46. Which of the following is NOT a public policy reason for the doctrine of strict liability?

a.

consumers should be compensated for injuries caused by unsafe products.

b.

manufacturers should have an incentive to avoid carelessness in the manufacture and design of their products.

c.

consumers should be responsible for their own safety.

d.

manufacturers and sellers are in a better position to bear the costs of injuries resulting from faulty products than are consumers and users.

47.An implied warranty of merchantability means

a.

the goods are of better-than-average quality.

b.

the goods do not meet federal standards of safety.

c.

the goods are fit for a special use.

d.

the goods are reasonably fit for the general purpose for which they are sold.

48.Big Pill Company makes a heart medicine approved by the FDA. Big Pills medicine has some side effects and the FDA requires Big Bill to use its most stringent "Black Box" warning (i.e. - Big Pill has to put the black box warning on all its heart medicine packages). A customer of Big Pill suffers a serious side effect and sues Big Pill for failure to warn of the seriousness of the side effect. What is the likely result?

a.

Big Pill's drug helps victims of heart disease and enjoys liability protection under federal law because of its public purpose.Big Pill should win.

b.

The customer suffered a serious injury and Big Pill should pay no matter what under the principal of trying to compensate victims.

c.

The customer should win a lawsuit under the theory that the product was dangerous beyond the expectations of an ordinary consumer because the warning was not large enough.

d.

Big Pill complied with a government standard in its warning and meeting that standard should pre-empt any lawsuits based on failure to warn.It should win (although some recent cases have gone the other way).

49.Pepi sells aquariums and fish and wins a lot of business by also installing the aquariums for customers.One of his customers sues him under the UCC, Article 2.Pepi defends by claiming that he is selling a service, fish tank installation, not a good, fish tank and fish.What's the likely result?

a.

The customer will win because both services and goods are subject to the UCC.

b.

The customer will win because the court will have to determine the pre-dominate purpose of the contract and that is likely to be the sale of a good (the tank) subject to the UCC.

c.

Pepi will successfully win any UCC claims because his service is not subject to the UCC.

50.Dwight goes to Bakersfield Cadillac to buy a new car. Dwight picks out a car and makes an offer of $25,000. The salesman laughs and suggests a price of $35,000 is more in order. Dwight counters with a price of $30,000. The salesman thinks about the price for a minute, then counters with a price of $32,500. Dwight leaves. The next day, the salesman calls to tell Dwight that his car is on the way and that the salesman accepted his $30,000 offer.Dwight thinks he is bound to the deal, but would rather not do it. Is there a contract at $30,000?

a.

No, the salesman's counteroffer of $32,500 terminated Dwight's $30,000 offer.

b.

Yes, because Dwight was silent when the salesman told him the car was on its

way.

c.

Yes, because Dwight made the $30,000 offer in good faith.

d.

No, because Dwight's offer was only open for a reasonable time, and more than a

day is not reasonable.

1. Gigantic Corp. just entered a new market that is dominated by many small firms serving different geographic areas. Gigantic Corp. has determined that it can take a large share of the market by using a national distribution model and national branding. Sure enough, Gigantic Corp. comes to dominate the market (over 75%). Smaller competitors complain to the Department of Justice that they have been harmed and that Gigantic is trying to form a monopoly. Has Gigantic violated the antitrust laws?

a.

Yes, Gigantic knew its business model was better and would hurt small providers and is therefore guilty of monopolistic behavior.

b.

No, Gigantic is not a monopoly if it only controls 75% of the relevant market.

c.

Yes, by definition any company with over 70% market share violates the law and must divest assets to get below 70%.

d.

No, it is not illegal to obtain a monopoly through business acumen and economies of scale.

2.The purpose of antitrust is to:

a.

To protect consumers by ensuring competition that in turn ensures lower prices, more product information, and a better distribution of the wealth.

b.

To concentrate power in a few corporations

c.

To break up large inefficient corporations (AT&T as an example)

d.

To protect smaller corporations from the economies of scale achieved by larger corporations

3.As a consumer, you are upset after purchasing a food product that says "All Natural" on the package, but the product actually contains a bunch of chemicals.You call and complain and the company spokesperson tells you "everything we use to create the product came from the planet earth so it's natural."What's our government's response to an issue like this?

a.

Caveat Emptor - Let the Buyer Beware.The government does not get involved in matters like this and it's the consumer's job to ask questions, read publications such as Consumer Reports and otherwise be careful.

b.

Consumer protection disclosure laws provide the best protection because the disclosure laws requiring specific disclosures about what's in a food product and also regulate the use of terms; such as, "all natural," that otherwise might confuse people.

c.

The government relies solely on tort lawsuits to police this sort of problem.Although the dollar amount of the claim is small, a consumer could sue based on the tort of fraud and that threat of a lawsuit keeps companies honest in their advertising.

d.

It's not the government's job to decide what "all natural," "organic," "fat-free," "low-fat," or any other terms mean - that's the marketplace's job.