of the following statements is true? A) A free rider contributes to teamwork but does not receive pay. B) Mitigating the agency problem requires alignment of the interests of principal and agent. C) The horizon problem describes agents who focus on the long-term. D) Agency costs are advertising expenses. E) None of the choices are correct

B) Mitigating the agency problem requires alignment of the interests of principal and agent.

Scott, who is 15-years-old, purchased a laptop computer on a lease plan for $100 a month over 18 months from Laptops-R-Us. Under the law of contracts, this is A) a void contract B) a voidable contract C) a valid contract D) an unenforceable contract

B) a voidable contract

Which of the following is an Asymmetry problem: A) employee theft B) adverse selection problem C) horizon problem D) free-rider problem E) empire-building problem

B) adverse selection problem

Ruth was a server at a fancy restaurant. She took the order of two customers, Tom and Jerry, for steak and lobster dinners. Ruth went back to the kitchen, delivering the order to the chef. What type of contract has been formed in this case? A) express contract B) implied contract C) voidable contract D) quasi-contract

B) implied contract

The duty of _____ is the centerpiece of a fiduciary relationship between an agent and a principal because this duty obligates the agent to advance the principal's interests over her own. A) due care B) loyalty C) obedience D) disclosure

B) loyalty

Shelby is a pizza delivery driver for Quick-E-Pizza. One day Shelby negligently failed to close her delivery truck's passenger door while stacking up six pizzas for delivery in the passenger seat. When she took a corner a little too fast, the pizzas flew out the door, tumbling into a busy intersection. A pizza splatted on Manuel's front window and he swerved out of control and crashed into a food truck, causing thousands in damages and physical injuries. Which of the following is correct of liability for the damages? A) No one is liable; it was an accident. B) Shelby, but not Quick-E-Pizza, is liable. C) Both Shelby and Quick-E-Pizza are liable. D) Quick-E-Pizza, but not Shelby, is liable.

C) Both Shelby and Quick-E-Pizza are liable.

Precious, at a private party, agreed to sell LaStarshae her new Gucci purse for $2,000. LaStarshae asked Precious if she would hold the price open until the end of the month when LaStarshae received a quarterly bonus from her job. Precious agreed to do it for her as a favor. At the end of the month, LaStarshae approached Precious with $2,000 in hand, but Precious said "Sorry, LaStarshae, I just sold it to Celine, you're too late." What will be the result if LaStarshae sues for breach of contract? A) LaStarshae wins as this was a valid option contract that Precious breached. B) LaStarshae wins as this was a valid bilateral contract. C) Precious wins as there was no exchange of consideration. D) Precious wins as there was no writing.

C) Precious wins as there was no exchange of consideration.

Which of the following is not a dynamic of the Principal-Agent Model: A) Agents are employed at the leisure of the Principle. B) The Principle delegates decision responsibility to an Agent. C) Principles are employed at the leisure of the agent. D) Agents perform functions for Principles. E) The higher a Principle is in the firm, the more limited the available information.

C) Principles are employed at the leisure of the agent.

An agent's duty to account includes all of the following, except A) maintaining records of reimbursable expenses B) keeping track of liabilities incurred on behalf of the principal C) intermingling the principal's funds or property with the agent's own accounts or possessions D) maintaining written records of any money spent or received on behalf of the principal

C) intermingling the principal's funds or property with the agent's own accounts or possessions

Which of the following is not a factor to consider when deciding to make or buy: A) the efficiency and effectiveness related to the item B) the costs of contracting C) the financial impact to the supplying company D) the cost of acquiring knowledge E) the costs of monitoring

C) the financial impact to the supplying company

The proper mode of acceptance of an offer up and until the offer has been accepted is established by A) the subjective intentions of the offeree B) the offeree C) the offeror D) a third-party

C) the offeror

Alexander was a brilliant inventor who worked for GiantCo. Alexander received a salary of $90,000 a year, but also invented several products for GiantCo which made them in excess of $10 billion in profits in the five years he had worked for them. Alexander was dissatisfied with his salary and wanted a bonus based on the massive amount of money he made GiantCo, but they turned down his request and paid him only one dollar more than his base salary because he had signed an employment contract which called for him to give up "all rights to inventions in consideration of $1." Bill thinks this is unfair and has sued. What will be the likely court result? A) Alexander wins because there was no mutual assent in the contract. B) Alexander wins because $1 is inadequate consideration for $10 billion in profits. C) GiantCo wins because the $1 agreement for the rights to inventions was past consideration and thus not enforceable. D) GiantCo wins because this was a bargained-for exchange and consideration need not be of equal value.

D) GiantCo wins because this was a bargained-for exchange and consideration need not be of equal value.

Which of the following is true of the distinction between employee agents and independent contractors? A) If a principal provides the tools, this typically indicates an independent contractor relationship. B) Courts look primarily to federal law in the determination of most agency or independent contractor relationships. C) There is are no formal state penalties in the United States for agency misclassification, the only available remedy is a civil lawsuit. D) The agent is classified based on the level of direction and control that the principal has over the agent.

D) The agent is classified based on the level of direction and control that the principal has over the agent.

Rita defaulted on the loan of her motorhome. She had borrowed the money to purchase the motorhome from Thrifty Bank. Thrifty hired Roger the Repo Man to repossess the motorhome for a fee of $1,000. Roger was told to find the motorhome and take it in whatever manner he thought best so long as he did not break the law. Roger would be classified as A) a principal B) an agent/employee C) a gratuitous agent D) an independent contractor

D) an independent contractor

When an agent agrees to act for the principal, this is known as A) manifestation B) ssertion of control C) apparent authority D) consent

D) consent

Non-Pecuniary rewards do not include: A) country club memberships B) prestigious job titles C) free tickets to sporting events D) retirement benefits E) better office furnishings

D) retirement benefits

When a principal breaches a duty to an agent A) the agent has no legal rights except to terminate the agency relationship B) it terminates the agency by the destruction of the essential subject matter of the relationship C) it terminates the agency relationship by expiration D) the agent generally has the right to recover damages in court

D) the agent generally has the right to recover damages in court


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