LEGL 2301- Chapter 24 Quiz Flashcards


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Consumer Protection
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1

False

State consumer protection agencies are charged by Congress with the broadly
stated goal of preventing unfair and deceptive trade practices

2

False

Advertising that appears to be based on factual evidence will not be deemed
deceptive even if it is not reasonably supported by evidence

3

True

A sanction known as counter-advertising requires a company to advertise anew
to inform the public about earlier misinformation.

4

False

Advertising that contains an endorsement by a celebrity will not be deemed
deceptive.

5

False

Deceptive advertising does not occur in the online environment.

6

False

Puffery constitutes deceptive advertising.

7

False

The Consumer Product Safety Commission is the primary agency that issues
regulations on food labeling.

8

False

Labels on fresh meats are not required to indicate where the food originated.

9

False

Restaurants must post guidelines on the number of calories that an average
person requires daily.

10

True

The Federal Reserve Board of Governors has issued a regulation that governs
credit provisions associated with sales contracts—Regulation Z.

11

True

Merchants must issue a refund within a specified period of time when a
consumer cancels an order.

12

True

The Food and Drug Administration must ensure the safety of new medications.

13

True

The Consumer Product Safety Commission conducts research on the safety of
individual consumer products and maintains a clearinghouse on the risks
associated with various products.

14

False

The Food and Drug Administration does not have the authority to directly recall
any food products that it suspects are tainted but must rely on the producers to
recall items.

15

True

Insurance companies must spend at least 85 percent of all premium dollars from
large employers on benefits and quality improvements.

16

False

Credit can be denied solely on the basis of race.

17

True

Account numbers on credit-card receipts must be truncated (shortened).

18

True

A credit-card company must send monthly bills to cardholders twenty-one days
before the due date.

19

False

Major credit reporting agencies must provide consumers with free copies of their
own credit reports every six months.

20

True

A debt-collection agency is someone who regularly attempts to collect debts on
behalf of someone else, usually for a percentage of the amount owed.

21

a. federal and state law

Through careless manufacturing practices, Metalworks Company makes and
distributes unsafe products that are sold to Nabi and other consumers. This may
be subject to sanctions under

a. federal and state law

b. federal law only

c. no law, according to the principles of freedom to contract

d. state law only

22

d. none of the choices

Slow-Brew Coffee Company sells coffee and related beverages. The company's
ad contends that ambitious businesspersons "Drink Us & Rise Up in the World!' "
The Federal Trade Commission would consider this ad to be

a. false and misleading

b. impermissibly vague and general

c. a deceptive half-truth

d. none of the choices

23

d. none of the choices

SmartPhone Company's ad states that its product is "The Best that Money Can
Buy." Because of this ad, the Federal Trade Commission is most likely to issue

a. a cease-and-desist order

b. a counter-advertising order

c. a multiple product order

d. none of the choices

24

b. a multiple product order

Mouth & Gums, Inc. (CSI), engages in deceptive advertising when it markets its
product Oral Rinse as able to kill germs over long periods of time. In an action
against Mouth & Gums, the firm is ordered to stop its false advertising of Oral
Rinse and other products. This is

a. counter-advertising

b. a multiple product order

c. a "cooling-off" law

d. a validation notice

25

b. draft a formal complaint

Spicy Salsa, Inc., complains to the Federal Trade Commission (FTC) about an
ad broadcast by Tangy Taco Sauce Company, Spicy Salsa's competitor. The
FTC investigates and concludes that the ad is deceptive. The FTC's next step is
to

a. conduct negotiations between the competitors

b. draft a formal complaint

c. issue a cease-and-desist

d. permit Spicy Salsa to broadcast similarly deceptive counter-advertising

26

c. possible fines by the Federal Communications Commission

Medi-Insurance Company faxes ads to Nancy and other individual consumers
without the recipients' permission. This is subject to

a. a cease-and-desist order by the Federal Trade Commission

b. no sanctions

c. possible fines by the Federal Communications Commission

d. rescission on the order of the Federal Reserve Board

27

d. warranted by the nature of the food

Sweet Treats, Inc., wants to market a new snack food. On the product's label,
standard nutrition facts are

a. prohibited

b. required

c. strictly voluntary

d. warranted by the nature of the food

28

a. a restaurant chain with twenty or more locations

Sweet Treats, Inc., wants to market a new snack food. On the product's label,
standard nutrition facts are

a. a restaurant chain with twenty or more locations

b. a food distributor with twenty or more customers

c. a food processor with twenty or more products

d. a food producer with twenty or more acres

29

d. the Food and Drug Administration

Nature's Food Market sells groceries. Metro Snacks & Drug Store sells groceries
and fills prescriptions. The party with the chief responsibility to prevent unsafe
food and drugs from being sold is

a. nature's Food Market and Metro Snacks & Druge STore

b. Metro Snacks & Drug Store only

c. the Federal Trade Commission

d. The Food and Drug Administration

30

d. remove the tool from the market

Grid Tool Company makes and sells tools. One of the tools is believed to be
hazardous. The appropriate government agency may require Grid to

a. export the tool and sell it only abroad

b. increase the price to cover the cost of any injuries or damage

c. reduce the price to indicate the hazard to consumers

d. remove the tool from the market

31

d. the Truth-in-Lending Act

Grover signs an installment contract with Home Appliance Store to finance the
purchase of new kitchen appliances—stove, refrigerator, dishwasher,
microwave, and toasteroven—for $3,999. This transaction is subject to

a. no federal law

b. the Fair Credit Reporting Act

c. the Telecommunications Act

d. the Truth-in-Lending Act

32

d. Truth-in-Lending Act

Tory borrows $10,000 from USA National Bank to remodel a room in her home.
This transaction is subject to

a. no federal law

b. the Consumer Leasing Act

c. the Consumer Product Safety Act

d. the Truth-in-Lending Act

33

d. the car loan, the home repair loan, and the retail installment sale

Cecilia borrows $20,000 from Debit & Credit Union to repair her home and to buy
a car. She buys a laptop from eStuf Store in a transaction financed by the seller.
If these parties are subject to the Truth-in-Lending Act, Regulation Z applies to

a. the car loan only

b. the home repair loan only

c. the retail installment sale only

d. the car loan, the home repair loan, and the retail installment sale

34

d. race

QuikPay Inc. extends credit to consumers. QuikPay is subject to the Equal Credit
Opportunity Act, which prohibits credit discrimination based on

a. intelligence

b. education

c. income

d. race

35

d. not liable for any amount

Jasmine receives an unsolicited credit card in the mail and tosses it on her desk.
Without Jasmine's permission, her roommate Ilene uses the card to buy a new tablet for $500. Jasmine is

a. liable for $500

b. liable for $250

c. liable for $50

d. not liable for any amount

36

b. an assessment of damages

In the ordinary course of business, Loan2Buy Corporation offers credit to Mai
and other consumers and reports on the loans to credit agencies. To save time
and money, Loan2Buy generally does not correct or update its reported
information. This is most likely to result in

a. a levy of a nominal fine

b. an assessment of damages

c. an order of rescission of the loan contracts

d. no sanctions

37

c. the Fair Debt Collections Practices Act

Debt & Loan Collection Agency calls Ethel several times a day, and sometimes
in the middle of the night, about an overdue bill that a Furniture4U store turned
over to Debt & Loan for collection. This is a violation of

a. no federal law

b. the Fair and Accurate Credit Transactions Act

c. the fair Debt Collection Practices Act

d. the Truth-in-Lending Act

38

a. no federal law

Lucy takes out a student loan from Midtown Bank. When she fails to make the
scheduled payments for six months, Midtown advises her of further action that it
will take. This violates

a. no federal law

b. the Fair and Accurate Credit Transactions Act

c. the Fair Debt Collection Practices Act

d. the Truth-in-Lending Act

39

a. no federal law

Kip opens an account at a Lotsa Goodies Store, and buys a digital music player
and other items, but makes no payments on the account. To collect the debt,
Mako, the manager, contacts Kip's parents. This violates

a. no federal law

b. the Fair and Accurate Credit Transactions Act

c.the Fair Debt Collection Practices Act

d. the Truth-in-Lending Act

40

c. the Fair Debt Collection Practices Act

The credit department of Discount Retail Stores Inc. calls Emmett at work about
an overdue bill. Emmett's employer objects. Discount Retail's credit department
continues to call Emmett at work. This is a violation of

a. no federal law

b. the Fair and Accurate Credit Transactions Act

c. the Fair Debt Collection Practices Act

d. the Truth-in-Lending Act