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1.True or false: In a franchise agreement, the franchisor and the franchisee are separate legal entities.

2.Which of the following is not true of general partnerships?

  • Partners have joint ownership of business assets.
  • Partners must always agree to split the profits and losses evenly.
  • Partners have an equal right to engage in the management of the business.
  • Partners share profits and losses according to the partnership agreement.

3.Corporations created to assist doctors, lawyers, accountants, and so on are known as _________________ corporations.

  • alien
  • not-for-profit
  • professional
  • closely held

4.True or false: Profits and losses from an LLC must be distributed in the same proportion to all members.

5.Which of the following is true of general and limited partners in a limited partnership?

  • General partners are required to invest capital and refrain from managing the business.
  • General partners are not liable for partnership debts.
  • Limited partners are not liable for partnership debts.
  • General and limited partners are jointly responsible for partnership debt.

6.Which of the following is not true of a business operating under sole proprietorship?

  • A sole proprietorship is considered a separate legal entity.
  • No government approval is required to set up a sole proprietorship.
  • A sole proprietor pays only personal taxes.
  • If the owner dies, the business usually dies as well.

7.An administrative agency is prohibited from doing all but which of the following?

  • violating judicial decisions
  • making arbitrary laws
  • exercising legislative power
  • extending beyond its authority

8.Which of the following is true of administrative agencies?

  • An existing administrative agency may not create new law.
  • All administrative agencies answer directly to the president.
  • Each state and local government has administrative agencies.
  • Administrative agencies may overrule judicial decisions.


9._________________ establishes the protocol that must be followed by an administrative agency while enforcing a(n) _________________.

  • Procedural law; substantive law
  • Interpretive law; substantive law
  • Substantive law; interpretive law
  • Substantive law; procedural law

10.True or false: Production cost may be used as a defense against a company accused of price discrimination.

11.The act of controlling prices for goods and services is known as _________________.

  • dividing markets
  • regulating competitive practices
  • price fixing
  • controlling output

12.An agreement to refuse to deal with another business is known as a _________________.

  • boycott
  • split
  • division
  • control


13.Which of the following is not a prerequisite to be considered a failing company prior to entering a merger?

  • There is no other reasonable alternative.
  • Its assets would evaporate but for a merger.
  • Too much competition exists in a particular geographical area.
  • No other buyer is available to rescue the company.

14.Which of the following is a legitimate defense against a claim of exercise of monopoly power?

  • The business owns 25 percent of the geographical market.
  • The business owns 75 percent of the product market.
  • The business acquired the monopoly innocently as an unintended consequence of another purpose.
  • The business engaged in a tying arrangement with another business.


15.One business having almost all of one product type or service within a geographical area is known as _________________ power.

  • horizontal
  • vertical
  • monopoly
  • consolidated

16.True or false: The calculation of monopoly power rests squarely on a firm's percentage of dominance in the relevant market.

17.The U.S. Supreme Court has developed two tests for determining the lawfulness of an agreement: the per se rule and the _________________.

  • rule of trust
  • rule of law
  • rule of reason
  • rule of competition


18.In a(n) _________________, the distributor requires the purchaser of another product to buy another associated product.

  • geographic allocation agreement
  • tying arrangement
  • exclusive dealing agreement
  • price maintenance agreement

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