Test Bank For Cengage Advantage Books Essentials of The Legal Environment Today 5th Edition

Test Bank for Cengage Advantage Books Essentials of the Legal Environment Today, 5th Edition
Test Bank for Cengage Advantage Books Essentials

of the Legal Environment Today, 5th Edition
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-of-the-legal-environment-today-5th-edition/
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True / False
1. International law is a body of law that governs relations between and among citizens, not countries.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
REFERENCES: International Law
LEARNING OBJECTIVES: ELET.MILL.16.10-1 - What is the principle of comity, and why do courts deciding disputes
involving a foreign law or judicial decree apply this principle?
NATIONAL STANDARDS: United States - AICPA: BB-Legal
United States - BUSPROG: Analytic
KEYWORDS: BLOOM’S: Knowledge
2. Under the principle of comity, one nation may defer and give effect to the laws and judicial decrees of another country.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
3. Under the principle of comity, all foreign governments are subject to all U.S. laws.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
4. The act of state doctrine provides that the executive branch of one country will not examine the validity of public acts
committed by a recognized foreign government within its own territory.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
LEARNING OBJECTIVES: ELET.MILL.16.10-2 - What is the act of state doctrine? In what circumstances is this
doctrine applied?
KEYWORDS: BLOOM’S: Comprehension
5. Confiscation occurs when a government seizes private property for an illegal purpose or without just compensation.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
doctrine applied?
6. The act of state doctrine does not have important consequences for firms doing business in other countries.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
doctrine applied?
7. Expropriation occurs when a government seizes private property for a proper purpose and awards just compensation.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
doctrine applied?
8. The Foreign Sovereign Immunities Act spells out what a “foreign state” includes.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
LEARNING OBJECTIVES: ELET.MILL.16.10-3 - Under the Foreign Sovereign Immunities Act, in what situations is a
foreign state subject to the jurisdiction of U.S. courts?
9. Under the Foreign Sovereign Immunities Act, a foreign state can be a political subdivision of a foreign state.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
10. The doctrine of sovereign immunity cannot immunize a foreign nation from the jurisdiction of U.S. courts.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
11. According to the Foreign Sovereign Immunities Act, a foreign state that has committed a tort in the United States is
protected from the jurisdiction of the U.S. courts.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
12. According to the Foreign Sovereign Immunities Act, a foreign state that waived its immunity by implication is subject
to the jurisdiction of the U.S. courts.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
13. The simplest way for a U.S. firm to do business in a foreign market is to export its products directly to that market.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
REFERENCES: Doing Business Internationally
NATIONAL STANDARDS: United States - AICPA: BB-Critical Thinking
United States - BUSPROG: Reflective
14. In direct exporting, a U.S. company signs a sales contract with a foreign purchaser that provides for the conditions of
shipment and payment of goods.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
15. When a U.S. firm wishes to increase its involvement in an international market, it normally establishes an agency
relationship with a foreign firm.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
16. A party to a licensing agreement generally agrees to pay royalties on some basis.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
LEARNING OBJECTIVES:ELET.MILL.16.10-3 - Under the Foreign Sovereign Immunities Act, in what situations is a
17. International franchisees usually do not pay fees for the license to use a trademark or trade name.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
18. In a joint venture, the parent company in the United States retains complete ownership and authority over all phases of
the operation.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
19. Restrictions on imports may include prohibitions.

a. True
b. False
ANSWER: True
DIFFICULTY: Easy
REFERENCES: Regulation of Specific Business Activities
20. A tariff is always a flat rate per unit.

a. True
b. False
ANSWER: False
DIFFICULTY: Easy
21. Restrictions on imports may include quotas.

a. True
b. False
ANSWER: True
DIFFICULTY: Easy
22. Tariffs are imposed only on exports.

a. True
b. False
ANSWER: False
DIFFICULTY: Easy
23. Quotas are limits on the amounts of goods that can be exported.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
24. Dumping is the exporting of environmentally polluting goods to a foreign market.

a. True
b. False
ANSWER: False
DIFFICULTY: Easy
25. Dumping is the sale of imported goods at “less than fair value.”
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
26. The chief aim of the World Trade Organization and other trade agreements is to maximize trade barriers among their
members.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
27. The chief aim of the European Union and other trade organizations is to minimize trade barriers among their members.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
28. The primary goal of the North American Free Trade Agreement is to eliminate tariffs among the United States,
Canada, and Mexico.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
29. All international sales contracts should have a choice-of-language clause to designate the official language by which
the contract will be interpreted.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
REFERENCES: International Contracts
LEARNING OBJECTIVES: ELET.MILL.16.10-4 - What are three clauses commonly included in international business
contracts?
30. Force majeure clauses in international business contracts commonly set forth the major clauses of the contracts.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
contracts?
31. Foreign exchange markets comprise a worldwide system for buying and selling currency.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
REFERENCES: Payments Methods
contracts?
32. Generally, a foreign government cannot sue under U.S. antitrust laws in U.S. courts.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
REFERENCES: U.S. Laws in a Global Context
LEARNING OBJECTIVES: ELET.MILL.16.10-5 - What federal law allows U.S. citizens, as well as citizens of foreign
nations, to file civil actions in U.S. courts for torts that were committed overseas?
33. Any conspiracy that has a substantial effect on U.S. commerce is within the reach of the U.S. antitrust laws.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
34. A U.S. citizen can bring a civil suit in a U.S. court against a U.S. entity for a tort allegedly committed overseas.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
35. U.S. laws that prohibit discrimination in employment apply to U.S. employees working for U.S. firms located abroad.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Multiple Choice
36. Yokio, Ltd., and Zeno, S.A., transact an international sale of goods. At the request of these parties, a court in Portugal
resolves a dispute between them. A U.S. court will most likely honor the judgment
a. if it is consistent with U.S. laws and public policy.
b. if it is consistent with Portuguese laws and public policy.
c. if it does not benefit the U.S. to deny it.
d. under no circumstances.
ANSWER: a
DIFFICULTY: Moderate
KEYWORDS: BLOOM’S: Application
37. Michael, a citizen of Ireland, and Nina, a citizen of the United States, enter into a contract. When Nina breaches the
contract, Michael obtains an award of damages in an Irish court. He asks a U.S. court to enforce the award. The U.S. court
defers to and enforces the Irish court’s decree. This is
a. a travesty of justice.
b. the act of state doctrine.
c. the doctrine of sovereign immunity.
d. the principle of comity.
ANSWER: d
38. The basis for India to give effect to the laws and court decisions of the United States is primarily
a. courtesy and respect.
b. fear and intimidation.
c. admiration and envy.
d. payments of cash and exchanges of property.
ANSWER: a
DIFFICULTY: Easy
39. Premier Clothing, Inc., a U.S. firm, obtains a judgment in a U.S. court against Quang Tri, Ltd., a Vietnamese business.
Whether the court’s judgment will be enforced by a court in Vietnam depends on the Vietnamese court’s application of
a. the act of state doctrine.
b. the doctrine of sovereign immunity.
c. the principle of comity.
d. the World Trade Organization.
ANSWER: c
40. Mountain Mining Company, a U.S. firm, owns property in Bolivia. The government of Bolivia seizes the property for
an illegal purpose without paying just compensation. This is
a. confiscation.
b. defalcation.
c. dumping.
d. expropriation.
ANSWER: a
DIFFICULTY: Easy
doctrine applied?
41. Sudan seizes the assets of Triage Medical, Inc., a U.S. firm. Triage’s recovery from Sudan in a U.S. court may be
prevented by
a. the act of state doctrine.
b. the doctrine of sovereign immunity.
c. the Foreign Corrupt Practices Act.
ANSWER: a
doctrine applied?
42. Call Center Corporation, a U.S. firm, owns property in India. The government of India seizes the property for a proper
public purpose and pays Call Center just compensation. This is
a. confiscation.
b. defalcation.
c. dumping.
d. expropriation.
ANSWER: d
DIFFICULTY: Easy
doctrine applied?
43. UniOil, a U.S. firm, owns property in Venezuela. When the government of Venezuela seizes the property, UniOil asks
a U.S. court to order the property’s return. The court rules that Venezuela is exempt from the court’s jurisdiction. This is
a. a travesty of justice.
b. the act of state doctrine.
c. the doctrine of sovereign immunity.
ANSWER: c
44. US Cars, a U.S. firm, owns property in Argentina. The government of Argentina seizes the property. US Cars claims
that this is confiscation. The government of Argentina claims that it is expropriation. The burden of proof lies with
a. the U.S. government.
b. the government of Argentina.
c. US Cars.
d. the U.S. Supreme Court.
ANSWER: b
doctrine applied?
45. Soleful Shoes, Inc. owns property in Somalia. The Somalian government seizes the property. In order for the seizure
to be considered an expropriation and not a confiscation, the Somalian government must
a. pay just compensation to Soleful Shoes.
b. give Soleful Shoes at least thirty days notice of the seizure.
c. give Soleful Shoes at least ninety days notice of the seizure.
d. notify the U.S. government before the seizure.
ANSWER: a
DIFFICULTY: Easy
doctrine applied?
46. Metallic Metals, Inc., a U.S. firm, files a suit against a Venezuela government agency. The agency has committed a
tort in the United States. Under the Foreign Sovereign Immunities Act
a. the Venezuelan government agency is not immune from the jurisdiction of the U.S. courts.
b. the Venezuelan government agency is immune from the jurisdiction of the U.S. courts.
c. Metallic Metals cannot bring a suit against the Venezuelan agency.
d. Metallic Metals must file suit in Venezuela.
ANSWER: a
47. In some cases, foreign states are not immune from the jurisdiction of U.S. courts. These circumstances are governed
by
a. the Uniform Commercial Code.
b. the Foreign Sovereign Immunities Act.
c. the European Union.
d. the North American Free Trade Agreement.
ANSWER: b
DIFFICULTY: Easy
48. Wrugged Woolens, Inc., a U.S. corporation, sets up a specialized marketing organization in Scotland by appointing a
foreign agent. This is called
a. direct exporting.
b. indirect exporting.
c. a joint venture.
d. piracy.
ANSWER: b
DIFFICULTY: Easy
49. WiFi Corporation, a U.S. firm, signs a contract with Bueno Computadores, Ltd., an Argentinean firm, for a shipment
and payment for WiFi’s goods. This is
a. a distribution agreement.
b. a joint venture.
c. direct exporting.
d. licensing.
ANSWER: c
DIFFICULTY: Easy
50. Optima Medico Corporation, a U.S. firm, signs a contract with Pharma Beneficial, Ltd., a Canadian firm, to give
Pharma the right to sell Optima’s products in Canada. This is
b. a joint venture.
d. licensing.
ANSWER: a
DIFFICULTY: Easy
51. KO Marketing Company, a U.S. firm, signs a contract with Librador Corporacion, a Chilean firm, to give Librador the
right to use Innovative’s animation techniques and characters in product promotions. This is
b. a joint venture.
d. licensing.
ANSWER: d
DIFFICULTY: Easy
52. The U.S. corporation Fun Toys, Inc. sets up a firm in China. The parent company remains in the United States and
retains complete ownership of the China branch as well as complete authority and control over all phases of the operation.
This is
b. a wholly owned subsidiary.
c. a joint venture.
d. direct exporting.
ANSWER: b
DIFFICULTY: Easy
53. Secure Investments, Inc., a U.S. firm, expands into international markets through a joint venture. In this situation,
Secure owns
a. all of the operation, and its profits and liabilities.
b. all of the operation, and none of its profits and liabilities.
c. none of the operation, and none of its profits and liabilities.
d. part of the operation, and shares its profits and liabilities.
ANSWER: d
54. Senator Brown and other politicians want to restrict the flow of technologically advanced products and data from the
United States to other countries. To restrict or encourage exports, Congress can
a. do nothing.
b. assess antidumping duties.
c. impose export taxes.
d. set export quotas.
ANSWER: d
55. Vieux Carré S.A., a French firm, imports its goods into the United States and offers those goods for sale at “less than
fair value.” “Fair value” is the price of
a. comparable goods in a select “basket” of other countries.
b. Vieux Carré’s goods in France.
c. Vieux Carré’s goods in the United States.
d. Vieux Carré’s goods on the world market.
ANSWER: b
56. The United States and other members of a certain organization agree to grant normal trade relations status to each
other with regard to imports and exports. This organization is
a. the Convention on Contracts for the International Sale of Goods.
b. the International Export-Import Bank.
c. the United Nations.
d. the World Trade Organization.
ANSWER: d
57. The United States taxes each barrel of imported oil at a flat rate. This is
a. an antidumping duty.
b. a dumping duty.
c. a quota.
d. a tariff.
ANSWER: d
58. The government of Japan sets a limit on the amount of rice that can be imported from the United States. This is
a. a dumping duty.
b. an antidumping duty.
c. a quota.
d. a tariff.
ANSWER: c
59. Canada and the United States form an agreement to govern their commercial exchanges with one another. This is
a. a bilateral agreement.
b. a lateral agreement.
c. a multilateral agreement.
d. a unilateral agreement.
ANSWER: a
contracts?
60. Wytex, Inc., a U.S. firm, and Findora Commercial, a Nigerian firm, are parties to a contract that specifies that the
official language of the contract is English. This is
a. a choice-of-forum clause.
b. a choice-of-language clause.
c. a choice-of-law clause.
d. an arbitration clause.
ANSWER: b
contracts?
61. Telfonix Corporation, a U.S. firm, and Adex, Inc., a British firm, are parties to a contract with a forum-selection
clause. The forum specified in the clause
a. must be within the geographic boundaries of the United States.
b. must be within the geographic boundaries of Britain.
c. need not be within the geographic boundaries of either party.
d. must be within the geographic boundaries of either the United States or Britain.
ANSWER: c
contracts?
62. Quality Energy Company, a U.S. firm, and Royal Petro, a Dutch firm, enter into a contract that includes an arbitration
clause. This clause must provide that the arbitrator will be
a. any specified third party.
b. the American Arbitration Association.
c. the Dutch Arbitration Organization.
d. the International Chamber of Commerce.
ANSWER: a
contracts?
63. Suisse Internationale, a Swiss maker of athletic equipment, enters into a price fixing agreement with Total World
Sports, a U.S. wholesaler of Suisse’s products. U.S. courts will apply U.S. antitrust laws if
a. the agreement was made in Switzerland.
b. the agreement was made in the United States.
c. the price fixing has a substantial effect on U.S. commerce.
d. the Swiss government agrees to be sued in the United States.
ANSWER: c
64. Bulbous Cordials, Inc., a U.S. firm, enters into an agreement with Columbiana Cacao, S.A., a South American firm, to
fix the price of dark chocolate in the U.S. market. If the agreement is a per se violation of U.S. antitrust laws, a U.S. court
could exercise jurisdiction over
a. Bulbous Cordials and Columbiana Cacao.
b. Bulbous Cordials only.
c. Columbiana Cacao only.
d. neither Bulbous Cordials nor Columbiana Cacao.
ANSWER: a
65. Two Japanese firms—Mikato, Ltd., and Shuzushi, Ltd.—enter into a joint venture in an attempt to increase their
market share of the U.S. auto market. If the joint venture is not a per se violation of U.S. antitrust laws, a U.S. court could
exercise jurisdiction over the firms
a. if the joint venture has a substantial effect on U.S. commerce.
b. if the joint venture has any effect on U.S. commerce.
c. if the joint venture was entered into in the United States.
d. under no circumstances.
ANSWER: a
66. Bango! Business, Inc., a U.S. firm, may have committed, in Chile, acts that would constitute, in the United States,
violations of U.S. antitrust laws. These laws apply
a. extraterritorially.
b. only to signatories of the North American Free Trade Agreement.
c. only to members of the World Trade Organization.
d. only within U.S. borders.
ANSWER: a
67. Qang and other foreign citizens allege human rights violations committed overseas by the government of Burma on
behalf of Railway Construction Company, a U.S. firm. To seek redress for their injuries in a U.S. court, these citizens can
a. allege antitrust injuries under the Sherman Act.
b. bring civil suits under the Alien Tort Claims Act.
c. file criminal complaints under Title VII of the Civil Rights Act.
d. do nothing.
ANSWER: b
LEARNING OBJECTIVES:ELET.MILL.16.10-5 - What federal law allows U.S. citizens, as well as citizens of foreign
68. Sam, or any U.S. citizen, can bring a civil suit in a U.S. court against a foreign entity for
a. a tort allegedly committed in the United States only.
b. a tort allegedly committed in the United States or overseas.
c. a tort allegedly committed overseas only.
d. no purpose.
ANSWER: b
DIFFICULTY: Easy
69. Real World Sports Corporation (RWSC) is a U.S. firm with a workplace in Switzerland. Generally, RWSC must abide
by U.S. anti-discrimination laws in Switzerland
a. under any circumstances.
b. under no circumstances.
c. unless to do so would contravene the cultural norms of Switzerland.
d. unless to do so would violate the law of Switzerland.
ANSWER: d
70. Miranda is a U.S. citizen working in Europe for Tourist Vacations, Inc., a U.S. travel agency. Tourist fires Miranda for
reasons that she believes violate U.S. antidiscrimination laws. Those laws apply
a. extraterritorially.
b. only to signatories of the North American Free Trade Agreement.
c. only to members of the World Trade Organization.
d. only within U.S. borders.
ANSWER: a
Essay
71. The management of Sport Shoes Corporation, a U.S. firm, wants to expand into foreign investment and employment
markets. They are considering either opening their own production facility in a foreign country or entering into a licensing
agreement with a foreign firm. What are the advantages and disadvantages of each of these courses of action?
ANSWER: One of the advantages of opening a wholly owned production facility, in the United States or
in a foreign nation, is that all of the profits accrue to the owner. The disadvantages include
the risk involved in opening a production facility in a foreign country. There is a possibility
of the foreign government’s expropriation of the facility. Expropriation is the taking of
private property for a public purpose and the paying of just compensation. Foreign
governments have also sometimes confiscated the property of foreign companies.
Confiscation is the taking of private property for a public purpose without just compensation.
Under the act of state doctrine, U.S. courts would be reluctant to intervene, either by ordering
the property returned or ordering the payment of a fair price. Thus, there could be a
considerable sum of money at risk in a foreign production facility. A licensing agreement, by
contrast, involves relatively little capital investment and represents less risk of loss from a
confiscation or an expropriation. By entering into a licensing agreement with a foreign firm
for the rights to manufacture Sport products, or to sell products under the Sport trademark,
Sport eliminates the chance that its assets would be lost if they were confiscated. Of course,
there will also be fewer profits and those will likely be in the form of royalties.
DIFFICULTY: Challenging
NATIONAL STANDARDS: United States - AICPA: BB-Decision Modeling
KEYWORDS: BLOOM’S: Analysis
72. Savory Cooking Sauces, Inc., a U.S. business firm, makes and sells distinctively flavored cooking sauces. Although
the recipes are secret, the ingredients could be revealed and the sauces could be reconstructed with diligent efforts. What
can Savory do to prevent its products from being “decoded” and pirated abroad?
ANSWER: One possibility is that Savory Cooking Sauces, or any U.S. firm, or any domestic firm in any
nation, can license its recipe, formula, product, or process to a foreign company to avoid the
theft of the trade secret. The foreign firm would obtain the right to make and sell the product
according to the recipe (or formula, or right to use the process, or other trade secret) and
agree to keep the information confidential and to pay royalties to the licensing firm. The
royalties might be based on so many cents per unit made or a percentage of profits from units
sold in a particular geographic territory. Licensing can benefit both parties to the deal. A firm
that receives the license can take advantage of an established reputation. The firm that grants
the license can receive income from the sale of the license or the sales of its products and
may enhance its reputation through this marketing. Once a firm’s products are more widely
known globally, the firm may experience an increased demand for other products that it
makes or sells.
DIFFICULTY: Challenging
Test Bank for Cengage Advantage Books Essentials of the Legal Environment Today, 5th Edition

NATIONAL STANDARDS: United States - AICPA: BB-Decision Modeling
KEYWORDS: BLOOM’S: Analysis
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19. Restrictions on imports may include prohibitions.

20. A tariff is always a flat rate per unit.

21. Restrictions on imports may include quotas.

22. Tariffs are imposed only on exports.

24. Dumping is the exporting of environmentally polluting goods to a foreign market.

foreign state subject to the jurisdiction of U.S. courts?

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