Smith and Roberson’s Business Law International Edition 15th Edition by Richard A. Mann -Test Bank

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Chapter 5—Administrative Law

TRUE/FALSE

1. Administrative law is the branch of private law created by agencies in the form of rules, regulations,

orders, and decisions to carry out regulatory powers and duties.

ANS: F PTS: 1

2. Administrative agencies must, within one year of their creation, make records available by electronic

means.

ANS: T PTS: 1

3. Administrative agencies could include commissions, boards, bureaus, or departments but not

government corporations or offices.

ANS: F PTS: 1

4. Administrative agencies establish rules, and then act as both prosecutor and judge in determining

whether the rules have been violated.

ANS: T PTS: 1

5. An administrative agency is created when Congress enacts an enabling statute that delegates to the

agency the power to issue rules, regulations, and guidelines to carry out its statutory mandate.

ANS: T PTS: 1

6. Congress appoints and removes the chief administrators of federal administrative agencies.

ANS: F PTS: 1

7. Only the federal government creates administrative law.

ANS: F PTS: 1

8. A statute may preclude judicial review of an agency action.

ANS: T PTS: 1

9. Interpretative rules are exempt from the APA’s procedural requirements of notice and comment.

ANS: T PTS: 1

10. Enabling statutes may not impose more stringent procedural requirements for promulgating legislative

rules than those found in the APA.

ANS: F PTS: 1

© 2012 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different

from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. Notice of a proposed rule may be given by publication in the Federal Register.

ANS: T PTS: 1

Interpretative rules of administrative agencies are automatically binding on the private parties the

agency regulates.

ANS: F PTS: 1

In carrying out their enforcement function, agencies traditionally have been accorded little discretion

to compel the disclosure of information.

ANS: F PTS: 1

In general, procedural rules are exempt from the notice and comment requirements of the APA.

ANS: T PTS: 1

After investigating a violation, an administrative agency must always use formal procedures to resolve

the matter.

ANS: F PTS: 1

In 1995, Congress enacted the Administrative Dispute Resolution Act to require federal agencies to use

arbitration or mediation to resolve disputes.

ANS: F PTS: 1

Only documentary evidence may be admitted at an administrative hearing.

ANS: F PTS: 1

Administrative hearings are held before a jury, just as are court hearings.

ANS: F PTS: 1

Administrative law judges are appointed by the President and confirmed by the Senate just as are

judges in the U.S. District Court.

ANS: F PTS: 1

Agencies must submit newly adopted rules to Congress, and a major rule does not become final until

Congress has the opportunity to disapprove it.

ANS: T PTS: 1

When reviewing factual determinations of an administrative agency, the courts must always use the

“arbitrary and capricious” test.

ANS: F PTS: 1

© 2012 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different

from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. Informal rulemaking procedure does not require prior notice of a proposed rule.

ANS: F PTS: 1

Administrative agencies create more legal rules and adjudicate more controversies than all the

legislatures and courts combined.

ANS: T PTS: 1

Congress enacted the Administrative Procedure Act in 1946.

ANS: T PTS: 1

Hybrid rulemaking is more formal than procedures the agency uses in informal rulemaking.

ANS: T PTS: 1

Parties seeking to challenge agency action must have standing and must have exhausted their

administrative remedies.

ANS: T PTS: 1

All administrative agency decisions must include a statement of the appropriate rule, order, sanction,

or relief.

ANS: T PTS: 1

The rules of evidence apply to an administrative hearing just as they do to a jury trial in the U.S.

District Court.

ANS: F PTS: 1

If a decision of an ALJ is appealed, the governing body of the agency may decide the case de novo.

ANS: T PTS: 1

The Freedom of Information Act and the Government in the Sunshine Act are different names for the

same legislation.

ANS: F PTS: 1

An agency can charge for providing records to a person requesting access to its files.

ANS: T PTS: 1

Only records specifically exempted from disclosure by statute are exempt from FOIA.

ANS: F PTS: 1

© 2012 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different

from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.33. 34. 35. Most legislative rules are issued in accordance with the informal rulemaking procedures of the

Administrative Procedure Act (APA).

ANS: T PTS: 1

The Government in the Sunshine Act allows for closed meetings if they concern agency participation

in pending or anticipated litigation.

ANS: T PTS: 1

All agency decisions must include a statement of findings of fact and conclusions of law.

ANS: T PTS: 1

MULTIPLE CHOICE

1. 2. 3. What is the name given to the process by which an administrative agency promulgates statements

designed to implement, interpret, or process law or policy?

a. Rulemaking

b. Lobbying

c. Adjudication

d. Enforcement

ANS: A PTS: 1

Criticism of administrative agencies includes that they:

a. lack the knowledge or time necessary to provide continuous and flexible solutions to

evolving regulatory problems.

b. c. lack the broad powers necessary to effectively deal with regulatory problems.

are in effect miniature independent governments which have too much power

concentration since the same bodies establish rules and then act as prosecutors and judges

in determining whether those rules have been violated.

d. All of the above.

ANS: C PTS: 1

Administrative statutes, often called regulations, issued by an agency are:

a. legislative rules.

b. enabling statutes.

c. appropriations.

d. orders.

ANS: A PTS: 1

© 2012 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different

from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.4. 5. 6. 7. 8. 9. Where there has been informal rulemaking or informal adjudication by an administrative agency and

the decision by that agency is then appealed to the courts, the court will generally apply what test in

reviewing factual determinations?

a. The unwarranted by the facts standard.

b. The substantial evidence test.

c. The arbitrary and capricious test.

d. The beyond a reasonable doubt standard.

ANS: C PTS: 1

The President has significant control over administrative agencies housed within the executive branch

by virtue of his power to:

a. influence the budgeting process.

b. appoint and remove the chief administrator of those agencies.

c. impound moneys appropriated to the agency by Congress.

d. All of the above.

ANS: D PTS: 1

To what do the letters APA refer?

a. The Administrative Protection Act

b. The Administrative Procedures for Adjudication

c. The Administrative Procedure Act

d. The Administrative Policy Association

ANS: C PTS: 1

Much of federal, state, and local law in this country has been established by administrative agencies.

Because agencies possess tremendous power, many people have labeled them the:

a. independent commissions.

b. legislative enforcers.

c. fourth branch of government.

d. None of the above.

ANS: C PTS: 1

To what do the letters ALJ refer?

a. American Law Judges

b. Administration’s Legal Judge

c. Administrative Law Judge

d. Administrative Local Judiciary

ANS: C PTS: 1

Rulemaking powers of federal agencies are primarily governed by the:

a. SEC.

b. APA.

c. FCC.

d. NHTSA.

ANS: B PTS: 1

© 2012 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different

from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.10. 11. 12. 13. 14. Which of the following is an administrative agency?

a. The EPA

b. The FTC

c. The SEC

d. All of the above are administrative agencies.

ANS: D PTS: 1

The Administrative Dispute Resolution Act:

a. b. c. was enacted by Congress in 1980 to help alleviate the caseload on administrative agencies.

requires federal agencies to use alternative dispute resolution.

was enacted to require state and federal agencies to use formal methods of dispute

resolution.

d. authorizes and encourages, but does not require, federal agencies to use techniques such as

mediation, conciliation, and arbitration to resolve disputes informally.

ANS: D PTS: 1

The legislature may exercise control of administrative agencies in various ways. These are:

a. through its budgetary power.

b. c. e. through the power to appoint and remove chief administrators.

by amending an enabling statute to increase, modify, or decrease an agency’s authority.

d. All of the above.

(a) and (c), but not (b).

ANS: E PTS: 1

An agency’s deciding an appealed case de novo means:

a. b. agency hearings produce evidence of general conditions.

the agency may hear additional evidence and arguments in deciding whether to revise the

findings and conclusions made in the initial decision.

c. d. without regard to new evidence.

an agency may impose in its orders sanctions, such as penalties.

ANS: B PTS: 1

Administrative agencies perform what basic function?

a. Rulemaking

b. Law enforcement

c. Adjudication

d. All of the above.

e. None of the above.

ANS: D PTS: 1

© 2012 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different

from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.15. 16. 17. 18. 19. An administrative law judge for the Federal Trade Commission decides a case against a retail store

chain. The company wants to appeal the decision. Which of the following is correct regarding the

appeal of the case?

a. b. c. d. The FTC may decide the case de novo.

There is no appeal from the decision of the ALJ.

The governing body of the agency will decide the case by having a jury trial.

The appeal will go directly to the federal district court, which will strictly apply the

common law rules of evidence.

ANS: A PTS: 1

Which of the following statements is true regarding administrative law judges?

a. b. c. d. They are appointed by the president with the approval of the Senate.

They may be removed only for good cause.

The administrative law judge cannot impose sanctions in her orders.

There are more than twice as many federal judges as there are administrative law judges.

ANS: B PTS: 1

The Environmental Protection Agency (EPA) would like to adopt some new rules regarding

environmental impact statements, but it is afraid that if too many people know about them ahead of

time, the adverse publicity will force the agency to amend them. To avoid any public comment, the

agency seeks to adopt the rules without publishing them. Which of the following statements is true

regarding the agency’s actions?

a. The agency has a right to act in this way and a duty to be efficient with taxpayer money.

b. The rules in this instance are procedural in nature and therefore are not required to be

published.

c. The agency is seeking to adopt the rules by a procedure that violates the rulemaking

procedures set forth in the APA.

d. The agency has no rulemaking authority, because only Congress can make legislative

rules.

ANS: C PTS: 1

A federal agency that wishes to adopt administrative rules must do so in compliance with the:

a. Administrative Procedures Act.

b. U.S. Constitution.

c. agency’s enabling statute.

d. Rules must be adopted in compliance with all of the above.

ANS: D PTS: 1

In reviewing an agency action, which of the following is included in the questions of law a court will

consider?

a. b. c. Whether the agency violated any constitutional provision.

Whether the agency acted contrary to the procedural requirements of the law.

Whether the agency exceeded its authority.

d. All of the above

ANS: D PTS: 1

© 2012 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different

from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.20. What standard does a court use in reviewing the factual determinations of an administrative agency?

a. b. c. Whether the adjudication was arbitrary and capricious.

Whether the conclusions reached are supported by substantial evidence.

Whether the agency has conducted an adjudication with inadequate fact-finding

procedures or whether issues that were not properly before the agency were decided.

d. Any one of the above, depending on the particular situation.

ANS: D PTS: 1

21. Federal administrative agencies are charged with all but which of the following?

a. National security

b. Labor relations

c. Securities markets

d. Law enforcement

e. All of the above are regulated by federal administrative agencies.

ANS: E PTS: 1

22. What is required by the substantial evidence test?

a. The conclusions reached must be supported by such relevant evidence as a reasonable

mind might accept as adequate to support a conclusion.

b. c. d. It permits the court to try the facts de novo.

It requires that the agency set aside action if it is prejudicial.

It requires proof beyond a reasonable doubt.

ANS: A PTS: 1

23. The Privacy Act:

a. prohibits any disclosures of records covered by the Act to the individuals about whom

information has been collected.

b. c. is another name for the Freedom of Information Act.

requires agencies to collect information to the greatest extent practicable directly from the

individual affected.

d. requires agencies, after six years, to delete the information gathered about an individual.

ANS: C PTS: 1

24. The 1990 Congressional enactment encouraging the involvement of affected parties in the initial stages

of the policy-making process prior to the publication of notice of a proposed agency rule is the:

a. Negotiated Rulemaking Act.

b. Administrative Procedure Act.

c. Administrative Dispute Resolution Act.

d. Government in the Sunshine Act.

ANS: A PTS: 1

© 2012 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different

from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.25. 26. 27. 28. 29. The APA’s requirements that the agency provide prior notice of a proposed rule, an opportunity for

interested parties to participate in the rulemaking, and publication of a final draft containing a concise

general statement of the rule’s basis and purpose are the requirements for issuance of rules in

accordance with:

a. formal rulemaking.

b. hybrid rulemaking.

c. informal rulemaking.

d. negotiated rulemaking.

ANS: C PTS: 1

Emily would like to become an administrative law judge. How should she go about exploring this

employment option?

a. She should fill out an application for federal employment pursuant to the federal civil

service merit selection rules.

b. c. She should talk to her congressional representative and ask for a recommendation.

She should contribute a substantial sum of money to the President’s political party so that

the President will consider appointing her to such a job.

d. She should file for election to the job during the next election year.

ANS: A PTS: 1

The ____ is the federal public records statute requiring most records in agency files to be open to the

public.

a. FOIA

b. APA

c. ALJ

d. Government in the Sunshine Act

ANS: A PTS: 1

Agencies may deny access to which of the following types of records?

a. Those related to national defense and specifically authorized to be kept secret

b. Those relating to internal personnel rules

c. Trade secrets

d. All of the above.

ANS: D PTS: 1

Which of the following is not covered by the Government in the Sunshine Act?

a. The Securities and Exchange Commission

b. The Federal Trade Commission

c. The Food and Drug Administration

d. The Consumer Product Safety Commission

e. All federal agencies are covered by the requirements of the Government in the Sunshine

Act.

ANS: C PTS: 1

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from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.30. After a FOIA request has been made, an agency has ____ to indicate whether it intends to comply.

a. three business days

b. ten working days

c. three weeks

d. one month

ANS: B PTS: 1

ESSAY

1. Compare the adjudication process in an administrative hearing to the judicial process. What takes

place at an administrative hearing in contrast to what takes place at a trial in court?

2. 3. ANS:

When informal methods to resolve an administrative matter fail, then the agency must follow some

sort of formal adjudicatory process. However, the procedures in these agency hearings vary from

agency to agency. The hearing is presided over by an administrative law judge and is prosecuted by the

agency. Juries are never used in administrative hearings; either a judge or a jury can decide a case in

the judicial system. In both agency and court hearings, either party may introduce both oral and

documentary evidence. The rules of evidence apply in a court hearing; evidentiary rules in

administrative proceedings are usually more relaxed, because there is no need to protect a jury from

unreliable evidence. The appeal from an agency hearing is to the governing body of the agency, and

then to a court. An appeal from a federal district court goes directly to the Court of Appeals.

PTS: 1

What limits are imposed on administrative agencies by each of the following: (a) the courts; (b)

Congress; and (c) the executive branch?

ANS:

The courts exercise a check on administrative agencies by means of judicial review. Courts may either

compel agency action or set aside impermissible agency actions. Congress exercises control of

administrative agencies through its budgetary power; by amending the agency’s enabling statute or

even by eliminating the agency; by establishing general guidelines such as with the enactment of the

APA, by confirming high-level appointments to administrative agencies; and by reversing or changing

agency rules. Under the Congressional Review Act, agencies must submit newly adopted rules to each

house of Congress before they can take effect. The executive branch appoints high-level executives;

has a central role in the budgeting process of an agency; and can impound moneys and reorganize

various agencies.

PTS: 1

What is an administrative agency? What powers does an administrative agency possess? How does an

administrative agency utilize its powers?

ANS:

Administrative agencies are governmental entities, other than courts and legislatures, having authority

to affect the rights of private parties through their operations. Administrative agencies possess

whatever powers are granted to them by the enabling statute passed by Congress or the state

legislature. Agencies: (1) make rules; (2) enforce the law; and (3) adjudicate controversies.

PTS: 1

© 2012 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different

from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.4. 5. The SEC would like to adopt some new rules to protect investors. What factors should it consider as

part of the administrative process?

ANS:

Administrative rules can be legislative, interpretative, or procedural. The commission members should

carefully check their enabling statute before adopting new rules. More than likely, the rules it will be

adopting would be considered legislative rules, which are substantive rules under the authority granted

to the agency by the legislature. Most legislative rules must be promulgated in accordance with the

Administrative Procedures Act, which generally requires: (1) prior notice of the proposed rule, usually

by publication in the Federal Register; (2) an opportunity for interested parties to participate in the

rulemaking procedure; and (3) publication of a final draft containing a concise, general statement of

the rule’s basis and purpose at least thirty days before the rule takes effect. Under the Congressional

Review Act, the SEC would need to submit the new rules to each house of Congress before they can

take effect.

PTS: 1

(a) What is the purpose of the Freedom of Information Act?

(b) To what categories of records does the FOIA permit agencies to deny access?

ANS:

(a) The purpose of the Freedom of Information Act is to

give the public access to most records in files of the

federal administrative agencies. Requiring

administrative agencies to disclose information about

their actions makes them more accountable to the

public.

(b) 1. 2. 3. 4. 5. The FOIA permits agencies to deny access to:

records authorized to be kept secret in the interest

of national defense or foreign policy.

records relating solely to internal personnel rules

and practices of an agency.

records specifically exempted by statute.

trade secrets and commercial or financial information that is privileged or

confidential.

memos within or among agencies.

6. 7. 8. 9. personnel or medical files the disclosure o

clearly unwarranted invasion of personal

investigatory records compiled for law en

records relating to regulation or supervisi

certain geological and geophysical inform

PTS: 1

© 2012 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different

from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.