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Questions
Q:
A party seeking to recover in quasi contract must show that he or she has been unjustly enriched.
Q:
When a business has implicit costs,A) economic profits are greater than accounting profits. B) economic and accounting profits are the same.C) economic profits are less than accounting profits. D) economic costs are the same as accounting costs.
Q:
How does Section 16(b) of the Securities Exchange Act of 1934 protect the interests of a corporation? Explain with an example.
Q:
Quasi contracts allow the courts to act as if a contract exists when there is no contract.
Q:
What is insider trading? How is it regulated in the United States?
Q:
Reformation allows a court to rewrite a contract to reflect the parties' true intentions.
Q:
Insider trading in the purchase and sale of securities in the aftermarkets is prohibited by the ________.
Q:
Specific performance is the remedy customarily used when one party has breached a contract for personal services.
Q:
________ occurs when a company employee or company advisor uses material nonpublic information to make a profit by trading in the securities of the company.
Q:
Specific performance is the remedy customarily used when one party has breached a contract for a sale of land.
Q:
Blue-sky laws are state laws that regulate the issuance and trading of securities.
Q:
A consumer optimum is characterized byA) the marginal rate of substitution of one good divided by its price equal to the marginal rate of substitution of the other good divided by its price. B) the marginal rate of substitution equal to unity.C) the marginal rate of substitution equal to the ratio of the prices of the two goods.D) the marginal rate of substitution divided by the price ratio of the two goods equal to the income of the consumer.
Q:
Restitution involves one party's recapture of a benefit through which anÂother party has been unjustly enriched.
Q:
A 10-percent shareholder of an equity security of a reporting company is considered a statutory insider.
Q:
A breach of contract may entitle the innocent party to rescind the contract.
Q:
A tipper cannot be held liable for the profits made by the tippee.
Q:
On rescission of a contract, each party essentially advances to the position he or she would have been in if the contract had been fully executed.
Q:
When a company employee makes a profit by personally purchasing shares of the corporation prior to public release of favorable information, it is not considered illegal.
Q:
Liquidated damages are damages that are certain in amount.
Q:
The ________ coordinates state securities laws with federal securities laws.
A) Insider Trading Sanctions Act
B) Securities Exchange Act of 1934
C) Securities Act of 1933
D) Uniform Securities Act
Q:
Despite the fact that water is necessary to sustain life, it is less expensive than soft drinks. Economic theory suggests that this is so becauseA) there is a conspiracy among soft drinks producers to hold prices artificially high.B) although the total utility of water consumption is high, its marginal utility per dollar spent is low when compared to soft drinks.C) consumers are irrational.D) sellers of water hold the price of water artificially low because of its importance.
Q:
Normally, when a nonbreaching party has been damaged by a breach of conÂtract, he or she has a duty to mitigate those damages.
Q:
________ requires that any profits made by a statutory insider on transactions involving short-swing profits belong to the corporation.
A) Section 5 of the Securities Act of 1933
B) Section 12 of the Securities Act of 1933
C) Section 16(b) of the Securities Exchange Act of 1934
D) SEC Rule 10b5-1
Q:
The duty owed under the mitigation of damages doctrine depends on the situation.
Q:
Which of the following best defines short-swing profits?
A) profits made by an insider by selling shares of the corporation before the public disclosure of unfavorable information
B) profits made by an insider by personally purchasing shares of the corporation before the public release of favorable information
C) profits made by a statutory insider on trades involving equity securities of his or her corporation that occur within six months of each other
D) profits made by a tippee by personally purchasing shares of the corporation either before or after the public release of favorable information
Q:
Nominal damages normally establish that the defendant acted wrongly.
Q:
Of the following, who is considered a Section 16 statutory insider?
A) Sharon Muller, an editor who was tipped by her friend to buy shares of KYU Corp.
B) Robert Morgan, an employee who owns ten percent of all equity security of KYU Corp.
C) Jim Downey, a graphics engineer who quit KYU Corp. after five years of service.
D) Kate Harris, a legal consultant to KYU Corp.
Q:
Punitive damages are never awarded in breach of contract actions.
Q:
The ________ imposes liability under Section 10(b) and Rule 10b-5 on an outsider who misappropriates information about a company, in violation of his or her fiduciary duty, and then trades in the securities of that company.
A) Insider Trading Sanctions Act
B) Sarbanes-Oxley Act
C) tort of appropriation
D) misappropriation theory
Q:
When Mary earned $3,200 per month, she bought 2 concert tickets each month. Now her monthly income is $5,600, and the number of concert tickets she purchases has risen to 3 per month. Maryʹs income elasticity of demand for concert tickets equals and the tickets are a(n) good for Mary.A) -1.36; normal B) -0.21; inferiorC) +0.21; complementary D) +0.73; normal
Q:
A(n) ________ is a person who discloses material nonpublic information to another person.
A) issuer
B) tippee
C) grantor
D) tipper
Q:
Punitive damages are almost never available in contract disputes.
Q:
Which of the following is an example of insider trading?
A) An employee uses material nonpublic information to make a profit by trading in the securities of the company.
B) A manager purchases all the shares of a corporation available to the public.
C) A director purchases enough shares of a public company to gain a majority stake in its management.
D) An employee sells his shares to another employee without notifying the company.
Q:
Damages are awarded for whatever injury a nonbreaching party suffers, whether or not the breaching party could have foreseen the injury.
Q:
Consequential damages are foreseeable damages that arise from a party's breach of a contract.
Q:
________ is a federal statute that permits the Securities and Exchange Commission (SEC) to obtain a civil penalty of up to three times the illegal benefits received from insider trading.
A) The Securities Act of 1933
B) The Securities Exchange Act of 1934
C) The Insider Trading Sanctions Act
D) SEC Rule 506
Q:
Consequential damages are awarded to cover all of the remote conseÂquences of whatever injury a nonbreaching party suffers.
Q:
Which of the following violates Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5?
A) nonexemption status
B) scienter
C) a lack of due care
D) negligence
Q:
The greater is the absolute price elasticity of demand, theA) larger is the responsiveness of quantity demanded to the price change.B) smaller is the responsiveness to a price change. C) larger is the income of the buyer.D) higher is the change in demand to an income change.
Q:
On the breach of a contract involving the sale of land, money damages is alÂways the most approÂpriate remedy.
Q:
Distinguish between the nonissuer exemption, the intrastate offering exemption, and the private placement exemption.
Q:
List the securities exempt from registration with the Securities and Exchange Commission (SEC).
Q:
The measure of damages for breach of a construction contract depends on which party breaches and when.
Q:
SEC Rule 506—known as the private placement exemption—allows issuers to raise capital from an unlimited number of ________ without having to register the offering with the SEC.
Q:
The measure of damages for the breach of a contract for a sale of land deÂpends on which party breaches and when.
Q:
The Securities Act of 1933 provides a(n) ________ exemption that permits local businesses to obtain from local investors capital to be used in the local economy without the need to register with the Securities and Exchange Commission (SEC).
Q:
In a contract for a sale of goods, the usual measure of compensatory damÂages is the difference between the contract price and the market price.
Q:
An exemption from registration which states that securities transactions not made by an issuer, an underwriter, or a dealer do not have to be registered with the Securities and Exchange Commission (SEC) is known as a(n) ________ exemption.
Q:
Voluntary agreements may not be a feasible method to internalize an externality whenA) the dollar value of the externality is large.B) the externality is negative rather than positive. C) there are significant transaction costs.D) there are high taxes on the firms that cause the externalities.
Q:
The injury suffered by a nonbreaching party due to the breach of a conÂtract may be remedied by payment of compensatory damages.
Q:
In order to be found guilty for violation of Rule 10b-5, intentional conduct (scienter) must be proven.
Q:
The measure of damages on a breach of contract is the amount that will imÂpress on the breaching party the harm that has been done.
Q:
Section 10(b) of the Securities Exchange Act prohibits the use of manipulative and deceptive devices in contravention of the rules and regulations prescribed by the SEC.
Q:
Compensatory damages compensate the nonbreaching party for injuries or damages sustained by that party.
Q:
An accredited investor is defined as a person who does not understand the risks involved in securities investment and will suffer considerable financial damage if the investment fails.
Q:
The nonissuer exemption permits local businesses to raise capital from local investors to be used in the local economy without the need to register with the SEC.
Q:
The health care market in the United States is characterized by
A) considerable government involvement.
B) third-party payment of health care costs.
C) asymmetric information between providers and consumers.
D) all of the above
Q:
Expenses that are caused directly by a breach of contractsuch as those inÂcurred to obtain performance from another sourceare inciÂdental damÂages.
Q:
Damages are designed to punish a breaching party and deter others from similar conduct.
Q:
Drafts that have a maturity date of six months are exempt from registration with the SEC.
Q:
Ellen contracts to buy six cases of vintage Fertile Valley wine from Grapes & Vines Winery for $1,200. The contract states that delivery is to be made at Ellen's residence "on or before May 1, to be used for daughter's wedding reception on May 2." On May 1, Grapes & Vines's delivery van is involved in an accident, no wine is delivered that day, and no one from Grapes & Vines tells Ellen. On the morning of May 2, Ellen buys the wine from Happy Hill Winery. That afternoon, just before the reception, Grapes & Vines tenders delivery of the wine at Ellen's residence. She refuses tender. Grapes & Vines sues her for breach of contract. How is the court most likely to rule?
Q:
Which of the following is true of the small offering exemption?
A) Securities coming under this exemption cannot be sold through general selling efforts to the public.
B) Securities coming under this exemption can only be sold to accredited investors.
C) Securities coming under this exemption can only be sold to nonaccredited investors.
D) Securities coming under this exemption have no resale restrictions imposed on them.
Q:
Shade Tree Landscaping Company enters into a contract with Jill to landscape Jack's yard, using Fertile Nursery to supply trees and bushes. Maria owns the lot next to Jack's property. The landscaping is a gift from Jill to Jack, who is Jill's friend, but they are not related. What type of beneficiary is Jack? What type of beneficiary is Maria? What type of beneÂficiary is Fertile Nursery? If Shade Tree refuses to do the job, who can enÂforce the contract against it?
Q:
SEC Rule 506 is known as the ________ exemption.
A) nonissuer
B) intrastate offering
C) private placement
D) interstate offering
Q:
Evergreen Landscapers, Inc., owes Friendly Finance Company $5,000. Evergreen enters into a contract with Suburban Office Park under which Evergreen promises to maintain the landscaping on Suburban's property. Under the contract, Suburban promises to pay Friendly Finance the amount that will be due Evergreen until Evergreen's debt to Friendly Finance is paid. Evergreen performs as promised, but Suburban does not pay Friendly Finance. Can Friendly Finance succeed in a suit against Suburban? Why or why not?
Q:
The ________ is a registration exemption that permits local businesses to raise capital from local investors to be used in the local economy without the need to register with the Securities and Exchange Commission (SEC).
A) intrastate offering exemption
B) Regulation A offering
C) private placement exemption
D) nonissuer exemption
Q:
The way income is allocated among the population is called theA) income curve. B) income spread.C) distribution of income. D) Gini allocation.
Q:
Pam borrows $5,000 from Quality Auto Sales to buy a car. When Pam does not pay the loan or return the car, Quality wants to transfers the right to the payment to Rapid Collection Agency. Rapid agrees to pay Quality for this right, but for a price that is less than the amount owed. Can Quality transfer this right to Rapid without Pam's consent? If so, and Quality committed fraud in the deal with Pam, could Pam legitiÂmately refuse to pay Rapid? Explain.
Q:
The ________ is a registration exemption which states that securities transactions not made by an issuer, an underwriter, or a dealer do not have to be registered with the Securities and Exchange Commission (SEC).
A) intrastate offering exemption
B) private placement exemption
C) Regulation A offering
D) nonissuer exemption
Q:
Superb Construction, Inc., contracts to build a store for Tasty Confection Company, with Tasty's payment due on June 1. On June 1, Tasty's bank is closed, and for this reason, Tasty claims it cannot pay Superb on time. In this situation
a. Tasty's bank is in breach of contract.
b. Tasty is in breach of contract.
c. the contract is discharged.
d. the contract is suspended.
Q:
Exempt securities include ________.
A) stock dividends and stock splits
B) IPOs made by multinational corporations
C) securities that have been held by a single investor for longer than a year
D) securities worth $1 million or more
Q:
Haruko, who owns and operates Garden Orchard, agrees to sell Fresh Produce Cooperative ten bushÂels of apples.
When the market price for apples exceeds the price in the contract with Fresh Produce, Haruko decides not to deliver the apples. This
a. breaches the contract.
b. discharges the contract.
c. has no effect on the contract.
d. suspends the contract.
Q:
Which of the following is true of exempt securities?
A) Only the federal government can issue exempt securities.
B) Once a security is exempt, it is exempt forever.
C) An exemption notice must be filed with SEC each time the exempt security is transferred.
D) Exempt securities cannot be traded publicly.
Q:
The first type of labor unions that emerged in the United States wereA) industrial unions. B) craft unions.C) professional unions. D) transportation unions.
Q:
Haruko, who owns and operates Garden Orchard, agrees to sell Fresh Produce Cooperative ten bushÂels of apples.
When bad weather destroys Garden Orchard's apple crop, Haruko's obligaÂtion to deliver apples to Fresh Produce is
a. breached.
b. discharged.
c. not affected.
d. suspended.
Q:
How does a company sell its shares to the public for the first time? Explain the contents of a registration statement.
Q:
Flo agrees to work as Gary's personal accountant for one year but dies in the sixth month of the contract. Flo's estate
a. is discharged from any contractual liability.
b. must find a competent accountant to fulfill the contract.
c. must pay liquidated damages.
d. must refund any money paid to Flo on the contract.
Q:
________ allows small companies to raise capital from many small-dollar investors through Web-based platforms.
Q:
On April 1, OK Contractors, Inc., contracts to build a store for Lo-Cost Jewelers at a specific location in Metro City. On May 1, Metro changes its zoning laws to prohibit the construction of a commercial building at that location. When the store is not built, Lo-Cost files a suit against OK. In this situation
a. OK is in breach of contract.
b. Metro is in breach of contract.
c. the contract is discharged.
d. the contract is suspended.
Q:
A company that is issuing securities to the public must file a written ________ with the Securities and Exchange Commission (SEC).