1. What is legal is not necessarily ethical and what is ethical is not necessarily legal.

True

False 

2. The agency problem in corporate governance is about how to get managers’ interests well aligned with the shareholders’ interests.

True

False 

3. According to utilitarianism, _____.

results, not rules, are emphasized

ethical action arises from doing one’s duty

duties are defined by rational thought

emphasis is on what is the fair way to distribute goods among a group of people

people give up certain rights to government in exchange for security

4. Which of the following is true according to Aristotle and the Virtue theory?

Aristotle believed that as all activity was aimed at some goal or perceived good, no ranking was required among those goals or goods.

Aristotle rejected wealth, pleasure, and fame as the distinguishing feature of humans as opposed to other species.

Happiness is living according to passive use of reason.

The emphasis on virtue theory has gradually been reducing while more attention is being given to the utilitarian and deontological approaches to ethics.

Happiness cannot be associated with reason.

5. The manager’s fiduciary duty refers to _____.

the duty of managers to maximize returns to employees

the legally prescribed duties which make their employment possible

the moral duty managers have to act as responsible agents to the owners

managers resisting hostile takeover bids

managers managing by number

6. _____ helps companies embrace the idea that profit and prosperity must go hand in hand with social justice and environmental stewardship.

Social contract

Stakeholder theory

Conscious capitalism

Virtue ethics

Deontology

7. It is possible to become someone’s partner without intending to or even realizing that partnership has been created.

True

False 

8. Partnership is limited to a direct association between human beings.

True

False 

9. A _____ is the association of two or more people carrying on a business as co-owners for profit.

limited liability company

trust

partnership

proprietorship

agency relationship

10. The concept of a business firm as a legal person, with existence and accountability separate from its owners stems from _____.

entity theory

aggregate theory

concession theory

conduit theory

appropriation theory

11. The Uniform Partnership Act and the Revised Uniform Partnership Act do not dictate what relations among partners must be.

True

False 

12. The Revised Uniform Partnership Act (RUPA), generally, requires the judgment creditor to exhaust the partnership’s assets before going after the separate assets of a partner.

True

False 

13. For tortuous acts, the partners are said to be jointly and severally liable under both Uniform Partnership Act (UPA) and Revised Uniform Partnership Act (RUPA), and the plaintiff may separately sue one or more partners.

True

False 

14. _____ is the highest duty of good faith and trust, imposed on partners as to each other and the firm.

Embezzlement duty

Larceny duty

Escrow duty

Escheat duty

Fiduciary duty

15. A court order that directs a partnership to pay a partner’s judgment creditor the distribution that the partner would normally receive is called _____.

doctrine of estoppel

order of relief

proof of claim

performance bond

charging order

16. Sub-S corporations, limited liability partnerships, and limited liability limited partnerships are all entities.

True

False 

17. The partnership law imposed personal liability on the partners because people tend to be more careful when they are personally liable for their own mistakes and bad judgment.

True

False

18. The original source of limited partnership law is the _____ that was drafted in 1916.

Uniform Limited Partnership Act (ULPA)

Revised Uniform Limited Partnership Act

National Conference of Commissioners on Uniform Laws

Companies Act

Limited Liability Partnership Act

19. It is required that the limited liability company (LLC) members file a _____ with the secretary of the state during its creation.

certificate of stare decisis

certificate of organization

certificate of ultra vires

certificate of derivative action

certificate of parens patriae

20. When the limited liability company (LLC) is manager managed, _____.

all members have actual and apparent authority to bind the LLC to contracts on its behalf

all member votes have equal weights

non-manager members also have duty of care and fiduciary duty

only managers have the legal authority to bind the firm

firm decisions that are extraordinary can be taken only by its manager members

21. The corporate veil creates a separate, legally recognized corporate entity and shields the people behind the corporation from personal liability.

True

False 

22. Failure to follow corporate formalities may subject stockholders to personal liability.

True

False 

23. Choosing the particular venue in which to incorporate is the first critical decision to be made after deciding to incorporate.

True

False 

24. Public corporations are also known as _____ corporations.

closely held

S

nonprofit

professional

municipal

25. An officer can be held strictly liable for his corporation’s violation of the regulations, regardless of the fact that he or she had no knowledge about it.

True

False 

26. Shareholders are permitted to adopt, amend, and repeal the corporation’s bylaws.

True

False 

27. The Sarbanes-Oxley Act of 2002 states that a corporate officer or a director cannot be fired without a particular clause.

True

False 

28. A majority of the members of the board constitutes a quorum, unless the articles of incorporation specify a larger number.

True

False 

29. Who among the following have little decision making authority in a corporation?

A company’s director

A company’s employee

A company’s manager

A company’s officer

A company’s stockholder

30. The _____ doctrine is a doctrine holding that certain legal consequences attach to an attempt by a corporation to carry out acts that are outside its lawful powers.

promissory estoppel

delectus respondeat

family purpose

ultra vires

inter vivos

31. Drafters of the Sherman Act based the act on a common-law policy against monopolies and other infringements on competition.

True

False 

32. The Clayton Act was enacted in 1914 to plug the loopholes in the Sherman Act.

True

False 

33. Like the Sherman Act, the Federal Trade Commission Act is a civil statute, involving no criminal penalties.

True

False 

34. Possessing a monopoly is not per se unlawful.

True

False 

35. The Sherman Antitrust Act of 1890 was formed to:

forbid combinations in restraint of trade and monopolizing

forbid employers from interacting with workers in the private sector who create labor unions

limit the formation of yellow-dog contracts

set enhanced standards for all U.S. public company boards, management and public accounting firms.

limit the formation of runaway shop agreements

36. _____ is a remedy used to break up a firm into smaller, independent units, where the firm has exercised its monopoly power.

Amalgamation

Divestiture

Arson

Money laundering

Abatement

37. The first principle of Federal Trade Commission action is that it gauges deceptive acts and practices as interpreted by the general public, not by the more sophisticated.

True

False 

38. If a fact not disclosed has a bearing on a consumer’s decision whether to purchase the product, its omission might be tantamount to deception.

True

False 

39. The Federal Trade Commission can order a company to remove or modify a deceptive trade name.

True

False 

40. In the _____ Act of 1912, Congress for the first time empowered a federal agency to investigate and deter acts of unfair competition.

Federal Protective Service

Federal Emergency Management

Federal Trade Commission

Federal Law Enforcement Training

Federal Housing Administration