1. What is the purpose of the Bill of Rights in the U.S. Constitution?

A. To establish a division of power between the branches of government

B. To define the relationship between the states

C. To create and establish a basic foundation of individual liberties

D. To clearly organize the branches of government

2. Select the true statement about statutory law.

A. At the federal level, the President has no power whatsoever over the creation of statutory law.

B. Congress may enact statutory law in any area it so chooses.

C. Statutes at the state level are binding on all states.

D. Statutes are formed by democratically elected legislative bodies, subject to a system of checks and balances.

3. Knowledge of the __________ minimizes a business's liability exposure when making employment decisions.

A. Securities and Exchange Commission

B. Federal Trade Commission

C. Sarbanes-Oxley Act

D. Civil Rights Act

4. Which level of state court has the right to select which cases it wishes to hear?

A. Supreme court

B. General jurisdiction court

C. Intermediate appellate court

D. Limited jurisdiction court

5. Select the example where the court has established personal jurisdiction over the defendant.

A. Aisha, a resident of New York, is visited by a process officer at her workplace in New York City and delivered a summons to appear in court in Maryland. The lawsuit against her relates to property damage that occurred in a home she rented in New Jersey, which is owned by a woman from Maryland.

B. Frank, an accountant, is suing a client for unpaid bills. The client is located in Mississippi, and Frank lives and works in Virginia. Frank initiates his lawsuit in his home state, because he knows many of the state judges.

C. Miguel is being sued by an acquaintance of his over unpaid debts. Both Miguel and the plaintiff are residents of Colorado. Miguel has not been personally visited by a process server with a summons to appear in court, but he did receive one in the mail at his home.

D. Drew is being sued by a man who claims that Drew committed slander by speaking ill of him. Drew lives in Oregon, but the man is from Texas. Drew has received a summons ordering him to appear in court in Texas to respond to the complaint.

6. A 32-year-old woman accuses her business partner of embezzlement, and the case goes to trial. The trial results in a directed verdict.

When in the trial process did this occur?

A. Before the jury retired to deliberate the facts of the case

B. After the jury issued its unanimous verdict

C. Before jury selection began

D. Immediately following jury selection

7. The new CEO of a large coffee corporation makes fighting sexual harassment a cornerstone of the company's culture after a series of embarrassing incidents involving several of the company's managers are leaked to the media. The corporation drafts a new code of ethics with an expanded set of policies related to sexual harassment, creates a series of mandatory workshops for its workforce, and fires the managers involved in the incidents.

Consider what you have learned about the factors that impact corporate culture. What is the ethical strength of the corporation in the example?

A. Weak, because this focus on matters of social justice has no place in capitalism.

B. Strong, because the CEO is setting expectations for ethical behavior and holding violators accountable.

C. Weak, because the CEO should have cracked down on the employees who were leaking information to the media as well.

D. Strong, because the corporation must show that it has an ongoing process to discourage wrongdoing in order to avoid legal action.

8. Which of the following is a consideration when choosing a form of business organization?

A. The level of difficulty and cost associated with establishing the business entity

B. Whether the business organization will turn a profit

C. The level of motivation among the founders for the business to succeed

D. Whether it is a service business or a manufacturing business

9. An energy corporation is worried about its exposure to criminal liability after a rival company is indicted for violating environmental laws.

Select the strategy that would be least effective in reducing the company's criminal liability.

A. It could develop an anonymous internal reporting system for employees who suspect illegal or unauthorized behavior.

B. It could hold annual training seminars on the current state of environmental law, using the investigation as an example.

C. Its leadership could establish a culture of respect for legal compliance through example.

D. It could cooperate with authorities in their investigation of the rival company.

10. Since corporations are separate legal entities from their shareholders, which of the following is true?

A. Shareholders are usually not financially accountable for the actions of the corporation, but neither do they own the assets of the corporation.

B. Shareholders do not need to pay taxes on dividend earnings since corporations are taxed independently.

C. Under no circumstances can the protection of limited liability be removed from shareholders.

D. A corporation can only exist for as long as its original owners are present.

11. Which of the following is true of civil law?

A. Evidence of guilt beyond a reasonable doubt is necessary for conviction.

B. Defendants retain the right to remain silent.

C. Possible remedies include monetary damages.

D. Cases are always prosecuted by the government.

12. In which scenario do the different court systems in the U.S. interact properly?

A. An Arizona resident drove through New Mexico to visit his college roommate and is hit by a delivery truck. When the New Mexico state court hears the case, the judge only takes Arizona law into consideration, since that's where the plaintiff resides.

B. When an employee in Colorado sues her employer for sexual harassment, the state court judge applies federal law relating to workplace harassment because it extends protections to employees beyond those provided by state law.

C. When an employee tries to file a discrimination complaint against her employer in Maine after she loses in a Vermont state court, the Maine state court agrees to hear the case.

D. A federal judge refuses to hear a negligence case that includes a state-based claim in addition to a federal one. She cites the fact that federal courts can never have jurisdiction over cases that involve state laws.

13. Which of the following is a belief held by the theory of natural law?

A. Laws must be enforced even if they are considered "bad."

B. There are rights that are intrinsic to humankind.

C. There is no higher law than human-made law.

D. Humans require laws issued by sovereigns to distinguish right from wrong.

14. Which of the following correctly pairs the levels of the federal court system with the types of cases each decides?

A. U.S. Circuit Court - trials; U.S. District Court - trials

B. U.S. Supreme Court - trials; U.S. Circuit Court - appeals

C. U.S. Supreme Court - appeals; U.S. Circuit Court - trials

D. U.S. Circuit Court - appeals; U.S. District Court - trials

15. ABC Corporation is one of the largest energy companies in the United States, with over $50 million in publicly traded shares. The corporation's unusual accounting practices have disguised the fact that the company has accumulated significant losses over the past five years, making it appear far more profitable than it is. The CEO of ABC Corporation has decided to continue misleading investors by hiding its mounting debt in order to support the company's current market valuation.

How would a deontologist evaluate this decision?

A. ABC Corporation is acting unethically because it sees the investors' interests as unequal to the interests of the CEO and the corporation.

B. ABC Corporation is acting unethically because it is not striving for truthfulness or high-mindedness.

C. ABC Corporation is acting unethically because the results of its dishonesty are likely to be negative for its employees, for its shareholders, and for society as a whole.

D. ABC Corporation is acting unethically because it has certain rights as a corporation, and therefore has a corresponding duty to consider the public good.

16. After several quarters of negative earnings, the CEO of a social media corporation decides to end the company's policy of providing paid parental leave in order to reduce labor expenses, among other cost-saving measures. As a result of the CEO's decisions, the company's stock price rises significantly.

According to Milton Friedman, did the corporation fulfill its duty?

A. No, because employees are stakeholders who rely on the company for their well-being.

B. No, because paid parental leave is an important social good that companies have a responsibility to support.

C. Yes, because the shareholders' return on investment has risen.

D. Yes, because the CEO feels no personal obligation to support his or her employees' decisions to have children.

17. Select the true statement about primary sources of law in the U.S.

A. Private law applies to everyone within a lawmaking body's jurisdiction.

B. Public law is typically only binding on specific parties.

C. Procedural laws must provide for efficiency, but not fairness.

D. Substantive laws specify the right of all citizens to due process.

18. If a breach of contract case is filed in federal court, the court __________.

A. has subject matter jurisdiction if the claim is for less than $75,000 and no plaintiff lives in the same state as any defendant

B. has no subject matter jurisdiction, but can hear the case at its own discretion

C. has subject matter jurisdiction if the claim is for more than $75,000 and no plaintiff lives in the same state as any defendant

D. has no subject matter jurisdiction and cannot hear the case

19. Which of the following is an example of a sole proprietorship?

A. Gabrielle started a dog-walking company. She sometimes worries about the fact that she has no one to share the potential liabilities of the company with, but she does enjoy retaining 100% of the profits.

B. Issa and Raymond start a t-shirt printing company that earns a small profit in its first year of operation. They both invested capital in the business to get it up and running, so they are both glad to share in the small profit.

C. Shawn is a partner in a successful downtown law firm. He has a number of clients that he is exclusively responsible for, so he works very hard to make sure they're happy with his services.

D. Matt and Carlene are both owners of a business that sells hand-crafted home goods via the Internet. Although they both own the business, Matt is solely responsible for the business operations.

20. Arbitration is a __________ form of alternative dispute resolution.

A. sometimes involuntary, binding

B. voluntary, binding

C. sometimes involuntary, non-binding

D. voluntary, non-binding

21. Select the true statement about the relationship between law, ethics, and business.

A. It is impossible for a business to behave unethically if it follows the law.

B. Abiding by the law is sufficient for businesses to earn a moral reputation.

C. What is ethical in business is not necessarily required by law.

D. The law ensures ethical conduct in most areas of business.

22. Why is an LLC an attractive form of business organization for many new companies?

A. Because lenders are particularly willing to lend money to LLCs, since they are a very stable type of business

B. Because neither LLCs nor their members must pay taxes on earnings

C. Because it is a relatively simple way of establishing and operating a business while limiting the risk taken by its members

D. Because, although they are more complicated to manage than corporations, they provide greater protection from risk

23. X Corporation discovers that a product it manufactures has exposed its employees to asbestos for decades. It must decide what to do with this information. If it suppresses its discovery, the business will remain successful and the company's owners will continue to profit, but current and former employees will continue to endure negative health effects.

According to Josephson's core values model for ethical decision-making, what should X Corporation do next?

A. Determine if the benefits to the owners from suppressing the information outweigh the consequences to employees, or if the reverse is true.

B. Evaluate whether the decision to suppress the information would satisfy any core values and contrast it to other possible decisions.

C. Evaluate how likely the corporation is to successfully suppress this information and determine the consequences of being caught.

D. Decide which core values are at stake in the decision to suppress the information and rank them in order of importance.