Question 1

bait-and-switch advertising

Accepted Answer

- advertising a product at a very attractive price (the bait) and then informing the consumer, once he or she is in the store, that the advertised product is either not available or is of poor quality; the customer is then urged to purchase (switched to) a more expensive item - under the FTC guidelines, bait-and-switch advertising occurs if the seller refuses to show the advertised item, fails to have a reasonable quantity of the item in stock, fails to promise to deliver the advertised item within a reasonable time, or discourages employees from selling the item

Question 2

cease-and-desist order

Accepted Answer

- if the FTC succeeds in proving that an advertisement is unfair or deceptive, it usually issues a cease-and-desist order requiring the company to stop the challenged advertising

Question 3

consumer law

Accepted Answer

- the body of statutes, agency rules, and judicial decisions protecting consumers of goods and services from dangerous manufacturing techniques, mislabeling, unfair credit practices, deceptive advertising, and so on - consumer laws provide remedies and protections that are not ordinarily available to merchants or to businesses

Question 4

"cooling-off" laws

Accepted Answer

- a set of federal and state laws designed to protect purchasers and lessees of goods or property - for example, the Federal Trade Commission's cooling-off period is three business days for purchases of goods or services from door-to-door salespersons - cooling off periods vary for loans, mortgages, leases, etc.

Question 5

counteradvertising

Accepted Answer

- new advertising that is undertaken pursuant to a Federal Trade Commission order for the purpose of correcting earlier tasks claims that were made about a product

Question 6

deceptive advertising

Accepted Answer

- advertising that misleads consumers, either by making unjustified claims concerning a product's performance or by omitting a material fact concerning the product's composition or performance - vague generalities and obvious exaggerations are permissible and are known as puffery - when a claim takes on the appearance of literal authenticity, however, it may create problems - advertising that appears to be based on factual evidence but in fact is not reasonably supported by some evidence will be deemed deceptive - some advertisements contain "half-truths," meaning that the presented information is true but incomplete and therefore leads consumers to a false conclusion - advertising that contains an endorsement by a celebrity may be deemed deceptive if the celebrity does not actually use the product

Question 7

multiple product order

Accepted Answer

- an order issued by the Federal Trade Commission to a firm that has engaged in deceptive advertising by which the firm is required to cease and desist from false advertising not only in regard to the product that was the subject of the action but also in regard to all the firm's other products

Question 8

Regulation Z

Accepted Answer

- a set of rules promulgation by the Federal Reserve Board to implement the provisions of the Truth-in-Lending Act - if the contracting parties are subject to the Truth-in-Lending Act, the requirements of Regulation Z apply to any transaction involving an installment sales contract that calls for payment to be made in more than four installments - transactions typically include : installment loans, retail and installment sales, car loans, home-improvement loans, and certain real estate loans if the amount of financing is less than $25,000

Question 9

validation notice

Accepted Answer

- an initial notice to a debtor from a collection agency informing the debtor that he or she has thirty days to challenge the debt and request verification

Question 10

SAMPLE TEST QUESTIONS 1. 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

Accepted Answer

ANSWER : (A) CORRECT : (A) federal and state law

Question 11

SAMPLE TEST QUESTIONS 2. Slow-Brew Coffee Company sells coffee and related beverages. The company's ad contends that ambitious business persons "Drink Up & 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

Accepted Answer

ANSWER : (B) CORRECT : (D) none of the choices

Question 12

SAMPLE TEST QUESTIONS 3. 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 counteradvertising order c. a multiple product order d. none of the choices

Accepted Answer

ANSWER : (B) CORRECT : (D) none of the choices

Question 13

SAMPLE TEST QUESTIONS 4. 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. a counteradvertising order b. a multiple product order c. a "cooling-off" law d. a validation notice

Accepted Answer

ANSWER : (B) CORRECT : (B) a multiple product order

Question 14

SAMPLE TEST QUESTIONS 5. 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 order d. permit Spicy Salsa to broadcast similarly deceptive counteradvertising

Accepted Answer

ANSWER : (C) CORRECT : (B) draft a formal complaint

Question 15

SAMPLE TEST QUESTIONS 6. 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

Accepted Answer

ANSWER : (C) CORRECT : (C) possible fines by the Federal Communications Commission

Question 16

SAMPLE TEST QUESTIONS 7. 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

Accepted Answer

ANSWER : (B) CORRECT : (B) required

Question 17

SAMPLE TEST QUESTIONS 8. Under federal law, the calorie content of the food on a menu must be posted by Organic Mix, LLC, if Organic Mix is : 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

Accepted Answer

ANSWER : (A) CORRECT : (A) a restaurant chain with twenty or more locations

Question 18

SAMPLE TEST QUESTIONS 9. 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 Mart and Metro Snacks & Drug Store b. Metro Snacks & Drug Store only c. the Federal Trade Commission d. the Food and Drug Administration

Accepted Answer

ANSWER : (D) CORRECT : (D) the Food and Drug Administration

Question 19

SAMPLE TEST QUESTIONS 10. 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 customers d. remove the tool from the market

Accepted Answer

ANSWER : (D) CORRECT : (D) remove the tool from the market

Question 20

SAMPLE TEST QUESTIONS 11. Grover signs an installment contract with Home Appliance Store to finance the purchase of new kitchen appliances - stove, refrigerator, dishwasher, microwave, and toaster oven - 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

Accepted Answer

ANSWER : (D) CORRECT : (D) the Truth-in-Lending Act

Question 21

SAMPLE TEST QUESTIONS 12. 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

Accepted Answer

ANSWER : (D) ANSWER : (D) the Truth-in-Lending Act

Question 22

SAMPLE TEST QUESTIONS 13. Celia 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 loans, and the retail installment sale

Accepted Answer

ANSWER : (D) CORRECT : (D) the car loan, the home repair loans, and the retail installment sale

Brainscape's Knowledge GenomeTM

Chapter 24 - Consumer Law Flashcards

Brainscape's Knowledge Genome^TM