BULE 303 FINAL EXAM STUDY GUIDE UPDATED
QUESTIONS AND CORRECT ANSWERS
Question:
1. You and a friend are taking a road trip during sum-mer break and decide to stop for lunch. You
choose your favorite fast food restaurant. You both order a burger, fries, and a soft drink and chow
down. In the afternoon, as you are continuing your journey, both of you begin to feel stomach cramps.
They get worse so you decide to go to an urgent care clinic. The doctor there diagnoses you both with
food poisoning and pre-scribes medication. You fill the prescription, check into a hotel, and
experience several days of agony. You later discover the cook at the restaurant undercooked the beef
in your burger, which caused your food poisoning. You sue the restaurant. Is the restaurant liable to
you or is only the employee liable?
Answer:
Question:
2. -Only the employee is liable because she was act-ing outside the scope of her employment when
she cooked the food. -The restaurant is liable. -Only the employee is liable because the employee was
the one who was negligent in undercooking the hamburger. -Neither party is liable; when ordering
food customers assume the risk that the food might not be prepared properly.
Answer:
The restaurant is liable
Question:
3. Which of the following scenarios illustrates a business world without agency relationships?
-Hiring an expert as an employee.
-A corporation with only one employee.
-The owner prepares the tax returns.
-Hiring an expert as an independent contractor.
Answer:
The owner prepares the tax returns.
Question:
4. How do agency relationships affect businesses and the business world? Choose 2 answer choices.
-Workers can specialize and become experts. -Businesses can grow by hiring employees. -Principals
are benefited, but agents are not benefit-ed. -Agency relationships eliminate legal concerns.
Answer:
Worker can specialize and become experts & Busi-nesses can grow by hiring employees
Question:
5. What does the ratification of an agency relationship include?
-The principal led a third party to believe someone was an agent.
-The law creates an agency relationship in the case of an emergency.
-There is an agreement between the principal and the agent.
-A party affirms the contract another person made with a third party.
Answer:
-A party affirms the con-tract another person made with a third party
, Question:
6. What does agency by ratification require? Choose 2 answer choices. -The agent must have
followed all of the principal's rules in negotiating and signing the contract. -The principal must have
the legal capacity to contract. -The principal must have hired the agent before the contract was signed.
-The principal affirms the agent's entire act, not just a portion.
Answer:
-The principal must have the legal capacity to con-tract. -The principal affirms the agent's entire act,
not just a portion.
Question:
7. What is the key factor in apparent authority?
-The principal's actions -The agent's actions -The actions of both the principal and the agent
-Apparent authority is dictated by operation of law in case of emergencies.
Answer:
The Principal's actions
Question:
8. What are the two types of actual authority? Choose 2 answer choices. -Express authority -Implied
authority -Fiduciary relationship authority -Apparent authority
Answer:
Express and implied au-thority
Question:
9. In which situation does an agent have the least expo-sure to liability?
-Unidentified principal -An agent's liability exposure is the same, regardless of the degree of
disclosure.
-Fully disclosed principal -Undisclosed principal
Answer:
-Fully disclosed principal
Question:
10. What are some good reasons to refrain from disclosing an agency or a principal's identity? Choose
2 answer choices. -When a principal wishes to remain anonymous for privacy reasons -When a
principal wishes to avoid exposure to liability -When a principal wishes to enter into transactions, but
is concerned that if third parties knew his or her identity they would be less likely to enter into the
agreement -When a principal does not have adequate resources in case he or she is held liable for
damages related to an agency relationship
Answer:
-When a principal wishes to remain anonymous for privacy reasons -When a principal wishes to enter
into transactions, but is concerned that if third parties knew his or her identity they would be less
likely to enter into the agreement
Question:
11. What authority is ended with the termination of an agency relationship?
-Apparent authority -Notice authority -All agency authorities -Actual authority
Answer:
Actual authority
QUESTIONS AND CORRECT ANSWERS
Question:
1. You and a friend are taking a road trip during sum-mer break and decide to stop for lunch. You
choose your favorite fast food restaurant. You both order a burger, fries, and a soft drink and chow
down. In the afternoon, as you are continuing your journey, both of you begin to feel stomach cramps.
They get worse so you decide to go to an urgent care clinic. The doctor there diagnoses you both with
food poisoning and pre-scribes medication. You fill the prescription, check into a hotel, and
experience several days of agony. You later discover the cook at the restaurant undercooked the beef
in your burger, which caused your food poisoning. You sue the restaurant. Is the restaurant liable to
you or is only the employee liable?
Answer:
Question:
2. -Only the employee is liable because she was act-ing outside the scope of her employment when
she cooked the food. -The restaurant is liable. -Only the employee is liable because the employee was
the one who was negligent in undercooking the hamburger. -Neither party is liable; when ordering
food customers assume the risk that the food might not be prepared properly.
Answer:
The restaurant is liable
Question:
3. Which of the following scenarios illustrates a business world without agency relationships?
-Hiring an expert as an employee.
-A corporation with only one employee.
-The owner prepares the tax returns.
-Hiring an expert as an independent contractor.
Answer:
The owner prepares the tax returns.
Question:
4. How do agency relationships affect businesses and the business world? Choose 2 answer choices.
-Workers can specialize and become experts. -Businesses can grow by hiring employees. -Principals
are benefited, but agents are not benefit-ed. -Agency relationships eliminate legal concerns.
Answer:
Worker can specialize and become experts & Busi-nesses can grow by hiring employees
Question:
5. What does the ratification of an agency relationship include?
-The principal led a third party to believe someone was an agent.
-The law creates an agency relationship in the case of an emergency.
-There is an agreement between the principal and the agent.
-A party affirms the contract another person made with a third party.
Answer:
-A party affirms the con-tract another person made with a third party
, Question:
6. What does agency by ratification require? Choose 2 answer choices. -The agent must have
followed all of the principal's rules in negotiating and signing the contract. -The principal must have
the legal capacity to contract. -The principal must have hired the agent before the contract was signed.
-The principal affirms the agent's entire act, not just a portion.
Answer:
-The principal must have the legal capacity to con-tract. -The principal affirms the agent's entire act,
not just a portion.
Question:
7. What is the key factor in apparent authority?
-The principal's actions -The agent's actions -The actions of both the principal and the agent
-Apparent authority is dictated by operation of law in case of emergencies.
Answer:
The Principal's actions
Question:
8. What are the two types of actual authority? Choose 2 answer choices. -Express authority -Implied
authority -Fiduciary relationship authority -Apparent authority
Answer:
Express and implied au-thority
Question:
9. In which situation does an agent have the least expo-sure to liability?
-Unidentified principal -An agent's liability exposure is the same, regardless of the degree of
disclosure.
-Fully disclosed principal -Undisclosed principal
Answer:
-Fully disclosed principal
Question:
10. What are some good reasons to refrain from disclosing an agency or a principal's identity? Choose
2 answer choices. -When a principal wishes to remain anonymous for privacy reasons -When a
principal wishes to avoid exposure to liability -When a principal wishes to enter into transactions, but
is concerned that if third parties knew his or her identity they would be less likely to enter into the
agreement -When a principal does not have adequate resources in case he or she is held liable for
damages related to an agency relationship
Answer:
-When a principal wishes to remain anonymous for privacy reasons -When a principal wishes to enter
into transactions, but is concerned that if third parties knew his or her identity they would be less
likely to enter into the agreement
Question:
11. What authority is ended with the termination of an agency relationship?
-Apparent authority -Notice authority -All agency authorities -Actual authority
Answer:
Actual authority
