Intro to Business Law Unit 1 - Flashcards

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The most important primary source of our law is:

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The U.S. Constitution.

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State constitutions are a primary source of law.

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True

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Any law based on a constitution is called

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Constitutional law

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The U.S. Constitution is

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Supreme

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Hector believes that a law under which he was convicted for a crime violates the Constitution. If ultimately the Supreme Court agrees with him, that law will be declared

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Unconstitutional

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A second primary source of law involves the U.S. ______ and state and local ______

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Congress Legislatures

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The U.S. Congress passes federal statutes. They do not apply to all states.

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False

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The ________ is a uniform law adopted by all states that facilitates commerce.

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Uniform Commercial Code

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Administrative agencies are created to:

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Perform specific government functions.

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The Federal Trade Commission is an example of a

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independent regulatory agency

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Case law is based on the decisions made by those who run administrative agencies.

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False

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Case law is derived from judges' decisions for actual cases.

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True

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The rules, orders, and decisions of federal state, or local government administrative agencies

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Administrative Law

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Laws (statues and ordinances) enacted by the federal, state, and local legislatures.

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Statutory Law

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The laws expressed in the U.S. Constitution and state constitutions.

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Constitutional Law

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Judge-made law.

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Case Law

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Remedies ______ involve specific performance.

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In equity

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Part of the common law tradition relies on the doctrine of

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stare decisis.

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The Latin phrase for the correct answer in the previous question means

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to stand on decided cases.

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One of the important functions of law is to provide

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stability and predictability.

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A precedent is a decision that furnishes an example or authority for deciding subsequent cases involving similar legal principles or facts.

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True.

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A source of law that courts must follow when deciding a case is called a binding authority. A binding authority does NOT include which of the following

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opinions from trusted newspapers.

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Select the order for the following words to form the basic steps in legal reasoning:

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Issue, Rule, Application, Conculsion

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Generally speaking, the Restatements of Law:

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summarize the common law rules followed by most states.

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Li Ang is researching new state inheritance laws. She will NOT bother to investigate which of the following

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restatements of law.

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There is no law higher than the laws created by the government

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Positivist

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Doctrine that have withstood the passage of time help guide us in shaping present laws

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Historical

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Universal law as applicable to all human beings

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Natural law

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Takes into account customary practices and the circumstances surrounding the particular transaction.

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Legal realism

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Drag and drop the correct answers IN ALPHABETICAL ORDER. One way to divide law is into _____ and _________.

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Procedural law substantiate law

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Civil law, as opposed to criminal law, can best be described as:

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The law that governs relations between persons

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Which of the following laws CANNOT be at issue in criminal law?

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A law against not performing an employment agreement

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When Congress passes a law, you can find it in which publication?

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United States Statues at Large

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In the field of legal research, a "citation" is:

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a reference to a publication in which a legal authority can be found.

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The parties to lawsuits are the plaintiff and the defendant. Plaintiffs must always be individual persons.

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False

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_______ is the party who appeals a lower court's decision.

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The appellant

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Whenever a court's opinion is not unanimous, but most of the judges agree with it, is it called a

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majority opinion

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In a particular case, Judge Angle does not agree at all with the other judges' opinions. Which of the following type of opinion will he write?

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a dissenting opinion

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Assume that Congress passes a law establishing a new administrative agency to oversee cyberlaw issues. The agency writes rules to enable it to carry out its duties. The rules written by the agency will be known as a part of

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administrative law.

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Richard is a state appeals court judge. In making judicial decisions, Richard issues rulings that are consistent with precedents established in similar cases within his jurisdiction. Richard is following the principle of

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Stare decisis

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A case comes before a Wisconsin state trial court on the subject of free speech on the Internet. It is a case of first impression, meaning that no case involving the same issue has been decided by the Wisconsin courts. In deciding such a case, it would not be considered proper for the judge to consider

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the judge's personal feelings about the Internet.

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Tyler believes that some laws passed by his state's legislature are bad, and he refuses to comply with them. He believes that there is a universal law above all others that grants rights to all people and that it is above all other laws. Tyler subscribes to what school of jurisprudential thought?

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The natural law school

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Most appellate court judges write opinions in which they give the reasons for their decisions. These opinions are collected and published in volumes of books known as

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reporters

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Monroe is reviewing an appellate case for class and must correctly identify the parties to the case. The party appealing the case is known as the

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appellant

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International law can be defined as a body of law, formed as a result of international customs, treaties, and organizations, that governs relations among or between nations.

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True

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Law that pertains to a particular nation (as opposed to international law)

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National law

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A system of law derived from that of the Roman Empire and based on a code rather than case law

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Civil law system

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An agreement formed between two or more independent nations

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Treaty

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An international law, a term that generally refers to an organization composed mainly of nations and usually established by treaty.

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International organizations

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A major difference between international law and national law is:

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that government authorities enforce national law.

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The U.S. Constitution give the ____ the power "by and with the Advice and Consent of the ____, to make Treaties, provide two-thirds of the Senators present _____."

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President senate concur

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A bilateral agreement is an agreement formed by ____ nations to govern their ____ exchanges

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two commercial

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A multilateral agreement is formed by ____ nations.

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several

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The United States is a member of more than _____ multilateral and bilateral treaties

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100

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The United States is one of the nations with a legal system based on civil law.

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False

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One of the basic difference between a common law and a civil law legal system is that:

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judges in civil systems often actively question witnesses.

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A doctrine that provides that the judicial branch of one country will not examine the validity of public acts committed by a recognized foreign government within its own territory

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act of state doctrine

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A government's taking of privately owned business or personal property without a proper public purpose or an award of just compensation

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confiscation

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The seizure by a government of privately owned business or personal property for a proper public purpose and with just compensation.

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Expropriation

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A doctrine that immunizes foreign nations from the jurisdiction of the U.S. courts when certain conditions are satisfied.

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sovereign immunity

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The term comity means:

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the deference one nation shows for the laws and judicial decrees of another nation

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The act of state doctrine is frequently employed in:

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expropriation cases

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One of the major EXCEPTIONS to the doctrine of sovereign immunity is made when:

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a nation takes actions in connection with the commercial activity in the U.S. or that have a direct effect in the U.S.

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Venezuela passes a law stating that no dollars are allowed to enter the country, such that Americans traveling to Venezuela have to exchange their dollars for Venezuelan's domestic currency at any border crossing. Natalie, a U.S. citizen, files a lawsuit against Venezuela in a U.S. court challenging the legality of this law. Natalie will most likely:

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not prevail because of thee act of state doctrine.

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When a country's government seizes privately owned property of foreign investors without paying just compensation, it is knows as

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confiscation

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When the foreign state has _____ its immunity either ____ or by implication.

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Waived explicitly

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When the foreign state has ___ in commercial activity within the United States or in commercial activity outside the United States that has "a ___ effect in the United States."

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Engaged direct

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When the foreign state has committed a ___ in the United States or has ___ certain international laws.

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tort violated

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Landers, Inc., an American company, agrees to sell copper electric cables to a state-owned company in Ecuador. Landers was given specific manufacturing requirements and had to invest in new machinery to meet them. Once the order was processed, the Ecuadorian electric company repudiated the contract, claiming immunity under the Foreign Sovereign Immunities Act (FSIA). Nonetheless, Landers might prevail in court because:

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of the exception to the FSIA concerning national governments engaging in strictly commercial activities.

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A contract between a seller and a distributor of the seller's products setting out the terms and conditions of the distributorship.

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distribution agreement

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To sell products to buyers located in other countries

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export

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Highlight the four ways in which U.S. domestic firms can engage in international business transactions.

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exporting their goods establishing foreign product facilities licensing technology to existing foreign companies selling franchises to overseas entities

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Microlex, Inc., a U.S. corporation, signs a sales contract with Freres, S.A., a French corporation, in which Microlex agrees to sell Freres $100,000 worth of Microlex products. This is an example of

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direct exporting

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Dunkin Donuts licenses Nadia to use its trademark, trade name, and recipes to produce and sell donuts in Romania. Payment by Nadia will include a set-up fee, plus a small royalty on all revenues generated in Romania. This type of business arrangement is most likely a(n)

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franchise

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In ____ exporting, a U.S. company signs a sales contract with a foreign purchaser that provides for the conditions of shipment and payment for the goods.

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direct

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A U.S. company may establish a specialized marketing organization in a foreign country by appointing a foreign agent or a foreign distributor and this is called ___ exporting.

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indirect

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When a foreign country becomes a big market, the U.S. firm may wish to appoint a _____ located in that country.

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distributor

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A distribution agreement sets out the terms and conditions of the distributorship, such as price, currency of payment, and ____ of payment.

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method

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The main reason that U.S. firms establish manufacturing plants abroad is that:

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in so doing they reduce costs.

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Foreign companies, such as Sony and Nissan, have established U.S. plants to avoid import duties that are imposed on Japanese products entering this country.

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True

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When a U.S. firm establishes a wholly owned subsidiary in a foreign country, the parent company usually

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Remains in the U.S.

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A U.S. firm can expand into international markets through a joint venture.

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True

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Firms investing in foreign nations run all of the following risks:

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expropriation of the property. profits less than anticipated. new taxes imposed. costs that are higher than anticipated. confiscation of the property.

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The provision of the U.S. Constitution that provides that "No Tax or Duty shall be laid on Articles exported from any State" is found in

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Article I, Section 9

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export quotas. ____ sets export quotas on various items, such as grain being sold abroad

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congress

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Restrictions on technology exports. Under the Export Administrative Act of 1979, the flow of technologically ____ products and ___ data can be restricted.

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advanced technical

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Incentives and subsidies. The United States (and other nations) also use ____ and subsidies to ___ exports and thereby aid domestic businesses.

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incentives stimulate

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A status granted through an international treaty by which each member nation must treat other members at least as well as it treats the country that receives its most favorable treatment.

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Normal trade relations (NTR) status

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A tax on imported goods.

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Tarriffs

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An assigned import limit on goods.

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Quotas

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The selling of goods in a foreign country at a price below the price change for the same goods in the domestic market.

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Dumping

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The international organization charged with the responsibility for eliminating trade barriers including tariffs is

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the WTO

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The primary purpose of the North American Free Trade Agreement (NAFTA) is to:

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eliminate tariffs among the U.S., Canada, and Mexico.

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The U.S. government decides to charge $10.25 on every Blu-ray player that is imported. This policy:

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is a legally permitted tariff.

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By means of arbitration clauses in international contracts, the parties agree in advance to be bound by the decision of a specified third party in the event of a dispute.

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True

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A major international convention (treaty) that assists in the enforcement of arbitration clauses is the:

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New York Convention.

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There is a ___ (or recorded) agreement to arbitrate the matter.

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written

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The agreement provides for arbitration in a convention (treaty) ____ nation.

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signatory

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The agreement arises out of a ____ legal relationship.

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commercial

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One party to the agreement is not a U.S. citizen. In other words both parties ____ be U.S. citizens.

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cannot

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When an international sales contract does not have an arbitration clause, but does have a forum-selection clause and a choice-of-law clause, the law suit will always be heard by a court in the country where the plaintiff resides.

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False

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When an international sales contract does not specify a forum-selection and choice-of-law, what usually does NOT occur:

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The litigants will typically face lower legal costs.

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Which section of which act provides for the extraterritorial effect of U.S. antitrust laws?

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Section 1 of the Sherman Act

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Under the Sherman Act, foreign governments cannot be sued for violations.

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False

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Before U.S. courts will exercise jurisdiction and apply antitrust laws, it must be shown that the alleged violation had a ____ on U.S. commerce.

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substantial effect

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Othman is an Arab prisoner held in a U.S. prison. Another prisoner, Habib, attacks and seriously injures Othman. Othman's family in Saudi Arabia files a lawsuit against the U.S. corporation operating the prison. Othman's family may file this lawsuit that alleges a violation of a U.S. treaty and that treaty is the

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Alien Tort Claims Act

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Geo Sox, an American company, agreed to sell copper electric cables to a state-owned company in Nigeria. Geo Sox was given very specific manufacturing requirements and had to invest in new machinery to meet the requirements. Once the order was processed, the Nigerian electric company repudiated the contract, claiming immunity under the Foreign Sovereign Immunities Act (FSIA). However, Geo Sox might prevail in court because

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of the exception to the FSIA concerning national governments engaging in strictly commercial activities.

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Dunkin Donuts, an American company, licenses Olivia to use its trademark, trade name, and recipes to produce and sell doughnuts in Romania. Payment will include a rather large set-up fee plus a small royalty on all revenues generated by the Romanian company. The type of business arrangement Olivia and Dunkin Donuts have is most likely

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a franchise.

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Wai-tung, a Chinese firm, manufactures automobiles. In order to get a foothold in the American market, Wai-tung sells its cars for several thousand dollars below what it charges in China. Wai-tung

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may have antidumping duties imposed on its imported goods.

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Electronic Imports, a U.S. company enters into a contract with E Manufacturing, a company based in China. Both companies have a sign agreement with an arbitration provision, that in the event of any disputes, the matter will be arbitrated in the United States. An issue arises that causes E Manufacturing to breach its agreement with Electronic Imports, and E Manufacturing files suit in a court in China. Electronic Imports would rely on which of the following to enforce its arbitration provision in the agreement?

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The New York Convention

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Habib is an Arab prisoner being held in a U.S. prison. Another prisoner, Aham, attacks and seriously injures Habib. Habib's family in Saudi Arabia wants to file a lawsuit in a U.S. court against the American company that operates the prison for negligently allowing Habib to be injured. If Habib's family wishes to file a lawsuit alleging a violation of a U.S. treaty they may

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be able to bring a lawsuit under the Alien Tort Claims Act

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A common law doctrine under which persons may be held liable for using their property in manner that unreasonably interfere with others' rights to use or enjoy their own property.

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Nuisance

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A statement required by the National Environmental Policy Act for any major federal action that will significantly affect the quality of the environment. The statement must analyze the action's impact on the environment and explore alternative actions that might be taken

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Environmental Impact Statement (EIS)

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A personal injury caused by exposure to a toxic substance, such as asbestos or hazardous waste. Victims can sue for medical expenses, lost wages, and pain and suffering.

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Toxic Torts

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The body of statutory, regulatory and common law relating to the protection of the environment.

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Environmental law

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Most environmental law is based on common law.

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False

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Nuisance laws falls under the category of

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Common law

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Simmons manages a company that hauls toxic chemicals. He has made sure that everything is in compliance with all safety and environmental laws, but one tanker truck is in an accident and spills chemicals into a creek, requiring costly cleaning. Simmons:

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is strictly liable for all harms.

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Attempts at protecting the environment consist of regulations passed by

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the federal, state, and local governments

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The National Environmental Policy Act (NEPA) requires:

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that an environmental impact statement be prepared for major federal actions that significantly affect the environmental quality.

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The primary agency regulating the environment is the

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Environmental Protection Agency

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Under what common law doctrine may persons be held liable if they use their property in a manner that unreasonably interferes with others' rights to use or enjoy their own property?

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Nuisance

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The agency that implements the Clean Air Act of 1963 and its amendments is the

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Environmental Protection Agency

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Subsequent to a 2009 Supreme Court case, the EPA can regulate ___ emissions.

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CO2

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The EPA sets the maximum permissible levels of certain pollutants and the states ____ plans to achieve those standards.

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Formulate

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The Clean Air Act requires the EPA to list all hazardous air pollutions on a ____ schedule.

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Prioritized

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The Clean Air Act requires the major new sources of pollution to use pollution-control _____ that represents maximum achievable control technology to reduce emissions.

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equipment

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For violations of the emission limits under the Clean Air Act, the EPA can assess civil penalties of up to ____ per day.

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$25,000

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Antonin runs a dry cleaning business, which is considered a major polluter. He is in compliance with all Clean Air Act regulations, however. After 30 years in the same location, he opens a new store under the same name. Antonin's new location will be:

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held to the higher environmental standards that are now in place.

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Which of the following is a pollutant that normally enter streams, lakes, and oceans?

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Sediments from soil runoff Organic waste Nutrients Heated water Toxic chemicals

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The major law governing water pollution is the

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Clean water act of 1972

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Any point source emitting pollutants into water must have a permit.

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True

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National ____ (pollution) standards set by the EPA for each industry.

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effluent

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Water ___ standards set by the states under EPA supervision.

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Quality

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A discharge- ____ program that sets water-quality standards to limit pollution.

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permit

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special ___ for toxic chemicals and for oil spills

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Provisions

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Construction grants and ___ from the federal government for publicly owned treatments works, primarily sewage treatment plants.

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loans

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Bay City Water Commission sends its customers an annual printout of information regarding the drinking water it supplies. This information is provided as:

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required by law because Bay city is a water supplier

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Industrial Solutions, Inc., knowingly violates the Clean Air Act and the Clean Water Act by discharging hazardous pollutants. Industrial Solutions is subject to:

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fines and imprisonment of its corporate officers

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The Ocean Dumping Act is a popular names for the:

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Marine Protection, Research, and Sanctuaries Act of 1972

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The Ocean Dumping Act prohibits ocean dumping of all of the following EXCEPT:

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food residue

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Under the Oil Pollution Act, any business that discharges oil into navigable waters or onto an adjoining shore may be liable for cleanup costs as well as damages.

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true

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The law regulating pesticides and herbicides is the:

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Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) of 1947.

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Registered ___ they can be sold

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before

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Certified and used only for ___ applications

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approved

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Used in limited ___ when applied to food crops.

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quantities

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A substance is deemed harmful if human exposure to the substance, including exposure through eating food, results in a risk of one in ____ (or higher) of developing cancer.

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a million

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Violations of FIFRA are only civil.

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false

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Asbestos is regulated by the

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Toxic Substances Control Act

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In 1976, in response to increasing concerns about the effects of hazardous waste materials on the environment, Congress passed the

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Resource Conservation and Recover Act

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The federal legislation governing the cleanup of leaking hazardous waste disposal sites is the

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Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)

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Another name for CERCLA is

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Superfund

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It established an information-gathering and ___ system that enables the government to ___ chemical dumpsites and determine the appropriate action.

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analysis identify

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It authorized the EPA to ____ to hazardous substance emergencies and to arrange for the cleanup of the leaking site ___ if the persons responsible for the problem fail to cleanup the site

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respond directly

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It created a Hazardous Substance Response Trust Fund (also called Superfund) to __ for the cleanup of hazardous sites using funds obtained through taxes on certain businesses

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pay

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It allowed the government to ___ the cost of cleanup from the persons who were (even remotely) responsible for the hazardous substance ____.

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Recover releases

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the ___ owner or operator

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current

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the person who ___ the wastes disposed of at the site

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generated

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the person who ____ the waste to the site

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transported

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the person who ___ or operated the site at the time of the disposal.

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owned

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What happens when a potentially responsible party (PRP) does not cleanup a hazardous waste site?

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The EPA cleans up the site and recovers the costs from other PRPs.

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What is one way for a business to minimize its potential liability under Superfund?

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Regulatory conduct environmental compliance audits of its own operations

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Those who release hazardous substances on land may avoid liability by selling the land to others.

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False

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Sinto Investments is in the process of developing a 300-mile toll road that will run through federal land. Sinto will likely need

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an environmental impact statement.

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Christi Bay Water Commission sends its customers an annual printout of information regarding the drinking water it supplies. This information is provided as

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required by law because Christi Bay is a water supplier.

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Farm and Ranch Supply Co. discovers a cache of an unknown herbicide in a back corner of its warehouse. Farm and Ranch repackages the product, relabeling it as "Farmer's Friend" and stating on the label and in advertisements that it is a new product "guaranteed to kill blackberries." Farm and Ranch has

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violated the FIFRA and is subject to civil and criminal penalties.

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Tiger Stripe owns and operates gasoline filling stations. Patrick's Trucking delivers fuel to Tiger Stripe's storage facility on a regular basis. On one occasion, Patrick fails to pay proper attention to his truck when he is unloading fuel into Tiger Stripe storage tanks, and 1,000 gallons of fuel spills onto the ground. Soon after the spill, Tiger Stripe sells the storage facility to Roy's Fueling Stations. The EPA determines that cleanup of the site is warranted. Under

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CERCLA, Tiger Stripe, Patrick, and Roy's are all potentially responsible parties.

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Ethics can be defined as the study of

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What constitutes right and wrong behavior

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Business ethics does NOT focus on:

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How businesses are treated under international law.

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Investors dissatisfied with profit-maximization theory look beyond profits to consider the triple bottom line. Highlight the three aspects of this concept.

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corporate profits the impact of profits on people the impact of profits on the planet

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The ___ implications of each decision

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legal

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the ___ relations impact

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public

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The safety risks for ___ and employees

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consumers

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The ___ implications

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financial

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Business ethics are consistent only with short-run profit maximization.

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false

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Compliance with the law is sometimes called the _____.

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moral minimum

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You are starting a new company. You want your employees to act ethically. What will you NOT do?

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let employees know that only short run profits matter

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Olivia makes a statement on her Twitter account that casts a negative light on her employer. Her manager fires her for violating her company's social media policy. Olivia claims that federal law prohibits her from being fired. Does she have a valid argument?

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Yes, because federal labor law protects employees' rights to engage in "concerted activities."

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The application of morals and ethics to a situation is usually called ethical ____.

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reasoning

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Outcome-based ethics looks at the impact of decisions on key ______.

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stakeholders

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Every person has certain duties to others, including humans and the planet. ____ ethics is rooted in this principle.

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duty based

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Religious ethical principles allow managers to make decisions with few possible negative consequences.

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false

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One view of duty-based ethics focuses on the principle of rights. Highlight those groups whose rights can be affected by business decisions.

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Consumers of a firm's products and services a firms suppliers a firms owners (shareholders) a firms employees

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The application of the principle of rights, or rights theory, often involves conflicting rights.

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true

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You have to decide how to reduce labor costs by firing some of your workers, who will certainly be harmed. You must balance the interests of employees who have been loyal to the firm for a long time against the interests of _____ .

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your firms shareholders

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Which of the following philosophers is most associated with general guiding principles for moral behavior?

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Immanuel Kant

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Individuals should evaluate their actions in light of the consequences that would follow if everyone in society acted in the same way. This is called the _______

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categorical imperative

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______ is a philosophical theory developed by two British philosophers, Bentham and Mill.

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Utilitarianism

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Upper management wants to fire Gary because he is nonproductive. Using the utilitarian approach to business ethics, management would probably NOT consider

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Gary's fundamental rights.

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Choose the correct order for the following lists of steps involved in a systematic approach to implementing ethical concerns in business.

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inquiry discussion decision justification evaluation

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Managers who set unrealistic production or sales goals decrease the probability that employees will act unethically.

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false

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Lisa owns and manages a small auto-parts store. She hesitates to discuss business ethics with her employees because she wants them to spend more time with the customers and she also doesn't think she should tell them how to behave. Is Lisa going to create an ethical workplace? Why or why not?

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Lisa is unlikely to create an ethical workplace because the attitude of top management influences employee ethics.

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Highlight the act that requires companies to set up confidential systems so that "red flags" can be raised about suspected illegal and unethical business practices.

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The Sarbanse-Oxley Act

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Why is it important to monitor the employment practices of foreign suppliers?

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Because many corporate watch groups will discover and publicize the unethical behavior of your company's foreign suppliers.

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Since the late 1970s, the Foreign Corrupt Practices Act has prohibited U.S. businesspersons from bribing foreign officials to secure beneficial contracts.

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true

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Under the Foreign Corrupt Practices Act, some payments to minor foreign government officials are allowed to accelerate the performance of administrative services.

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true

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Marshall owns and operates a construction firm. He uses inexpensive and low-grade building products and accepts inferior carpentry work from his subcontractors. Nevertheless, Marshall complies with all the city building codes as well as all state and federal laws. Has he fulfilled all of his ethical obligations?

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No, because legal compliance is regarded as the moral minimum.

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Check My Work Ted is the owner and chief executive officer of a business. He recently began an advertising campaign to promote a new product that is regulated by state law. The law is somewhat unclear. Before launching the campaign, he researched the relevant law and consulted with his attorney in an effort to comply with the law. Nevertheless, the attorney general of his state has filed a lawsuit against him for deceptive advertising. Ted's best defense is that

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he acted in good faith

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The upper-level management of Nationwide Sales Corporation wants to fire Andy because he is a nonproductive employee. Using a utilitarian approach to business ethics, management would probably consider

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the costs and benefits of retaining a nonproductive employee

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Patrick, the human resources manager at Acme Company, must decide how to cut personnel costs. This decision will harm employees who are laid off or fired. Patrick must balance the interests of employees who have been loyal to the firm for a long time against the interests of

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Acme's shareholders

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Bribery is acceptable in certain foreign countries. Indeed, U.S. Development, Inc., has found that the only way it can ensure delivery on certain contracts in these countries is to bribe the officials. This is

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permitted by U.S. law if the payment is made to a minor official to speed up administrative procedures.

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___ of creation

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ease

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the __- of the owners

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liability

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tax ___

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considerations

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the ____ to raise capital

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ability

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What is the simplest form of business?

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sole proprietorship

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Pressler wants to be his own boss and wants to start a business. He has to decide which form of business organization to adopt and will likely consider all of the following EXCEPT:

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publicity and public relations

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Celia has convinced Maria to start a new business as a partnership rather than as a sole proprietorship. Celia wants to avoid:

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bearing the burden of all losses and liability

question

Collette is a sole proprietor of a 3-D printing shop. She has considered changing her business organizational structure but cannot find an alternative that would give her the main advantage she enjoys as a sole owner, which is ________.

answer

receives all profits

question

One basic difference between partnership and agency law is that:

answer

each partner has an ownership interest in the firm.

question

When there is no expressed partnership agreement what governs the operation of partnership?

answer

the Uniform Partnership Act

question

A tax return submitted by a partnership that only reports the income earned by the business

answer

Information return

question

Any entity that does not have its income taxed at the level of that entity; examples are partnerships, S corporations, and limited liability companies

answer

pass through entry

question

An agreement by two or more persons to carry on, as co-owners, a business for profit

answer

partnership

question

A ___ of profits or losses.

answer

sharing

question

A joint ___ of the business

answer

ownership

question

An ____ right to be involved in the management of the business.

answer

equal

question

The sharing of both profits and losses creates a legal inference that a partnership exists.

answer

True

question

Under the common law, a partnership was treated only as

answer

an aggregate of its members

question

In all cases, joint ownership of property creates a partnership.

answer

false

question

A partner's profit from the partnership is taxed as individual income to the individual partners.

answer

true

question

Highlight the two fiduciary duties that a partner owes the partnership.

answer

care loyalty

question

Under the UPA in the majority of states, the partners:

answer

are subject to joint and several liability

question

When one partner's relationship with a partnership comes to an end, but the partnership continues to do business, it is known as

answer

dissociation

question

By the partner's ___ giving notice of an "express will to withdraw."

answer

voluntarily

question

By the occurrence of an ____ specified in the partnership agreement.

answer

event

question

By a _____ vote of the other partners under certain circumstances

answer

unanimous

question

By order of a court or arbitrator if the partner has engaged in ____ conduct that affects the partnership business.

answer

wrongful

question

By the partner's declaring bankruptcy, assigning his of her interest in the partnership for the benefit of creditors, or becoming physically or mentally _____, or by the partner's death.

answer

incapacitated

question

Chase, Marla, and Enrique have been operating a chain of self-service laundries as a general partnership for many years. Marla declares bankruptcy. In most states, Marla's bankruptcy will:

answer

cause Marla's dissociation from the partnership.

question

After a partner's dissociation, his or her interest in the partnership must be purchased.

answer

True

question

How is the buyout price of a dissociated partner calculated?

answer

The price is based on the amount that would have been distributed to the partner if the partnership had shutdown on the date of dissociation.

question

In the context of partnerships, an express agreement made at the time of partnership formation for one or more of the partners to buy out the other or others should the situation warrant - and thus provide for the smooth dissolution of the partnership.

answer

Buy-sell agreements

question

The second of two stages involved in the termination of a partnership. Once the firm is dissolved, it continues to exist legally until the process of winding up all business affairs (collecting and distributing the firms assets) is complete.

answer

Winding up

question

The formal disbanding of a partnership. It can take place by acts of the partners; the death of partners; the expiration of a time period stated in a partnership agreement; or judicial decree

answer

dissolution

question

Highlight the four acts that generally cause dissolution of a partnership.

answer

judicial decree, acts of the partners, death of a partner, expiration of time period

question

Any event that makes it unlawful for the partnership to continue its business will result in dissolution.

answer

true

question

After dissolution, the partnership does not continue for even a day.

answer

false

question

Pick the correct order in which partnership assets are prioritized.

answer

payment of debts, including those owned to partner and non partner creditors return of capital contributions and distribution of profits to partners.

question

What happens when, after winding up, the partnerships liabilities are greater than its assets?

answer

The partners bear the losses in the same proportion in which they shared the profits.

question

One licensing another (the franchisee) to use his or her trademark, trade name, or copyright in the sale of goods and services.

answer

Franchisor

question

Any arrangement in which the owner of a trademark, trade name, or copyright under specified conditions or limitations, in the selling of goods and services

answer

franchise

question

One receiving a license to use another's (the franchisor's) trademark, trade name, or copyright in the sale of goods and services.

answer

Franchisee

question

Highlight two common examples of distributorship-type franchising arrangements.

answer

automobile dealerships beer distributorships

question

Chain-style franchises are common in manufacturing.

answer

false

question

Bonni wants to go into business for herself and knows she can start a corporation over the Internet. Instead she chooses to invest in a new local Taco Bell restaurant, which is an example of

answer

chain-style business operation franchise

question

written or electronically recorded disclosures treating the range of goods and services included in the value and estimate ___ of the franchise

answer

profitability

question

To prevent deception, all representations made to prospective franchisees must have a ____ basis at the time they are made

answer

reasonable

question

If a franchisor provides projected earnings, the franchisor must indicate whether they re based on ___ data or hypothetical examples.

answer

Actual

question

If actual data are used to make earning projections, the franchisor must disclose the ____ of its existing franchises that have achieved this result

answer

percentage

question

Franchisors must ___ termination, cancelation, and renewal provisions of the franchise contract.

answer

explain

question

Highlight the two requirements that state statutes and case law governing franchises tend to emphasize the most:

answer

good faith fair dealing

question

Pick which one oversight action franchisors rarely, if ever, undertake:

answer

when employees can take their breaks.

question

One of the reasons state governments and the federal government have passed statutes regulating franchises is to:

answer

protect perspective franchisees from dishonest franchisors and franchise termination without good cause.

question

Typically, state law determines the duration of a franchise.

answer

false

question

What is the most common termination statement in a typical franchise agreement?

answer

that franchise can be terminated for cause with grounds for termination

question

Most franchise litigation involves claims for wrongful _____.

answer

termination

question

Typically the franchise ____ little for the business on termination

answer

recieves

question

Federal and state laws attempt to protect franchisees from the _____ and unfair termination of their franchises.

answer

arbitrary

question

Even when a contract contains a notice-and-cure provision, a franchisee's breach of the duty of honesty and fidelity may be enough to allow the franchisor to terminate the franchise.

answer

true

question

To determine whether a franchisor has acted in good faith when terminating a franchise agreement, what do the courts attempt to do?

answer

Attempt to balance the rights of both parties.

question

Marsha is a sole proprietor of a small quilting shop. She has considered changing her business structure, but she cannot find an alternative structure that would give her the main advantage she enjoys as a sole owner. The major advantage is that she

answer

receives all the profits.

question

Rubina convinced Mariah to start a business with her in a partnership rather than a sole proprietorship. The disadvantage of a sole proprietorship that Rubina wants to avoid is

answer

bearing the burden of all losses and liabilities.

question

Roy, Andy and Tim are partners in a general partnership, and have all been sued individually based on a breach of contract relating to the partnership. The judge dismisses the lawsuit on the basis that the plaintiff should have filed a lawsuit only against the partnership under the UPA as an

answer

entity.

question

Chance, Justina, and Rich have been operating a chain of self-service laundries as a general partnership for three years. At the beginning of the fourth year, Justina declares bankruptcy. Under the version of the Uniform Partnership Act (UPA) that is in effect in most states, Justina's bankruptcy will

answer

cause Justina's dissociation from the partnership.

question

Anna and Jennifer start a new business as a partnership, and agree from the beginning that if one of the partners wants to leave the partnership at a later date, that the other partner will purchase the leaving partner's ownership interest at book and amortized over a five-year term. This type of agreement is referred to as a

answer

buy-sell agreement

question

Tina designed a new type of handbag that has proven to be very popular. She begins manufacturing these handbags on a large scale and considers her options for setting up a business to market the bags nationwide. She opts for a distributorship franchise under which she will

answer

license distributors to sell her handbags

question

A limited liability company (LLC) combines the tax characteristics of:

answer

a partnership with the liability of a corporation.

question

A hybrid form of business enterprise that offers the limited liability of the corporation but the tax advantages of a partnership

answer

Limited liability company

question

The term used to designate a person who has ownership interest in a limited liability company

answer

Members

question

The document filed with a designated state official by which a company is formed

answer

Articles of organization

question

The Uniform Limited Liability Company Act (ULLCA) has now been adopted by almost all of the states.

answer

True

question

One of the great benefits of LLCs, and one that helps promote investment, is the fact that:

answer

Foreign investors are allowed to become LLC memebrs

question

In an LLC, a member is someone who:

answer

has ownership interest in an LLC and limited liability for LLC debts

question

When a group of members joint to form an LLC, the name of the organization must:

answer

include the words "limited liability company" or the letters LLC

question

LLCs are legal entitles apart from their owners and as such can sue or be sued, enter into contracts, and hold title to property.

answer

True

question

Which of the following is NOT typically a part of the contents of an LLC's articles of organization filed with the central state agency?

answer

the hours of operations of the business

question

Marsden wants to start a new company with different partners to explore oil-drilling opportunities in several states. When discussing the LLC form, Marsden's attorney mentions that one of the biggest disadvantages of the LLC form is that:

answer

there is no uniform law governing LLCs in the United States

question

Highlight the two options for management of an LLC.

answer

member-managed manager-managed

question

Xavier consults with his attorney about the management of his LLC. He has chosen the manager-managed LLC form of management in which:

answer

the managers may be members, nonmembers, or a combination of both.

question

Typically, managers in a manager-managed LLC owe fiduciary duties to the ________.

answer

LLC and its members

question

The events causing a member to be dissociated from the LLC include _____ withdrawal, expulsion by members or by court order, incompetence, and death.

answer

Voluntary

question

If a member dies or otherwise dissociates from an LLC, the LLC business may _______ .

answer

continue

question

When a member dissociates from an LLC he or she loses the right to ______ in management and the right to act as an agent for the LLC.

answer

participate

question

Generally, a dissociated member has no right to force the LLC to dissolve.

answer

true

question

Upon the dissolution of the LLC, which member may participate in the winding up process?

answer

any members who did not wrongfully dissociate

question

Choose the order in which the proceeds from the sale of an LLC's assets are distributed.

answer

payoff all debts to creditors, including members who are creditors members' capital contribution returned anything left over distributed to members in equal shares

question

Upon dissolution of an LLC, all assets must be sold immediately.

answer

false

question

A form of partnership that allows professionals to enjoy the tax benefits of a partnership while limiting their personal liability for the malpractice of other partners

answer

limited liability partnership (LLP)

question

A limited liability partnership (LLP) in which the majority of the partners are persons related to each other, essentially as spouses, parents, grandparents, siblings, cousins, nephews, or nieces. All of the partners must be natural persons or persons acting in a fiduciary capacity for the benefit of natural persons.

answer

family limited liability partnership (FLLP)

question

The two categories of enterprises for which a limited liability partnership (LLP) is especially attractive are:

answer

professional services and family businesses.

question

LLPs must be formed and operated in compliance with federal law.

answer

False

question

What is the major advantage of an LLP?

answer

It limits the personal liability of partners to only their own wrongful acts.

question

The family limited liability partnership (FLLP), is most often used in ______.

answer

agriculture

question

The basic document filed with a designated state official by which a limited partnership is formed.

answer

Certificate of limited partnership

question

A partnerships consisting of one or more general partners (who manage the business and are liable to the full extent of their personal assets for debts of the partnership) and one or more limited partners (who contribute only assets and are liable for only to extent of their contributions).

answer

Limited partnership

question

A type of limited partnership. The difference between a limited partnership and an LLLP is that the liability of the general partner in an LLLP is the same as the liability of the limited partner. That is, the liability of all partners is limited to the amount of their investments in the firm.

answer

Limited liability limited partnership

question

In order to form a valid limited partnership (LP), the partnership must:

answer

file a certificate of limited partnership

question

Generally speaking, a limited partnership will be dissolved if:

answer

a general partner goes bankrupt.

question

The formation of both a traditional partnership and a limited partnership requires a public and formal proceeding that must follow statutory requirements.

answer

false

question

In a limited partnership, the liability of a limited partner is:

answer

limite to the capital contribution

question

What happens if a limited partner in a limited partnership participates in management?

answer

The limited partner becomes just as liable as a general partner to any creditor

question

Mack is an oil executive. He wants to start a new company with different partners to explore some drilling opportunities. His attorney advises him about the various business forms. When discussing the LLC form, his attorney mentions that one of the biggest disadvantages of the LLC form is that

answer

there is no uniform law governing LLCs in the United States.

question

Xavier consults with an attorney and some business acquaintances from the Chamber of Commerce about the management of his LLC. He is told that management may take one of two forms, a member-managed LLC or a manager-managed LLC. In the second form

answer

the managers may be members, nonmembers, or a combination of both.

question

Matt and Chad for an LLC, and Matt later decides to withdraw as a member. They do not have a provision in their operating agreement regarding withdrawal of a member, but they do live in a state that has adopted the ULLCA, which means that

answer

the LLC must purchase Chad's interest at fair value within 120 days.

question

Doug, Frank and Sarah want to form an entity for their new accounting firm, and want to ensure that each avoids personal liability for the malpractice of the other partners, so they should form

answer

a limited liability partnership.

question

Doug, Frank and Sarah want to form an entity for their new accounting firm, and want to ensure that each avoids personal liability for the malpractice of the other partners, so they should form

answer

a limited liability partnership.

question

Doug, Frank and Sarah want to form an entity for their new accounting firm, and want to ensure that each avoids personal liability for the malpractice of the other partners, so they should form

answer

a limited liability partnership.

Intro to Business Law Unit 1 – Flashcards

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