The doctrine of separation of powers basically requires that:

	a. the authority of state governments is superior to that of the federal government.
	b. each branch of the government plays its own role in governing.
	c. the authority of the president (the executive branch) is distinct from and superior to the other branches.
	d. each house of the US Congress has its own legislative authority.

.

With regard to the powers of the president, the US Constitution:

	a. has provided clear and unambiguous limits.
	b. requires the president to consult with Congress before making major foreign policy decisions.
	c. is considered deliberately ambiguous.
	d. does not allow the president to use military force without congressional authorization.

.

Under a federal system of government:

	a. power is centralized within the national government.
	b. power is held by independent states.
	c. the central government is a creation of regional governments.
	d. power is divided between a central government and local governments.

.

The Supreme Court of the United States has held that in the American federal system:

	a. the federal government has supremacy over the states.
	b. the states have supremacy over the federal government.
	c. the authority of the states and of the federal government is equal.
	d. the states have no authority except what is granted by Congress.

.

A rule of law system is a system:

	a. under which the government and people are bound by laws.
	b. that originated in the United States.
	c. allows predictability and the restraint of government action.
	d. Answers A and C are both correct.

.

Examples of how the law affects finance include which of the following?

	a. The Truth in Lending Act
	b. Title VII of the Civil Rights Act
	c. Regulation by the Securities and Exchange Commission
	d. Answers A and C are both correct.

.

What is the most important role of the Supreme Court of the United States?

	a. To interpret the US Constitution
	b. To make new laws
	c. To administer and enforce laws
	d. None of the above answers is correct.

.

What do US District Courts mainly serve as?

	a. Appeals courts
	b. Administrative courts
	c. Trial courts
	d. Criminal courts

.

The discovery process in litigation generally includes which of the following?

	a. The filing of pre-trial motions
	b. Voir dire
	c. Requests for the production of written communications
	d. The filing of pleadings

.

A motion by which the defendant in a trial argues that even if one were to admit that everything in the complaint is factually true, that does not lead to legal liability, is called a motion:

	a. to dismiss for failure to state a cause of action.
	b. for judgment on the pleadings.
	c. to dismiss based on the statute of limitations.
	d. for summary judgment.

.

At the trial stage of a legal case, which of the following can occur?

	a. The case can be dismissed based on the statute of limitations.
	b. The case can be dismissed for failure to state a cause of action.
	c. The judge can issue a judgment notwithstanding the verdict.
	d. Interrogatories may be submitted.

.

Negotiation, arbitration, and mediation are:

	a. central to the pre-trial phase of litigation.
	b. part of the appeal process after trial.
	c. methods of alternative dispute resolution.
	d. all generally required in the litigation process.

.

A sole proprietorship is a form of business in which:

	a. the business offers shares of stock to owners.
	b. owners are not liable for the debts of the business.
	c. the owner and the business are taxed separately.
	d. the owner and the business are legally identical.

.

Which of the following business entities offer limited liability?

	a. Sole proprietorships
	b. General partnerships
	c. Corporations
	d. None of the above answers is correct.

.

As a business entity, a corporation:

	a. is legally identical to its owners.
	b. is legally separate and distinct from its owners.
	c. has liability characteristics similar to a sole proprietorship.
	d. has liability characteristics similar to a partnership.

.

Which of the following is a characteristic of a limited liability company?

	a. It is a hybrid form of business organization.
	b. Its owners are generally liable for debts of the entity.
	c. It has the same liability characteristic as general partnerships.
	d. It is taxed like a corporation.

.

In filing articles of incorporation with a state's corporations division, which of the following MUST the filer do?

	a. List the name of all executive officers
	b. Explain in exact detail the purpose of the corporation
	c. State the price at which shares of stock will be offered
	d. List an agent for service of process

.

In comparison with articles of incorporation, a certificate of formation filing generally differs because it requires the filer to:

	a. state whether the management of the entity will be vested in a manager or managers.
	b. state the name that will be given to the business organization.
	c. state a purpose for the formation of the business organization.
	d. provide the name and address of an agent for service of process.

.

Which of the following elements are required to form a contract?

	a. Offer, acceptance, and exchange of money
	b. Offer, acceptance, and consideration
	c. Offer, counter-offer, and mutual assent
	d. Invitation to bargain, offer, and consideration

.

If someone offers to sell you an iPad for $250 and you make a counter-offer of $150:

	a. your counter-offer will be considered an acceptance.
	b. your counter-offer binds the offeror.
	c. your counter-offer serves as a rejection of the seller’s offer.
	d. you can still bind the offeror by later accepting the original offer of $250.

.

Consider the following scenario and choose the correct answer from the options below.

You accept an employment contract for a term of one year with XYZ Corp. to design widgets, with a compensation of $75,000 for the year. Three weeks following your acceptance, your project supervisor presents you with a new contract that includes the requirement that you make coffee every morning.

If you sign the new contract, what will be the likely result?

	a. You will be bound to the new contract because you accepted the initial offer.
	b. You will not be bound to the new contract because your acceptance of the initial contract does not mirror the current offer.
	c. You will be bound to the new contract because the subject matter of the contract is legal.
	d. You will not be bound to the new contract because no additional consideration has been provided.

.

You are offered an iPad for $250. You respond by telling the offeror, "I agree to buy the iPad for $250 if it does not rain tomorrow." What is the likely result of your statement in terms of whether this interaction constitutes a contractual agreement?

	a. There is no contract because the consideration is illusory.
	b. There is a valid contract because the consideration is valid.
	c. There is no contract because you have made a counter-offer.
	d. There is a valid contract because you will suffer a legal detriment.

.

Consider the following scenario and choose the correct answer from the options below.

You are having your kitchen remodeled. You hire a contractor to put in new cabinets, tile the floor, and paint the walls green. When the contractor is done, you review the work and find that the contractor has painted the walls blue.

What will you likely need to do as a result of this scenario?

	a. You will not have to pay the contractor because he or she has breached the contract.
	b. You will have to pay the contractor the contract price, less the costs of repainting, due to the principle of substantial performance.
	c. You will have to pay the contractor because the error amounts to a material breach.
	d. You will have to pay the contractor because the breach is not material.

.

Performance to the standard of personal satisfaction is:

	a. never enforceable.
	b. enforceable in service contracts.
	c. enforceable if the circumstances suggest that such a high standard is reasonable.
	d. enforceable if the contract explicitly requires it.

.

In order to be considered negotiable, an instrument must meet which of the following requirements?

	a. It must be in writing and must be for a fixed or indefinite amount of money.
	b. It must be signed by the maker or drawer and must contain either a conditional or unconditional promise or order to pay.
	c. It must be an oral or written agreement with an unconditional promise or order to pay.
	d. It must be signed by the maker or drawer and must be payable to order or bearer, unless it is a check.

.

A negotiable instrument must be signed by the maker or drawer. In practice, this means that:

	a. any symbol used with intent to authenticate the writing is acceptable.
	b. the signature must be executed in personal handwriting.
	c. a written personal signature must follow the terms of the instrument.
	d. only handwritten or stamped signatures are acceptable.

.

Under the UCC, an instrument will not be negotiable if:

	a. it refers to another writing.
	b. it states an express condition.
	c. payment is limited to being from a specific source or fund.
	d. All of the above answers are correct.

.

In order to meet the requirement that the secured party gives value for a security interest to attach, a creditor:

	a. must pay money.
	b. may accept delivery under a pre-existing contract for purchase.
	c. may provide any consideration that will create a valid contract.
	d. Answers B and C are both correct.

.

Article 9 of the Uniform Commercial Code (UCC) governs security interests in all of the following categories EXCEPT:

	a. Goods
	b. Intangible property
	c. Land
	d. Indispensable paper

.

Why must a secured party perfect the security interest?

	a. To prevent subordination to the rights of later lien-holders
	b. To allow the creditor to repossess the collateral
	c. To prevent others from learning about the security interest
	d. To ensure that there is an authenticating record

.

Title VII of the Civil Rights Act of 1964 allows discrimination based on which demographic category?

	a. Race
	b. Religion
	c. Seniority
	d. Sex

.

Fill in the blank to complete the statement below.

_____________________ impose/s on employers a general duty to provide a place of employment free from hazards that are likely to cause death or serious physical harm.

	a. Title VII of the Civil Rights Act
	b. The Fair Labor Standards Act
	c. Workers compensation laws
	d. The Occupational Safety and Health Act

.

Under common law, an employee who does not have an employment contract:

	a. can be fired at any time.
	b. is protected from being fired by federal law.
	c. is treated no differently from an employee who does have a contract.
	d. cannot be discriminated against in employment.

.

Consider the following scenario and choose the correct answer from the options below.

You go to a job interview for a new position at a company. The position is not subject to a written contract. The Human Resources manager says the company will offer you an initial compensation of $40,000 annually. However, when you receive your first paycheck, you find that you are making only $30,000 annually.

If you consider taking legal action as a result of this pay discrepancy, which of the following will be a likely result of this scenario?

	a. You will not have a cause of action because you are an at-will employee.
	b. You may have a cause of action for an enforceable oral promise.
	c. You will not have a cause of action because employment contracts must be in writing.
	d. You may have a cause of action because this situation goes against public policy.

.

According to the National Labor Relations Act, workers participating in interstate commerce:

	a. are at-will employees.
	b. can be fired for attempting to form a union.
	c. have the right to bargain collectively.
	d. cannot engage in concerted activities in violation of antitrust laws.

.

Which of the following is one of the six unfair labor practices of unions prohibited by the Taft-Hartley Act?

	a. Collective bargaining
	b. Union organizing
	c. Strikes
	d. Secondary boycotts

.

What type of property includes land, as well as certain things attached to land?

	a. Real property
	b. Personal property
	c. Chattel
	d. Fungible property

.

In addition to land, what can real property include?

	a. Certain things attached to land
	b. Subsurface rights
	c. Plants and trees severed from the land
	d. Answers A and B are both correct.

.

What is chattel?

	a. Intangible personal property
	b. Moveable tangible personal property
	c. Property that can easily be substituted by other property
	d. Real property

.

A finder of personal property may claim ownership of the property if the property has been:

	a. Lost
	b. Mislaid
	c. Abandoned
	d. None of the above answers is correct.

.

A trademark:

	a. is invalid if it becomes associated with a class of goods.
	b. remains valid forever.
	c. must refer to a class of goods.
	d. is invalid if it refers to a specific producer or origin.

.

One common defense to a claim of patent infringement argues that:

	a. the patent is only a business method patent.
	b. the patent is not valid.
	c. the patent is for a living thing and therefore is invalid.
	d. Answers A and C are both correct.

.

If a tortfeasor knows with substantial certainty that certain consequences will result from his or her act, the tort he or she is liable for is:

	a. Negligence
	b. Strict liability
	c. An intentional tort
	d. A breach of contract

.

In an action for negligence, if the plaintiff proves that the defendant has had (1) a duty of care, (2) a breach of that duty, and (3) causation, he or she will still have to prove:

	a. Intent
	b. Recklessness
	c. Strict liability
	d. Injury

.

In strict liability, any retailer, wholesaler, or manufacturer is strictly liable if it:

	a. sells an unreasonably dangerous product.
	b. breaches a duty of care.
	c. sells a product with an intent to harm someone.
	d. sells a product to someone who has assumed the risk.

.

Why must businesses be vigilant against white-collar crime?

	a. White-collar crime generally involves violence.
	b. There is no absolute way to identify those who might turn toward criminal behavior in the workplace.
	c. Such crime involves typical street crimes, such as burglary or robbery.
	d. White-collar crimes are person-to-person crimes.

.

Fill in the blanks to complete the statement below.

The burden of proof in a criminal case is ______________, while the burden of proof in a civil tort case is generally ________________.

	a. preponderance of the evidence; beyond a reasonable doubt
	b. clear and convincing evidence; preponderance of the evidence
	c. beyond a reasonable doubt; preponderance of the evidence
	d. beyond a reasonable doubt; clear and convincing evidence

.

When someone takes property that was in his or her possession but that he or she does not own and converts it to his or her own use, what crime has that person committed?

	a. Larceny
	b. Operating a Ponzi scheme
	c. A RICO violation
	d. Embezzlement

.

Fill in the blank to complete the statement below.

The most significant impact of the _______________________ is the requirement that federal agencies prepare an environmental impact statement in every recommendation for or report on proposals for legislation, as well as whenever undertaking a major federal action that significantly affects environmental quality.

	a. The National Environmental Policy Act
	b. The Clean Water Act
	c. The Marine Protection, Research, and Sanctuaries Act
	d. The Resource Conservation and Recovery Act

.

Fill in the blank to complete the statement below.

The _______________________ governs private industry and imposes stringent standards on the discharge of pollutants into waterways and publicly owned sewage systems.

	a. The Environmental Protection Act
	b. The Clean Water Act
	c. The Marine Protection, Research, and Sanctuaries Act
	d. The Resource Conservation and Recovery Act

.

What did the two most important sections of the Sherman Antitrust Act do?

	a. They required a partnership between government and business.
	b. They focused on government-business cooperation in order to regulate trade.
	c. They prohibited combinations in restraint of trade and monopolizing.
	d. They established the Federal Trade Commission and gave it regulatory authority.

.

In order to comply with the Securities Act of 1933, a company issuing securities to the public must generally register the securities with the Securities and Exchange Commission, as well as:

	a. demonstrate that there is an expectation of profit.
	b. undergo a merit review.
	c. demonstrate that the offering is fair and just and will provide a fair return.
	d. disclose material information about the offering.

.

As a result of the Sarbanes-Oxley Act, public companies:

	a. have been required to take on significant regulatory obligations.
	b. may employ any auditors they choose.
	c. are required to have independent audit committees.
	d. Answers A and C are both correct.

.

Consider the following scenario and choose the correct answer from the options below.

An executive of ABC Corporation, a publicly traded corporation, is presented with the company's financial statements for certification. She notices that some of the debts of the company have been assigned to shell companies in an attempt to hide the company's debt and create the appearance that the company has a higher income than it actually does.

If the executive certifies the financial statements, she may face a maximum of:

	a. 20 years in prison
	b. 15 years in prison
	c. 10 years in prison
	d. 25 years in prison

.

A key component of recent corporate governance reforms has been:

	a. the adoption of the Sarbanes-Oxley Act.
	b. the voluntary adoption of reforms by public corporations.
	c. action by independent auditors to reign in abuses.
	d. None of the above answers is correct.

.

In light of the Sarbanes-Oxley Act, _______________________ is/are required to take a more active role in corporate governance within companies.

	a. senior finance executives
	b. shareholders
	c. the audit committee
	d. Answers A and C are both correct.

.

Consider the following scenario and choose the correct answer from the options below.

A corporation recently adopted in-depth regulatory compliance guidelines. To oversee the implementation of the guidelines, the company has assigned responsibility to a middle manager who is also responsible for overseeing the company's extensive team of Northwest region sales representatives. The middle manager has not been given a raise in her compensation, nor an increased budget, for her new duties.

How would you assess the company's compliance efforts as described above?

	a. The company is not meeting its obligations. Compliance oversight should be assigned to a senior executive with adequate time, financial resources, and board access – not to a middle manager.
	b. As long as the compliance efforts address all high-priority areas, the company is meeting its obligations.
	c. The company has met its obligations by appointing an officer to oversee ethics and compliance.
	d. The company’s compliance success depends on the middle manager. The middle manager must set the correct tone in these efforts. If she does, the program will be a success. If she does not, it will fail.

.

DEF Corporation has just issued an ethics code. The code addresses the company’s responsibilities to its employees, shareholders, suppliers, and customers. What other group should the code address?

	a. Competitors
	b. The community at large
	c. The government
	d. Executive officers

.

An important goal of a regulatory compliance program is to:

	a. protect corporate officers from liability.
	b. reduce the need for a corporation’s board to take action.
	c. promote board action when red flags arise.
	d. ensure that the goals of the board and the audit committee are the same.

.

Which of the following might raise an ethical red flag for a corporation’s board?

	a. Low levels of litigation against the corporation
	b. The audit committee exercising direct responsibility for the appointment of independent auditors
	c. A thorough review of a potential issue, followed by the decision that there is no problem
	d. The creation of a “culture of fear” that penalizes internal debate

.