The Legal Environment of Business Text and Cases 9th Edition by Cross – Test Bank

The Legal Environment of Business Text and Cases 9th Edition by Cross – Test Bank

Chapter 6

Administrative Agencies

N.B.: TYPE indicates that a question is new, modified, or unchanged, as follows.

N A question new to this edition of the Test Bank.

+ A question modified from the previous edition of the Test Bank.

= A question included in the previous edition of the Test Bank.

true/false questions

1. Like statutory law, administrative law is created by legislatures.

answer: F PAGES: Section 1 TYPE: N

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2. Administrative agencies at various levels of government work together and share the responsibility of enforcing particular regulations.

answer: t PAGES: Section 1 TYPE: N

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3. Business has little incentive to try to influence the regulatory environment through lobbying.

answer: F PAGES: Section 2 TYPE: N

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4. Federal administrative agencies can exercise only those powers that a state legislature has delegated to them in enabling legislation.

answer: F PAGES: Section 2 TYPE: N

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5. Legislative rules simply declare policy and do not affect legal rights or obligations.

answer: F PAGES: Section 2 TYPE: +

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6. A party seeking court review of an administrative action must first exhaust all of his or her administrative remedies before seeking court review.

answer: T PAGES: Section 2 TYPE: =

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7. An administrative rule may be arbitrary and capricious if the agency failed to provide a rational explanation for its decision.

answer: T PAGES: Section 3 TYPE: N

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8. All federal agencies must follow specific procedural requirements when fulfilling their basic functions.

answer: T PAGES: Section 3 TYPE: N

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9. Unlike statutes, administrative regulations do not have a binding effect.

answer: F PAGES: Section 3 TYPE: N

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10. Anyone can submit comments on a proposed administrative rule.

answer: T PAGES: Section 3 TYPE: +

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11. A party can be directly prosecuted for violating an administrative agency’s interpretive rule or guidance document.

answer: F PAGES: Section 3 TYPE: N

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12. When the meaning of a statute’s language is unclear and an agency interprets it, a court need not follow the interpretation even if it is reasonable.

answer: F PAGES: Section 4 TYPE: +

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13. Few agency rules require considerable compliance reporting from regulated entities.

answer: F PAGES: Section 5 TYPE: N

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14. If a business firm refuses to comply with an agency’s request to inspect facilities or business records, the agency must defer to the refusal.

answer: F PAGES: Section 5 TYPE: =

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15. Warrants are required to conduct administrative searches in all highly regulated industries.

answer: F PAGES: Section 5 TYPE: N

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16. Administrative agencies generally have no discretion over the type of hearing procedures that they use.

answer: F PAGES: Section 5 TYPE: +

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17. There are no significant differences between a trial and an administrative hearing.

answer: F PAGES: Section 5 TYPE: N

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18. All federal government agencies must make their records available electronically on the Internet and in other electronic formats.

answer: t PAGES: Section 6 TYPE: +

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19. A federal administrative agency must alert small businesses—through advertising in trade journals, for example—about forthcoming regulations.

answer: T PAGES: Section 6 TYPE: N

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20. Federal agencies must consider ways to reduce the economic impact of new regulations on small businesses.

answer: T PAGES: Section 6 TYPE: =

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multiple choice questions

1. Therapeutic Pharmaceutical Company is subject to regulations issued by the Food and Drug Administration, which is a federal agency. These regulations are part of the body of

1. administrative law.
2. legislative law.
3. executive law.
4. statutory law.

ANSWER: A PAGES: Section 1 TYPE: N

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2. State and federal transportation agencies may issue regulations that conflict. When a state regulation conflicts with a federal regulation

1. the federal regulation takes precedence.
2. the state regulation takes precedence.
3. the regulations are mutually void.
4. the regulations are of equal effect.

ANSWER: A PAGES: Section 1 TYPE: N

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3. Information Security Inc. pays income and other taxes collected by the Internal Revenue Service (IRS). Like other federal administrative agencies, the IRS was created by

1. Congress, through enabling legislation.
2. the courts, through the adjudicatory process.
3. the U.S. Constitution, in Article I, Section 8.
4. the president, through an executive order.

ANSWER: A PAGES: Section 2 TYPE: +

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4. Persons who favor the creation of a federal biotech agency to regu­late the production of genetically modified agricultural and animal products should con­cen­trate their lobbying ef­forts on

1. Congress.
2. federal administrative agencies that oversee such products.
3. the United States Supreme Court.
4. the president of the United States.

answer: a PAGES: Section 2 TYPE: =

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5. Congress enables the Environmental Protection Agency to regulate air and water pollution. This congressional act is

1. divine right.
2. a delegation of legislative power.
3. a gap-filling power.
4. arbitrary and capricious.

answer: b PAGES: Section 2 TYPE: +

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6. Grid Tools & Hardware Company is subject to a decision by the Consumer Product Safety Commission. Opposed to the decision, Grid Tools wants a court to review it. First, however, the firm must use all of the potential administrative remedies. This is

1. an actual controversy at issue.
2. standing to sue.
3. the exhaustion doctrine.
4. the ripeness doctrine.

ANSWER: C PAGES: Section 2 TYPE: =

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7. The functions of the National Transportation Safety Board, like those of other federal adminis­trative agencies, include

1. adjudication.
2. declaration.
3. enunciation.
4. pronunciation.

answer: A PAGES: Section 2 TYPE: =

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8. Maxi Retail Corporation is subject to a decision by the National Labor Relations Board. Maxi Retail appeals the decision, arguing that it is arbitrary and capricious. This could mean that the decision

1. followed a consideration of legally appropriate factors.
2. justifiably changed the agency’s prior policy.
3. was accompanied by a rational explanation.
4. was plainly contrary to the evidence.

ANSWER: D PAGES: Section 3 TYPE: =

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9. The Securities and Exchange Commission decides to create a new rule relating to the dissemination of material nonpublic information through corporate Web sites. This process begins with

1. an on-site inspection.
2. the filing of a complaint against a charged party.
3. the publication of a notice of proposed rulemaking.
4. the solicitation of public comments.

answer: C PAGES: Section 3 TYPE: +

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10. To notify the public of a proposed rule, the U.S. Office of Labor-Management Standards, like other federal agencies, publishes the proposal in

1. the Administrative Procedure Act.
2. the Code of Federal Regulations.
3. the Federal Register.
4. the United States Code.

answer: B PAGES: Section 3 TYPE: N

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11. In reviewing the actions of the U.S. Bureau of Land Management and other federal agencies, the courts

1. are usually reluctant to review questions of fact.
2. rarely defer to the technical expertise of administrative agencies.
3. often rule on the merits of policy determinations.
4. never defer to an agency’s interpretation of law.

answer: a PAGES: Section 4 TYPE: =

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12. The U.S. Patent and Trademark Office (USPTO) wants to review certain records of Omni App Corporation. The USPTO can legitimately gain access to the records through

1. agency coercion.
2. infiltrating Omni App’s computers without the firm’s knowledge.
3. public comment.
4. Omni App’s voluntary compliance.

answer: D PAGES: Section 5 TYPE: +

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13. Armando is a witness in a contro­versy involving the U.S. Bureau of Tobacco and Firearms. Armando can be compelled to appear before an adminis­trative law judge if he is served with

1. an order for specific performance.
2. an executive order.
3. a subpoena.
4. a search warrant.

answer: C PAGES: Section 5 TYPE: +

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14. The U.S. Food Safety and Inspection Service conducts searches of certain businesses. This agency and other administrative agencies can conduct warrantless searches in

1. all industries.
2. highly regulated industries.
3. no industries.
4. newly regulated industries only.

answer: B PAGES: Section 5 TYPE: =

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15. The U.S. Fish and Wildlife Service discovers that Grosse Farm Fisheries, Inc. has violated a federal regulation. If no negotiated settlement can be reached, the agency will most likely

1. issue a formal complaint against Grosse Farm.
2. do nothing.
3. file a petition with the U.S. Supreme Court.
4. impose immediate sanctions on Grosse Farm.

ANSWER: A PAGES: Section 5 TYPE: N

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16. The Occupational Safety and Health Administration (OSHA) discovers that Petro Refinery, Inc., is violating an OSHAS regulation. If this situation is resolved like most such disputes, the outcome will be

1. a negotiated settlement.
2. a trial and a fine.
3. a trial and an appeal to a higher authority.
4. a trial and the dissolution of the business.

answer: A PAGES: Section 5 TYPE =

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17. Personnel Employment, Inc., has been ordered to appear at a hearing be­fore an administrative law judge of the Social Security Administration. A significant difference between a trial and an administrative hearing is that

1. attorneys are not allowed to attend administrative hearings.
2. clients are not allowed to communicate with their attorneys dur­ing adminis­trative hearings.
3. hearsay can be introduced as evidence in an administrative hearing.
4. the burden of proof is on the charged party to prove innocence.

answer: C PAGES: Section 5 TYPE: =

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18. The U.S. Small Business Administration issues a new regulation that will have a significant impact on a substantial number of small businesses. Under the Regulatory Flexibility Act, the agency must do all of the following except

1. measure the cost that the rule will impose on small businesses.
2. consider less burdensome alternatives.
3. conduct a regulatory flexibility analysis.
4. adjust the rule to the satisfaction of the regulated businesses.

answer: D PAGES: Section 6 TYPE: N

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19. A failure of the U.S. Drug Enforcement Administration to comply with a request under the Freedom of Information Act (FOIA) may be challenged in

1. a federal district court.
2. a hearing before the U.S. Freedom of Information Agency.
3. a meeting with Congress’s FOIA subcommittee.
4. a special conference with the president of the United States.

answer: A PAGES: Section 6 TYPE: =

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20. Closed meetings of the National Security Agency and other federal administrative agencies are permitted when

1. the subject of the meeting concerns accusing a person of a crime.
2. open meetings would frustrate the implementation of future actions.
3. the subject of the meeting involves matters relating to future liti­ga­tion or rulemaking.
4. all of the choices.

answer: d PAGES: Section 6 TYPE: =

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Essay Questions

1. Guitar Maker, Inc., makes guitars. The Occupational Safety and Health Administration (OSHA) proposes a safety rule governing the handling of wood and its dust in the workplace, including the woods that Guitar Maker uses in its operations. Guitar Maker contends that the rule will involve sub­stantial compliance costs without significantly increasing workplace safety. The firm sends a letter to OSHA indicating its objections to the pro­posed rule and enclosing research reports and other data sup­porting those objections. Does OSHA have any obligation to consider these objec­tions? What procedures must OSHA follow when it makes new rules, such as this one?

ANSWER: In formulating new rules, a federal administrative agency has to follow specific rulemaking procedures. The most commonly used procedure is notice-and-comment rulemaking, which consists of three steps: notice of the proposed rulemaking, a com­ment period, and the fi­nal rule. The notice of the proposed rulemaking proceeding is published in the Federal Register. The notice states where and when the proceed­ings will be held, the agency’s legal authority for making the rule, and the terms or subject matter of the proposed rule. Following publication of the notice, the agency must allow time for persons to comment in writing on the proposed rule. (If a hearing is held, the comments may be oral.) The agency need not respond to all comments, but it must respond to any signifi­cant comments that bear directly on the proposed rule.

Thus, if Guitar Maker’s comments are significant, OSHA must take them into consid­era­tion. OSHA can respond by either modi­fying its final rule or explain­ing, in a statement accompanying the rule, why it did not make any changes.

After the agency reviews the comments, it drafts the final rule and pub­lishes it in the Federal Register. Later, the rule is compiled with those rules of other federal agen­cies in the Code of Federal Regulations.

PAGES: Section 3 type: =

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2. Friend2Friend, Inc., a social network provider, is cited by an Internal Revenue Service (IRS) representative for an underpayment of federal income tax. Friend2Friend’s accountants believed that the agency overlooked some of the firm’s legitimate tax deductions and credits. Erin, Friend2Friend’s chief executive officer, wants to challenge the assessment. What are Erin and Friend2Friend’s next steps?

ANSWER: Friend2Friend cannot ask a court for an injunction to stop the en­forcement of the regulation until it has exhausted its administrative remedies.

Friend2Friend’s first step would be to appeal the IRS representa­tive’s order to the agency. After investigating, the agency might negoti­ate a settlement with Friend2Friend. If a settlement cannot be reached, and the agency still considers Friend2Friend in violation of the rule, the agency might is­sue a complaint against the firm. This would be an attempt to bring the firm into compliance and may be accompanied by a press release. Friend2Friend can respond by filing an answer to the charge, and may also re­spond with its own press release. If there is no settlement, there may be a hearing before an administrative law judge (ALJ). After the hearing, the ALJ will issue an initial order, and if Friend2Friend is still dissatisfied, the firm can appeal to the commission that governs the agency. If Friend2Friend is dis­satisfied with the commission’s decision, it may appeal to a federal court of appeals. If there is no appeal, or if the commission and the court re­fuse to review the case, the ALJ’s order becomes final. Ultimately, Friend2Friend may appeal adverse rulings to the United States Supreme Court.

PAGES: Section 5 type: +

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