Name: __________________________ Class: _______________ Date: _____________
ID: A
EXAM 3 Review - Chapters 18, 20 - 22
Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question
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Ethan is seventeen years old. Under the Fair Labor Standards Act, Ethan cannot work
a. during school hours.
b. in a hazardous occupation.
c. more than eighteen hours per week.
c. without a special permit.
Able Transport Company (ATC) employs Brad as a computer operator. When additional staff is needed to
load trucks, Brad is reassigned to the loading dock. Brad complains and offers to train others to fill the job,
but ATC declines. Brad quits and files for unemployment benefits. According to the decision of the court in
Case 18.1, Lewis v. Director, Employment Security Department, Brad is
a. entitled to benefits.
b. not entitled to benefits because Brad caused ATC to fill two jobs.
c. not entitled to benefits because Brad is not entitled to a good job.
d. not entitled to benefits because Brad left a good job for no cause.
Jay is forty years old, Karen is forty-one years old, and both work for Little Business, Inc. The Age
Discrimination in Employment Act protects
a. Jay and Karen.
b. Jay only.
c. Karen only.
d. neither Jay nor Karen.
American Goods, Inc. is a corporation. Responsibility for the overall management of American Goods is
entrusted to
a. the board of directors.
b. the corporate officers and managers.
c. the owners of the corporation.
d. the shareholders.
Carol and Drew are two of nine authorized directors of East Coast Corporation. In most states, the minimum
number of directors that could declare a dividend on East Coast stock is
a. one.
b. two.
c. five.
d. nine.
Adam and Beth are officers of Computer Products Corporation. As corporate officers, the rights of Adam
and Beth are
a. determined by their employment contracts.
b. specified in state corporation statutes.
c. the same as those of the directors.
d. the same as those of the shareholders.
Nina is a director of Omega, Inc. Under the standard of due care owed by directors of a corporation, Nina’s
decisions must be
a. ambiguous and questionable.
b. arguable and defensible.
c. informed and reasonable.
d. perfect and unassailable.
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Name:_____________________________
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ID: A
Fiona owns one share of stock in Great Corporation, as evidenced by a stock certificate. Fiona loses the
certificate. Her ownership of the stock is
a. forfeited immediately.
b. forfeited within ten days of a third party’s claim to ownership.
c. forfeited within thirty days if she cannot find the certificate.
d. not affected.
Fact Pattern 20-1
AAA Apartments, Inc. merges with Better Rentals, Inc. Only AAA remains.
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Refer to Fact Pattern 20-1. Better Rentals owed money to Construction Repair Associates and other
creditors. After the merger, AAA must pay
a. all of Better Rentals’ debts.
b. half of Better Rentals’ debts.
c. none of Better Rentals’ debts.
d. only debts that Better Rentals incurred after a merger was proposed.
Fact Pattern 20-2
First Bank Company decided to consolidate its operations with Global Loans, Inc. to form International
Investment Corporation (IIC).
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Refer to Fact Pattern 20-2. Global Loans owed money to Holly & Associates and other creditors. After the
consolidation, IIC must pay
a. all of Global Loans’ debts.
b. half of Global Loans’ debts.
c. none of Global Loans’ debts.
d. only debts that Global Loans incurred after consolidation was proposed.
Refer to Fact Pattern 20-2. The terms of the consolidation agreement differ from First Bank’s articles of
incorporation. The articles
a. are replaced by Global Loans’ articles of incorporation.
b. are replaced by the consolidation agreement.
c. effectively prevent the consolidation.
d. prevail.
Atlantic Corporation’s articles of incorporation prohibit a sale of its assets without a vote from the board of
directors. Atlantic’s officers sell some assets to Pacific Company without notice to the board. The officers
also fail to pay Atlantic’s taxes on time, and some Atlantic funds are not accounted for. Under the decision
of the court in Case 20.3, Colt v. Mt. Princeton Trout Club, Inc. with respect to Atlantic’s shareholders, this
conduct is most likely
a. not oppressive because it is undertaken by Atlantic’s officers.
b. oppressive because Atlantic’s directors may be personally liable.
c. oppressive because Atlantic’s shareholders may be personally liable.
d. oppressive because it departs from the standards of fair dealing.
Kim is a holder of preferred stock in Macro, Inc. Kim has priority over holders of Macro common stock as
to
a. increases in value over time.
b. payments of dividends.
c. the date on which Macro must re-purchase the shares.
d. upward changes in the market price of the shares.
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Name:_____________________________
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ID: A
Retail Sales, Inc. wants to issue stock of $1 million in a single offering. Retail does not have to provide any
investors with any material information about itself, its business, or its securities if
a. all of the investors are accredited.
b. all of the investors are unaccredited.
c. any of the investors are accredited.
d. any of the investors are unaccredited.
Global Investment Corporation, and its officers, directors, and shareholders buy and sell securities. Section
10(b) of the Securities Exchange Act of 1934 covers
a. all purchases and sales of securities.
b. only purchases and sales of securities by investment companies.
c. only purchases and sales of securities involving short-swing profits.
d. only purchases and sales of securities involving tippers and tippees.
Hugh, an engineer for Innovative Corporation, learns that Innovative has developed a computer chip to triple
the speed of any computer. Hugh buys 1,000 shares of Innovative stock. He tells Jan, who buys 500 shares.
After the new chip is announced publicly, the price of Innovative stock increases. Hugh and Jan sell their
shares for a profit. Under the Securities Exchange Act of 1934, liability may be imposed on
a. Hugh and Jan.
b. Hugh only.
c. Jan only.
d. neither Hugh nor Jan.
Fact Pattern 21-2
Allen, a director of Business Computer Company (BCC), learns that a BCC engineer has developed a new,
significantly faster computer chip. Allen busy BCC stock and tells his friend Cora, who also buys BCC
stock. When the new chip is announced three weeks later, Allen and Cora sell their stock for a profit.
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Refer to Fact Pattern 21-2. Of Allen’s profits on the purchase and sale of BCC stock, under Section 16(b)
of the Securities Exchange Act of 1934 BCC may recapture
a. all.
b. half.
c. 10 percent.
d. none.
Phil, an officer for Quality Company, buys 1,000 shares of Quality stock. One week later, Eagle announces
that it will merge with Rich Industries, Inc. The next day, the price of Quality stock increases, and Phil sells
his shares for a profit. Under Section 16(b) of the Securities Exchange Act of 1934, Phil would not be liable
if he had waited
a. a reasonable time after the merger was announced to buy the stock.
b. a reasonable time after the purchase of the stock to sell it.
c. more than six months after the merger to buy the stock.
d. more than six months after the purchase of the stock to sell it.
Fact Pattern 21-3
The government investigates Ross’s buying and selling of Small Business Company (SBC) stock. The
media reports on the investigation and the value of the stock drops. At a conference attended by investors,
Ross briefly defends his actions before making a presentation on a different topic. Other presentations on
other topics by other individuals and companies follow.
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Refer to Fact Pattern 21-3. According to the reasoning of the court in Case 21.3, United States v. Stewart,
Ross’s conduct is
a. a criminal violation of the securities Act of 1933 and the Securities Exchange Act of 1934.
b. a criminal violation of the Securities Act of 1933 only.
c. a criminal violation of the Securities Exchange Act of 1934 only.
d. not a criminal act.
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Name:_____________________________
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ID: A
Tom, and accountant for Universal Company, learns that Vicky, a Universal director, has violated insidertrading laws. Tom does not suffer a loss in trading with Vicky, but reports her to the Securities and
Exchange Commission. Tom may be entitled to
a. a bounty payment.
b. damages equal to the amount of Vicky’s profits.
c. damages equal to the amount of Universal’s losses (if any).
d. triple the profits gained by Vicky.
Metro Transport Company offers its stock for sale only in a single state. If the law in Metro’s state is like
the law in most states, Metro’s offer is subject to state securities statutes that include
a. antifraud provisions and disclosure requirements.
b. antifraud provisions only.
c. disclosure requirements only.
d. neither antifraud provisions nor disclosure requirements.
AgriEquip Corporation, Best Harvest Company and Corn Belt Enterprises, Inc. are farm equipment
distributors that control 90 percent of the market for their products in a certain geographic area. The firms
agree to sell their products for the same prices. This is
a. a group boycott.
b. a merger.
c. a price-fixing agreement.
d. a tying arrangement.
The United Association of Software Makers, which does not include all software producers, refuses to deal
with any parties who do not carry the products of its members. Under the Sherman Act, this group boycott is
a. a per se violation if it eliminates competition or prevents entry into a given market.
b. a per se violation under all circumstances.
c. subject to the rule of reason.
d. not a violation.
Pacific Bicycle, Inc. is the major distributor of bikes in the state of California. Pacific’s closest competitor
is Quality Bike Company, another California firm. They agree that Quality will distribute bikes in northern
California and Pacific will distribute bikes in southern California. This is
a. a group boycott.
b. a market division.
c. a price-fixing agreement.
d. a tying arrangement.
Fresh Vegetables, Inc., a wholesaler, refuses to sell its produce to Good Mart Stores, Inc., a retailer. Under
the Sherman Act, this is
a. “an unfair or deceptive act or practice.”
b. a per se violation.
c. not a violation.
d. subject to the rule of reason.
Imperial Jewelry, Inc., a wholesaler, refuses to sell its goods to Jim’s Gems, a retailer. Under the Sherman
Act, this is
a. an obvious illegal restraint of trade.
b. a per se violation.
c. not an antitrust violation.
d. subject to the rule of reason.
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Name:_____________________________
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ID: A
Press Corporation, a disk manufacturer, sells its DVD’s in certain quantities to Quik Shows, a retailer, for
$275 but charges Right Stuff, a competitive retailer, $350. This is most likely a violation of
a. the Clayton Act.
b. the Federal Trade Commission Act.
c. the Interstate Commerce Act.
d. the Sherman Act.
International Software, Inc. conditions the sale of one of its products on Nationwide Office System’s
agreeing to buy another of International’s products. This deal is
a. legal, depending on its purpose and the effect on competition.
b. legal, depending production and transportation costs.
c. legal under any circumstances.
d. not legal under any circumstances.
Agri-Products Corporation offers to sell its sugar substitute to Best Candies, Inc. only if Best agrees to buy
all the corn it needs from Agri-Products, even though there are other corn sellers from whom Best could
buy. This is
a. an exclusive-dealing contract.
b. a tying arrangement.
c. price discrimination.
d. price fixing.
Two firms, Value Chip Corporation and Worldwide Processors, Inc. account for 75 percent of their market.
A merger of these firms could be prohibited by
a. the Clayton Act.
b. the Federal Trade Commission Act.
c. the Interstate Commerce Act.
d. the Sherman Act.
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