Clark 11e TB a Ch04

31

Chapter 4

Constitutional Authority toRegulate Business

TRUE/FALSE QUESTIONS

A1. A federal form of government is a confederation of independent stateswith a central government of very limited powers.

ANSWER: F PAGE: 77 TYPE: NNAT: AACSB Analytic AICPA Critical Thinking

A2. The federal government retains all powers not specifically delegated tothe states.

ANSWER: F PAGE: 77 TYPE: =NAT: AACSB Analytic AICPA Legal

A3. The state governments retain all powers not specifically delegated to thefederal government.

ANSWER: T PAGE: 77 TYPE: =NAT: AACSB Analytic AICPA Legal

A4. Under their police powers, states can regulate only public activities,such as political demonstrations.


A5. The checks and balances in the U.S. Constitution prevent any onebranch of government from exercising too much power.

ANSWER: T PAGE: 79 TYPE: NNAT: AACSB Reflective AICPA Critical Thinking

32 TEST BANK AUNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS

A6. Congress can regulate all commerce in North America.


A7. The Constitution expressly excludes state regulation of commerce.

ANSWER: F PAGE: 80 TYPE: =NAT: AACSB Analytic AICPA Legal

A8. When there is a direct conflict between a federal and a state law, thestate law is rendered invalid.


A9. Whether the federal government has preempted a certain area is alwaysclear.

ANSWER: F PAGE: 82 TYPE: =NAT: AACSB Analytic AICPA Critical Thinking

A10. The taxing and spending clause of the U.S. Constitution has had agreater impact on business than any other clause in the Constitution.

ANSWER: F PAGE: 83 TYPE: NNAT: AACSB Analytic AICPA Legal

A11. Some constitutional protections apply to business entities.

ANSWER: T PAGE: 83 TYPE: =NAT: AACSB Reflective AICPA Critical Thinking

A12. The Bill of Rights confers absolute rights, not subject to interpretationby the United States Supreme Court.


A13. Political speech that would otherwise be protected by the First Amend-ment loses that protection if its source is a corporation.

ANSWER: F PAGE: 86 TYPE: =NAT: AACSB Reflective AICPA Critical Thinking

CHAPTER 4: CONSTITUTIONAL AUTHORITY TO REGULATE BUSINESS 33

A14. The First Amendment does not protect commercial speech as extensivelyas noncommercial speech.


A15. The establishment clause of the U.S. Constitution prohibits the federalgovernment from establishing an official religion.

ANSWER: T PAGE: 90 TYPE: NNAT: AACSB Analytic AICPA Legal

A16. A government law that restricts a fundamental right will be held to vio-late substantive due process unless it promotes a compelling or overrid-ing state interest.


A17. Any law that distinguishes between or among individuals violates theequal protection clause.


A18. The terms substantive due process and equal protection mean thesame thing.


A19. Review of a law on a substantive due process basis and review of a law onan equal protection basis considers some similar questions.


A20. There is a specific guarantee of a right to privacy in the Constitution.

ANSWER: F PAGE: 94 TYPE: =NAT: AACSB Reflective AICPA Critical Thinking


MULTIPLE CHOICE QUESTIONS

A1. Business Markets Coalition (BMC), a political lobbying group, wants acertain policy enacted into law. If BMCs policy conflicts with the U.S.Constitution, a law embodying it can be enacted by

a. any state legislature and Congress.b. any state legislature but not Congress.c. Congress but not any state legislature.d. none of the choices.

ANSWER: D PAGE: 77 TYPE: =NAT: AACSB Reflective AICPA Legal

A2. The state of New York regulates private activities to protect or promotethe public order, health, safety, and general welfare under its

a. police powers.b. taxing powers.c. spending powers.d. supremacy powers.

ANSWER: A PAGE: 77 TYPE: =NAT: AACSB Reflective AICPA Legal

A3. Eli, a citizen of Florida, wants to obtain a business license in Georgia.The Georgia state legislature enacts a law that imposes a $2,000 licensefee on nonresidents. Georgia residents pay $0. This most likely violates

a. no provision in the U.S. Constitution.b. the commerce clause.c. the full faith and credit clause.d. the privileges and immunities clause.

ANSWER: D PAGE: 78 TYPE: NNAT: AACSB Reflective AICPA Legal

A4. Uma, a citizen of Virginia, wants to enforce in Washington certain rightsthat she has under a contract with Xtra Services Company. AWashington state court is most likely to enforce such rights under

a. no provision in the U.S. Constitution.b. the commerce clause.c. the full faith and credit clause.d. the privileges and immunities clause.

ANSWER: C PAGE: 78 TYPE: NNAT: AACSB Reflective AICPA Legal


A5. The Constitution sets out the authority and the limits of the branches ofthe government. The term checks and balances means that

a. Congress writes checks and the president balances the budget.b. each branch of government has some power to limit the actions of

the other branches.c. each branch of government may exercise the authority of the other

branches.d. the president checks the courts, which balance the laws.

ANSWER: B PAGE: 79 TYPE: =NAT: AACSB Analytic AICPA Legal

A6. Tom files a suit against the state of Utah, claiming that a Utah state lawviolates the commerce clause. The court will agree if the statute

a. imposes a substantial burden on interstate commerce.b. promotes the public order, health, safety, morals, or general

welfare.c. regulates activities within Utahs borders.d. regulates private activities.

ANSWER: A PAGE: 80 TYPE: =NAT: AACSB Reflective AICPA Decision Modeling

A7. The Motor Vehicle Insurance Association wants the federal governmentto spend money to build a new highway. Congress can spend revenues

a. only to carry out Congresss enumerated powers.b. to promote any objective that Congress deems worthwhile.c. without regard to whether the expense violates the Bill of Rights.d. without regard to whether the expense violates the Constitution.

ANSWER: B PAGE: 82 TYPE: =NAT: AACSB Analytic AICPA Legal

A8. Mike, an advocate of a certain religion, publishes an article in NewTimes magazine insisting that Congress base all federal law on hisreligions principles. The First Amendment guarantees Mikes freedom of

a. religion only.b. speech only.c. the press only.d. the press, speech, and religion.

ANSWER: D PAGE: 83 TYPE: =NAT: AACSB Reflective AICPA Legal


A9. Len, a citizen of Maryland, obtains a federal license to operate acommercial fishing boat in Chesapeake Bay. The Maryland statelegislature enacts a law that bans all commercial fishing in the bay. Thestate law most likely violates

a. no provision in the U.S. Constitution.b. the commerce clause.c. the due process clause.d. the supremacy clause.

ANSWER: D PAGE: 83 TYPE: NNAT: AACSB Reflective AICPA Critical Thinking

A10. Serene City enacts an ordinance that bans the use of sound amplifyingsystems on public streets. Tom wants to campaign for a seat on the citycouncil by broadcasting his message through speakers mounted on atruck. In Toms suit against the city, a court would likely hold thisordinance to be

a. constitutional under the First Amendment.b. not subject to the U.S. Constitution.c. unconstitutional under the commerce clause.d. unconstitutional under the First Amendment.

ANSWER: A PAGE: 85 TYPE: NNAT: AACSB Reflective AICPA Critical Thinking

A11. Beachside City enacts an ordinance that bans the distribution of allprinted materials on city streets. Carl opposes the citys latest revenue-enhancing measure and wants to protest by distributing handbills. Inhis suit against the city, a court would likely hold the printed-materialsban to be

a. constitutional under the First Amendment.b. not subject to the U.S. Constitution.c. unconstitutional under the commerce clause.d. unconstitutional under the First Amendment.

ANSWER: D PAGE: 86 TYPE: +NAT: AACSB Reflective AICPA Critical Thinking


A12. Congress enacts the Tight Money Act (TMA) of 2006 to ban major busi-ness entities from making political contributions that individuals canmake. A court would likely hold the TMA to be

a. an unconstitutional restriction of speech.b. constitutional under the First Amendment.c. justified by the need to protect individual rights.d. necessary to protect state interests.


A13. Minnesota enacts a statute to ban advertising in bad taste. This stat-ute would likely be held by a court to be

a. an unconstitutional restriction of speech.b. constitutional under the First Amendment.c. justified by the need to protect individual rights.d. necessary to protect state interests.


A14. Xtreme Publications, Inc., disseminates obscene materials. This is

a. a crime under numerous state and federal statutes.b. a privilege under Article IV, Section 2.c a right under the commerce clause.d. a right under the First Amendment.

ANSWER: A PAGE: 90 TYPE: =NAT: AACSB Analytic AICPA Legal

A15. The police obtain a search warrant and search Daves apartment. Afteryelling obscenities at the officers, Dave confesses to a crime and impli-cates his friends. The Constitution protects against

a. obscene speech only.b. others implication only.c. unreasonable searches only.d. obscene speech, others implication, and unreasonable searches.

ANSWER: C PAGE: 91 TYPE: =NAT: AACSB Reflective AICPA Legal


A16. River City enacts an ordinance that prohibits all churches from meetingwithin its city limits. This rule affects the residents right to

a. engage in interstate commerce under the commerce clause.b. full faith and credit under Article IV, Section 1.c. privileges and immunities under Article IV, Section 2.d. substantive due process under the due process clauses.

ANSWER: D PAGE: 92 TYPE: NNAT: AACSB Reflective AICPA Critical Thinking

A17. Wyoming enacts a statute that limits the liberty of all persons, includingcorporations, to broadcast annoying radio commercials. This mayviolate

a. equal protection.b. procedural due process.c. substantive due process.d. the right to privacy.

ANSWER: C PAGE: 92 TYPE: =NAT: AACSB Reflective AICPA Legal

A18. Myra claims that a Nebraska state statute infringes on her proceduraldue process rights. This claim focuses on

a. procedures used in making decisions to take life, liberty, orproperty.

b. the content of the statute.c. the similarity of the treatment of similarly situated individuals.d. the steps to be taken to protect Marys privacy.

ANSWER: A PAGE: 92 TYPE: =NAT: AACSB Reflective AICPA Legal

A19. South Carolina enacts a statute to impose a prison term, without a trial,on all street vendors who operate in certain areas. A court would likelyhold this to be

a. constitutional under the due process clause.b. constitutional under the equal protection clause.c. unconstitutional under the due process clause.d. unconstitutional under the equal protection clause.

ANSWER: C PAGE: 92 TYPE: =NAT: AACSB Reflective AICPA Critical Thinking


A20. Vacation Village enacts an ordinance to allow only a few street vendorsto operate in certain areas, for the purpose of reducing traffic. A courtwould likely subject this ordinance to

a. a police power test under the commerce clause.b. a rational basis test under the equal protection clause.c. intermediate scrutiny under the due process clause.d. strict scrutiny under the First Amendment.

ANSWER: B PAGE: 94 TYPE: NNAT: AACSB Reflective AICPA Critical Thinking

ESSAY QUESTIONS

A1. Jen operates Jens Fruits & Vegetables, a small market stocked entirelywith produce grown on her adjacent farm. Under what clause of theConstitution can the federal government regulate Jens activities? Whatis Jens best argument against federal regulation of her farm andbusiness?

ANSWER: Under the commerce clause, according to earlier decisionsby the United States Supreme Court, Congress has the power to regulateany activityinterstate or intrastatethat affects interstate commerce.Thus, under that clause, it could be argued that a farmers growing andselling of produce is subject to federal regulation because these activitiesaffect interstate commerce. The farmer-vendors best argument againstfederal regulation of her farm and business is that in her case, these ac-tivities and their effects are purely local. Because of the economic char-acter of these activities, and hence an effect on interstate commerce, de-spite their local character, it is unlikely that a court would accept thisargument, however.

PAGES: 7982 TYPE: =NAT: AACSB Reflective AICPA Decision Modeling

A2. Old Oak Brewery, Inc., makes and sells alcoholic beverages with labelsthat display a drawing of a squirrel making the gesture generally knownas giving the finger. Old Oak applies to the Ohio State LiquorAuthority (OSLA) for brand-label approval to sell the beer in Ohio.Without considering alternatives, OSLA denies approval because thelabel could appear in grocery stores, with obvious exposure on the shelfto children of tender age. Why would a court hold that the denial of OldOaks application violates the First Amendment?

ANSWER: A court would most likely reason that OSLAs ban on theuse of the labels lacks a reasonable fit with the states interest in


shielding minors from vulgarity, and OSLA did not adequately consideralternatives to the ban. The interest of OSLA, as a state agency, in pro-tecting children from vulgar advertising is substantial. The question iswhether banning Old Oaks labels directly advances that interest. Acourt might reason that barring the label at issue in this problem cannotrealistically be expected to reduce childrens exposure to such displays toany significant degree, considering such displays wide currency insociety. Also, as to whether the ban on the labels is more extensive thannecessary to serve such an interest, a court would likely point out thatthere may be many, less intrusive alternatives. For example, OSLAmight restrict the locations where Old Oaks products may be displayedin stores.

PAGES: 8688 TYPE: =NAT: AACSB Reflective AICPA Decision Modeling

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Clark 11e TB a Ch04

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