Essentials of Business Law and the Legal Environment 11th Edition by Richard A. Mann - Test Bank

Essentials of Business Law and the Legal Environment 11th Edition by Richard A. Mann – Test Bank

 

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Sample Questions Are Posted Below

 

Chapter 5—Administrative Law

 

TRUE/FALSE

 

1. Legislative rules by an administrative agency do not have the force of law.

 

ANS:  F                    PTS:   1                    MSC:  AACSB Analytic

 

2. Administrative agencies sometimes act as if they are judicial bodies.

 

ANS:  T                    PTS:   1                    MSC:  AACSB Analytic

 

3. Administrative agencies operate only at the federal level.

 

ANS:  F                    PTS:   1                    MSC:  AACSB Analytic

 

4. Administrative agencies establish rules, and then act as both prosecutor and judge in determining whether the rules have been violated.

 

ANS:  T                    PTS:   1                    MSC:  AACSB Analytic

 

5. Agencies create more legal rules and adjudicate more controversies than all the nation’s legislatures and courts combined.

 

ANS:  T                    PTS:   1                    MSC:  AACSB Analytic

 

6. Congress appoints and removes the chief administrators of federal executive administrative agencies.

 

ANS:  F                    PTS:   1                    MSC:  AACSB Analytic

 

7. Legislative rules may, in certain circumstances, exceed the authority granted to an agency by the enabling statute.

 

ANS:  F                    PTS:   1                    MSC:  AACSB Analytic

 

8. A statute may preclude judicial review of an agency action.

 

ANS:  T                    PTS:   1                    MSC:  AACSB Analytic

 

9. Under the informal rulemaking procedures of the APA, an agency must provide notice of a proposed rule only if there is a good cause.

 

ANS:  F                    PTS:   1                    MSC:  AACSB Analytic

 

10. The scope of administrative law has expanded greatly in the last fifty years.

 

ANS:  T                    PTS:   1                    MSC:  AACSB Analytic

 

11. Generally, legislative rules must be promulgated in accordance with the procedural requirements of the APA.

 

ANS:  T                    PTS:   1                    MSC:  AACSB Analytic

 

12. Interpretative rules of administrative agencies are automatically binding on the private parties the agency regulates.

 

ANS:  F                    PTS:   1                    MSC:  AACSB Analytic

 

13. Those interpretative rules of administrative agencies that are exempt from the APA’s notice and comment requirements are not automatically binding on the courts.

 

ANS:  T                    PTS:   1                    MSC:  AACSB Analytic

 

14. In general, procedural rules are exempt from the notice and comment requirements of the APA.

 

ANS:  T                    PTS:   1                    MSC:  AACSB Analytic

 

15. An administrative agency must always use formal procedures to resolve matters.

 

ANS:  F                    PTS:   1                    MSC:  AACSB Analytic

 

16. In 1990, Congress enacted the Administrative Dispute Resolution Act to require agencies to use alternative dispute resolution.

 

ANS:  F                    PTS:   1                    MSC:  AACSB Analytic

 

17. Only documentary evidence may be admitted at an administrative hearing.

 

ANS:  F                    PTS:   1                    MSC:  AACSB Analytic

 

18. Administrative hearings are held before a jury, just as are court hearings.

 

ANS:  F                    PTS:   1                    MSC:  AACSB Analytic

 

19. The 1990 Negotiated Rulemaking Act requires agencies to use negotiated rulemaking in the majority of circumstances.

 

ANS:  F                    PTS:   1                    MSC:  AACSB Analytic

 

20. Administrative law judges are appointed by the President and confirmed by the Senate just as are judges in the U.S. District Court.

 

ANS:  F                    PTS:   1                    MSC:  AACSB Analytic

 

21. An important and fundamental part of administrative law is the limits imposed by judicial review upon the activities of administrative agencies.

 

ANS:  T                    PTS:   1                    MSC:  AACSB Analytic

 

22. To be constitutionally permissible, an enabling statute must establish reasonable standards to guide an agency in implementing the statute. Using a broad phrase such as “fair and equitable” in an enabling statute meets this requirement.

 

ANS:  T                    PTS:   1                    MSC:  AACSB Analytic

 

23. Formal rulemaking is the most frequently used rulemaking procedure for administrative agencies.

 

ANS:  F                    PTS:   1                    MSC:  AACSB Analytic

 

24. Interpretative rules are exempt from the APA’s procedural requirements of notice and comment.

 

ANS:  T                    PTS:   1                    MSC:  AACSB Analytic

 

25. Congress enacted the Administrative Procedure Act in 1946.

 

ANS:  T                    PTS:   1                    MSC:  AACSB Analytic

 

26. Agencies are required to submit most newly adopted agency rules to each house of Congress before the rules can take effect.

 

ANS:  T                    PTS:   1                    MSC:  AACSB Analytic

 

27. Parties seeking to challenge agency action by way of judicial review must have standing and must have exhausted their administrative remedies.

 

ANS:  T                    PTS:   1                    MSC:  AACSB Analytic

 

28. An administrative agency’s discretion to compel the disclosure of information is subject to any legal privileges to withhold such information.

 

ANS:  T                    PTS:   1                    MSC:  AACSB Analytic

 

29. In exercising judicial review, when reviewing factual determinations, the court uses one of three different standards: arbitrary and capricious, substantial evidence, or unwarranted by the facts.

 

ANS:  T                    PTS:   1                    MSC:  AACSB Analytic

 

30. If the decision of an ALJ is appealed to the governing body of the agency, the case may be decided de novo.

 

ANS:  T                    PTS:   1                    MSC:  AACSB Analytic

 

31. The Freedom of Information Act and the Government in the Sunshine Act are different names for the same statute.

 

ANS:  F                    PTS:   1                    MSC:  AACSB Analytic

 

32. Federal agencies may not charge for providing records to a person requesting access to the agency’s files.

 

ANS:  F                    PTS:   1                    MSC:  AACSB Analytic

 

33. Only records specifically exempted by statute from disclosure are inaccessible under the FOIA.

 

ANS:  F                    PTS:   1                    MSC:  AACSB Analytic

 

34. Under the Administrative Procedure Act (APA), most legislative rules are issued in accordance with the informal rulemaking procedures.

 

ANS:  T                    PTS:   1                    MSC:  AACSB Analytic

 

35. The Sunshine Act allows for closed meetings if they concern agency participation in pending or anticipated litigation.

 

ANS:  T                    PTS:   1                    MSC:  AACSB Analytic

 

36. All ALJ decisions must include a statement of findings of fact and conclusions of law and the reasons or basis for them, as well as a statement of the appropriate relief.

 

ANS:  T                    PTS:   1                    MSC:  AACSB Analytic

 

37. There are more than twice as many federal judges as there are administrative law judges.

 

ANS:  F                    PTS:   1                    MSC:  AACSB Analytic

 

38. Federal administrative agencies must, within one year after creating records, make them available by electronic means.

 

ANS:  T                    PTS:   1                    MSC:  AACSB Analytic

 

39. An agency may impose in its orders sanctions, such as seizing property or revoking a license.

 

ANS:  T                    PTS:   1                    MSC:  AACSB Analytic

 

40. The technical common law rules governing admissibility of evidence are used by most administrative agencies during hearings.

 

ANS:  F                    PTS:   1                    MSC:  AACSB Analytic

 

MULTIPLE CHOICE

 

1. In 1990, Congress enacted the Administrative Dispute Resolution Act. This Act does not:

a.	encourage the federal agencies to use arbitration.
b.	authorize federal agencies to use mediation and conciliation.
c.	require the agencies to use alternative dispute resolution.
d.	All of the above.

 

 

ANS:  C                    PTS:   1                    MSC:  AACSB Analytic

 

2. What term refers to the entire set of activities in which an administrative agency engages?

a.	Rulemaking.
b.	The administrative process.
c.	Promulgating.
d.	Enforcement.

 

 

ANS:  B                    PTS:   1                    MSC:  AACSB Analytic

 

3. Administrative statutes issued by an agency are known as:

a.	legislative rules.
b.	interpretive rules.
c.	hybrid rules.
d.	procedural rules.

 

 

ANS:  A                    PTS:   1                    MSC:  AACSB Analytic

 

4. Where there has been informal rulemaking or informal adjudication by an administrative agency and the decision by that agency is then appealed to the courts, the court will generally apply what standard in reviewing factual determinations?

a.	The unwarranted by the facts standard.
b.	The substantial evidence standard.
c.	The arbitrary and capricious standard.
d.	The beyond a reasonable doubt standard.

 

 

ANS:  C                    PTS:   1                    MSC:  AACSB Analytic

 

5. The president has significant control over administrative agencies housed within the executive branch by virtue of the power to:

a.	remove commissioners for causes set forth by statute.
b.	appoint and remove the chief administrator of those agencies.
c.	impound moneys appropriated to the agency by Congress.
d.	All of the above.

 

 

ANS:  D                    PTS:   1                    MSC:  AACSB Analytic

 

6. Federal legislation that requires agencies to maintain in their records only that information about an individual that is relevant and necessary to accomplish an agency function and to collect information to the greatest extent practicable directly from the individual is the:

a.	FOIA.
b.	Privacy Act.
c.	Government in the Sunshine Act.
d.	APA.

 

 

ANS:  B                    PTS:   1                    MSC:  AACSB Analytic

 

7. Much of federal, state, and local law in this country has been established by __________, which people label as the “fourth branch of government” because they possess tremendous power.

a.	executive committees
b.	administrative agencies
c.	the courts
d.	legislatures, including Congress

 

 

ANS:  B                    PTS:   1                    MSC:  AACSB Analytic

 

8. A major rule of an administrative agency:

a.	does not become final until Congress has had an opportunity to disapprove it.
b.	is any rule that the Office of Management and Budget finds has resulted in or is likely to result in an annual effect on the economy of at least one million dollars.
c.	must be published in the Federal Register prior to its becoming final, but need not be submitted to Congress.
d.	is a rule that will have a significant effect on competition and that becomes final if it is submitted to and approved by the President.

 

 

ANS:  A                    PTS:   1                    MSC:  AACSB Analytic

 

9. Rulemaking powers of federal agencies are primarily governed by the:

a.	SEC.
b.	APA.
c.	FCC.
d.	NHTSA.

 

 

ANS:  B                    PTS:   1                    MSC:  AACSB Analytic

 

10. Parties that seek to challenge agency action must:

a.	have standing.
b.	have exhausted their administrative remedies.
c.	be a party injured by the agency action.
d.	All of the above.

 

 

ANS:  D                    PTS:   1                    MSC:  AACSB Analytic

 

11. Which of the following is characteristic of an executive administrative agency?

a.	It has complete independence from the president.
b.	It deals only with executives of major corporations.
c.	It is housed within the executive branch of the government.
d.	It has complete independence from Congress.

 

 

ANS:  C                    PTS:   1                    MSC:  AACSB Analytic

 

12. The legislature may exercise control of administrative agencies in various ways. These are:

a.	through its budgetary power.
b.	through the power to appoint and remove chief administrators.
c.	by amending an enabling statute to increase, modify, or decrease an agency’s authority.
d.	All of the above.
e.	(a) and (c), but not (b).

 

 

ANS:  E                    PTS:   1                    MSC:  AACSB Analytic

 

13. An advantage of administrative agencies is that they:

a.	relieve legislatures from trying to create legislation that deals with every detail of a specific problem.
b.	can be specialized bodies staffed by individuals with expertise in the regulated field.
c.	do not have to be concerned about compliance with constitutional mandates since they perform powers of all three branches of government.
d.	All of the above.
e.	Both (a) and (b).

 

 

ANS:  E                    PTS:   1                    MSC:  AACSB Analytic

 

14. Formal rulemaking differs from informal rulemaking in that with formal rulemaking:

a.	the procedures are governed by the same APA provisions that govern an adjudication.
b.	an agency  must give prior notice of a proposed rule, usually by publication in the Federal Register.
c.	an opportunity must be given for interested parties to participate in the rulemaking.
d.	publication of a final draft of the rule, along with a statement of the rule’s purpose, must be given at least fourteen days before its effective date.

 

 

ANS:  A                    PTS:   1                    MSC:  AACSB Analytic

 

15. An administrative law judge for the Federal Trade Commission decides a case against a retail store chain. The company then appeals the decision to the commission itself. Which of the following is correct regarding the appeal of the case from the administrative law judge to the commission?

a.	The commission may hear additional evidence and arguments in deciding whether to revise the findings and conclusions it made in the initial decision.
b.	There is no appeal from the decision of the ALJ.
c.	The commission will decide the case by having a jury trial.
d.	The commission must decide the case on the record, abstracts, and briefs and may not hear any evidence.

 

 

ANS:  A                    PTS:   1                    MSC:  AACSB Reflective Thinking

 

16. Which of the following statements is true regarding administrative law judges?

a.	ALJs are appointed by the president with the approval of the Senate.
b.	ALJs may be removed only for good cause.
c.	There are more than twice as many federal judges as there are administrative law judges.
d.	Administrative law judges preside over jury cases within the area of expertise of the agency.

 

 

ANS:  B                    PTS:   1                    MSC:  AACSB Analytic

 

17. The Environmental Protection Agency (EPA) would like to adopt some new rules regarding environmental impact statements, but it is afraid that if too many people know about them ahead of time, the adverse publicity will force the agency to amend them. To avoid any public comment, the agency seeks to adopt the rules without publishing them. Which of the following statements is true regarding the agency’s actions?

a.	The agency has a right to act in this way and a duty to be efficient with taxpayer money.
b.	The rules in this instance are procedural in nature and therefore are not required to be published.
c.	The agency is seeking to adopt the rules by a procedure that violates the rulemaking procedures set forth in the APA.
d.	The agency has no rulemaking authority, because only Congress can make legislative rules.

 

 

ANS:  C                    PTS:   1                    MSC:  AACSB Reflective Thinking

 

18. A federal agency that wishes to adopt administrative rules must do so in compliance with the:

a.	Administrative Procedures Act.
b.	U.S. Constitution.
c.	agency’s enabling statute.
d.	Rules must be adopted in compliance with all of the above.

 

 

ANS:  D                    PTS:   1                    MSC:  AACSB Analytic

 

19. In reviewing an agency action, which of the following are included in the questions of law a court will consider?

a.	Whether the agency violated any constitutional provision.
b.	Whether the agency acted contrary to the procedural requirements of the law.
c.	Whether the agency exceeded its authority.
d.	All of the above.

 

 

ANS:  D                    PTS:   1                    MSC:  AACSB Analytic

 

20. What standard does a court use in reviewing the factual determinations of an administrative agency?

a.	Whether the agency properly interpreted the applicable law.
b.	Whether the conclusions reached are supported by substantial evidence.
c.	Whether the agency acted contrary to procedural requirements of the law.
d.	Any one of the above, depending on the particular situation.

 

 

ANS:  B                    PTS:   1                    MSC:  AACSB Analytic

 

21. How are ALJs selected?

a.	They are appointed by the president and then confirmed by Congress.
b.	They are elected by Congress.
c.	They are appointed by the president without confirmation by Congress.
d.	They are appointed by the agency through a professional merit selection system.

 

 

ANS:  D                    PTS:   1                    MSC:  AACSB Analytic

 

22. What is required by the substantial evidence test?

a.	The conclusions reached must be supported by such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.
b.	It requires the court to try the facts de novo.
c.	It requires only that the agency had a rational basis for reaching its decision.
d.	It requires proof beyond a reasonable doubt.

 

 

ANS:  A                    PTS:   1                    MSC:  AACSB Analytic

 

23. The Government in the Sunshine Act covers all but which of the following agencies?

a.	Consumer Product Safety Commission.
b.	Commodity Futures Trading Commission.
c.	Environmental Protection Agency.
d.	Securities and Exchange Commission.

 

 

ANS:  C                    PTS:   1                    MSC:  AACSB Analytic

 

24. The enabling statute of an administrative agency requires it to conduct a legislative-type hearing without allowing for cross-examination in adopting its rules. This is:

a.	a formal rulemaking process.
b.	an informal rulemaking process.
c.	a hybrid rulemaking process.
d.	an unconstitutional rulemaking process.

 

 

ANS:  C                    PTS:   1                    MSC:  AACSB Analytic

 

25. Congress has enacted disclosure statutes to enhance public and political oversight of agency activities. These statutes include:

a.	Freedom of Information Act.
b.	Government in the Sunshine Act.
c.	Both (a) and (b) are correct.
d.	Neither (a) nor (b).

 

 

ANS:  C                    PTS:   1                    MSC:  AACSB Analytic

 

26. The APA’s requirements that the agency provide prior notice of a proposed rule, an opportunity for interested parties to participate in the rulemaking, and publication of a final draft containing a concise general statement of the rule’s basis and purpose are the requirements for issuance of rules in accordance with:

a.	formal rulemaking.
b.	hybrid rulemaking.
c.	informal rulemaking.
d.	negotiated rulemaking.

 

 

ANS:  C                    PTS:   1                    MSC:  AACSB Analytic

 

27. The __________ is the federal statute requiring most records in agency files to be accessible to the public.

a.	FOIA
b.	APA
c.	ALJ
d.	Government in the Sunshine Act

 

 

ANS:  A                    PTS:   1                    MSC:  AACSB Analytic

 

28. A minor agency rule:

a.	if disapproved by Congress, must be resubmitted to both houses of Congress.
b.	if disapproved by Congress, must be revised according to Congressional guidelines.
c.	if disapproved by Congress, has no chance of approval by the President.
d.	takes effect but, if after being submitted to Congress it is disapproved, it is treated as though it had never taken effect.

 

 

ANS:  D                    PTS:   1                    MSC:  AACSB Analytic

 

29. The Lujan v. Defenders of Wildlife case involved:

a.	the doctrine of standing.
b.	the issue of whether an agency action violated the Administrative Procedure Act.
c.	interpretation of an administrative regulation.
d.	enforcement action on the part of an agency and whether the demand for information was sufficiently specific and not unreasonably burdensome.

 

 

ANS:  A                    PTS:   1                    MSC:  AACSB Analytic

 

30. After an FOIA request has been made, an agency has __________ working days within which to indicate whether it intends to comply.

a.	3
b.	10
c.	21
d.	30

 

 

ANS:  B                    PTS:   1                    MSC:  AACSB Analytic

 

ESSAY

 

1. Compare the adjudication process in an administrative hearing to the judicial process. What takes place at an administrative hearing in contrast to what takes place at a trial in court?

 

ANS:

An agency may use informal or formal methods to resolve a dispute. When informal methods to resolve an administrative matter fail, then the agency must follow some sort of formal adjudicatory process. However, the procedures in these agency hearings vary from agency to agency. The APA does establish some mandatory standards. An agency must give notice of a hearing.The hearing is presided over by an administrative law judge and is prosecuted by the agency. Juries are never used in administrative hearings; either a judge or a jury can decide a case in the judicial system. In both agency and court hearings, either party may introduce both oral and documentary evidence. The rules of evidence apply in a court hearing; evidentiary rules in administrative proceedings are usually more relaxed, because there is no need to protect a jury from unreliable evidence. The appeal from an agency hearing is to the governing body of the agency. An appeal from a federal district court goes to the Court of Appeals.

 

PTS:   1                    MSC:  AACSB Communication | AACSB Reflective Thinking

 

2. What limits are imposed on administrative agencies by each of the following: (a) the courts; (b) Congress; and (c) the executive branch?

 

ANS:

The courts exercise a check on administrative agencies by means of judicial review. Courts may either compel agency action unlawfully withheld or set aside impermissible agency actions. Congress exercises control of administrative agencies through its budgetary power; by amending the agency’s enabling statute or even by eliminating the agency; by confirming high-level appointments to administrative agencies; by enacting legislation, such as the APA, to establish guidelines; and by reversing or changing agency rules. The executive branch appoints and can remove high-level executives of agencies housed within the executive branch; has a central role in the budgeting process of an agency; and can impound moneys and reorganize or abolish executive agencies.

 

PTS:   1                    MSC:  AACSB Communication | AACSB Reflective Thinking

 

3. What is an administrative agency? What powers does an administrative agency possess?

 

ANS:

Administrative agencies are governmental entities, other than courts and legislatures, having authority to affect the rights of private parties through their operations. Administrative agencies possess whatever powers are granted to them by the enabling statute passed by Congress or the state legislature. Their basic powers are to: (1) make rules; (2) enforce the law; and (3) adjudicate controversies.

 

PTS:   1                    MSC:  AACSB Communication | AACSB Reflective Thinking

 

4. The SEC would like to adopt some new rules to protect investors. What factors should it consider as part of the administrative process?

 

ANS:

Administrative rules can be legislative, interpretative, or procedural. The commission members should carefully check their enabling statute before adopting new rules. More than likely the rules it will be adopting would be considered legislative rules, which are substantive rules under the authority granted to the agency by the legislature. Most legislative rules must be promulgated in accordance with the Administrative Procedure Act, which generally requires: (1) prior notice of the proposed rule, usually by publication in the Federal Register; (2) an opportunity for interested parties to participate in the rulemaking procedure; and (3) publication of a final draft containing a concise general statement of its basis and purpose at least 30 days before the rule takes effect. The SEC should also check to make sure its proposed new rules do not violate any provisions of the Constitution.

 

PTS:   1                    MSC:  AACSB Communication | AACSB Reflective Thinking

 

5. (a)  What is the purpose of the Freedom of Information Act?

(b)  To what categories of records does the FOIA allow denial of access?

 

ANS:

(a)		The purpose of the Freedom of Information Act is to give the public access to most records in files of federal administrative agencies in order to make agencies more accountable to the public.
(b)		The categories of records to which the FOIA allows agencies to deny access are:
	(1)		Records specifically authorized in the interest of national defense or foreign policy to be kept secret.
	(2)		Those exempted by statute.
	(3)		Trade secrets and commercial or financial information that is privileged or confidential.
	(4)		Investigatory records compiled for law enforcement.
	(5)		Records that relate solely to internal personnel rules and practices of an agency.
	(6)		Inter- or intra-agency memoranda.
	(7)		Personnel and medical files.
	(8)		Records relating to regulation of financial institutions.
	(9)		Certain geological and geophysical information and data.

 

 

PTS:   1                    MSC:  AACSB Communication | AACSB Reflective Thinking

 

6. Explain what is considered a “major rule” and the effect of an administrative rule’s being in this category.

 

ANS:

The Congressional Review Act enacted in 1996 subjects most administrative rules to an extensive form of legislative control. The Act requires agencies to submit newly adopted rules to each house of Congress before the rules can take effect. If the rule is a “major rule,” it does not become final until Congress has had an opportunity to disapprove it. A major rule is any rule that the Office of Management and Budget finds has resulted in or is likely to result in (a) an annual effect on the economy of at least $100 million; (b) a major increase in costs or prices, or (c) a significant adverse effect on competition, employment, investment, innovation, productivity, or international competitiveness of U.S. enterprises.

 

PTS:   1                    MSC:  AACSB Communication | AACSB Reflective Thinking

 

7. Discuss the role of judicial review in relation to administrative agencies.

 

ANS:

Judicial review is the process by which courts examine governmental action. Judicial review is ordinarily available only for final agency action and to parties with standing. In exercising judicial review, the court may compel agency action unlawfully withheld or set aside agency action that was impermissible. The court must review the whole record and may set aside agency action only if the error is prejudicial. When conducting a review, a court decides all relevant questions of law, including whether the agency exceeded its authority, whether it properly interpreted applicable law, whether it violated the constitution or acted contrary to procedural requirements of the law. Questions of fact are also reviewed, using one of three standards: arbitrary and capricious, substantial evidence, or unwarranted by the facts.

 

PTS:   1                    MSC:  AACSB Communication