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Chapter 8 Consumer Purchasing Strategies and Legal Protection True/False Questions: 1) Overspending is a common cause of financial difficulties

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Chapter 8 Consumer Purchasing Strategies and Legal Protection

True/False Questions:

1) Overspending is a common cause of financial difficulties.

2. The opportunity costs associated with consumer purchases refer to the cost of an item and any finance charges if the item was purchased on credit.

3. The first step in the buying process involves information gathering.

4. Advertising is a common type of consumer information from business organizations.

5. Consumers Union is a government agency that tests products for safety.

6. Several federal government agencies publish materials to assist consumers with buying decisions and financial planning.

7. Of the stores available to most consumers, specialty stores usually offer the widest variety of products.

 

8. Warehouse clubs are nonprofit organizations designed to save members money on certain goods and services.

9. The most consistent quality is usually found with nationally known, brand-name products.

10. Store-brand products are usually inferior in quality compared to national and store-brand items.

11. Open dating information provides consumers with a knowledge of product freshness.

12. An implied warranty is usually in written form.

13. Service contracts are usually included in the cost of appliances and other high- priced 

14. Most consumer complaints are the result of poorly manufactured products.

15. Most consumer complaints need legal action to be resolved.

 

16. Mediation involves a legally binding decision by a third party to solve a consumer complaint.

17. Representation by a lawyer is usually required in small claims court.

18. A class action suit allows many people with the same complaint to take action as a group.

19. Prepaid legal services are programs designed to provide unlimited or reduced-fee legal assistance for a set fee.

Multiple Choice Questions

20. An example of an economic buying influence would be

A) family size.

B) inflation.

C) advertising.

D) hobbies.

E) place of residence.

21. A personal opportunity cost associated with a consumer purchase refers to

A) buying on credit.

B) selecting a commonly known brand.

C) the influence of advertising on consumers.

D) time used to compare prices.

E) government regulation of deceptive business-government activities in an effort to prevent consumer fraud.

22. The first step of the consumer buying process is

A) gathering information.

B) evaluating alternatives.

C) identifying the problem.

D) researching alternatives.

E) selecting the buying location.

23. The most reliable source of product information is likely to come from

A) an advertisement.

B) salespeople in a store.

C) friends and relatives.

D) a food product ingredient label.

E) a mail order catalog.

24. Melissa Morano has a concern about the deceptive advertising aimed at older consumers in her neighborhood. A government agency she might contact about this problem is the

A) Federal Trade Commission.

B) Better Business Bureau.

C) Consumers Union.

D) Underwriters Laboratories.

E) Bureau of Labor Statistics.

25. Which organization has the purpose of testing products for electrical and fire safety?

A) Consumers Union

B) Better Business Bureau

C) Consumer Product Safety Commission

D) Underwriters Laboratories

E) Federal Trade Commission

 

26. The main purpose of Consumers Union is to

A) evaluate the quality of products and services.

B) reduce fire hazards of home appliances.

C) handle consumer complaints from government workers.

D) represent the government in consumer complaint hearings.

E) provide environmental information on automobiles.

27. Services are more difficult to purchase than products since

A) few companies offer services.

B) services are usually bought on credit.

C) quality is difficult to assess.

D) government regulations vary greatly on services.

28. Which factor is usually best to use when selecting services?

A) company size

B) price

C) information presented in advertisements

D) sales staff suggestions

E) company reputation

29. A store with a limited product line is a store.

A) department

B) specialty

C) discount

D) convenience

E) cooperative

 

30. Which type of store offers the widest variety of products?

A) specialty store

B) convenience store

C) factory outlet

D) buying club

E) department store

31. A cooperative is designed to

A) solve consumer complaints.

B) test consumer products for quality.

C) sell products or services to members at reduced prices.

D) obtain brand-name items for less than wholesale.

E) lobby for changes in consumer protection laws.

32. are non-profit stores created by people in a neighborhood to serve their customers, who are also called members. Prices at this type of store are usually lower than at other retailers.

A) Cooperatives

B) Warehouse stores

C) Factory outlets

D) Catalog showrooms

E) Hypermarkets

33. Cooperatives are most commonly organized to sell

A) service contracts.

B) furniture.

C) auto repair service.

D) food.

E) information processing service.

 

34. An example of direct selling would be

A) a consumer cooperative.

B) catalog sales.

C) a convenience store.

D) a factory outlet.

E) a hypermarket.

35. Impulse buying refers to

A) evaluating alternatives.

B) gathering information.

C) comparison shopping.

D) selecting the least desirable alternative.

E) unplanned purchasing.

36. The highest consistency of quality is associated with brand items.

A) generic

B) national

C) regional

D) store

E) manufacturer

37. The items produced for retail stores are commonly sold under a brand.

A) store

B) government

C) regional

D) generic

E) national

38. Which of the following information is required on food labels?

A) open dating

B) unit pricing

C) a generic name

D) common product name

39. Private label products are those that

A) are sold as government surplus.

B) require nutritional labeling information.

C) provide freshness information on the package.

D) are distributed by national chain stores.

E) are sold by one chain of stores.

40. Open dating provides information on

A) freshness.

B) pricing.

C) nutrition.

D) common product use.

E) government inspection.

41. A 32-ounce package selling for $1.60 would have a unit price of A) $1.60.

B) $2.00 a pound.

C) 5¢ an ounce.

D) 80¢ a quart.

E) 12¢ an ounce.

 

42. Warranty laws require that

A) all products costing over $100 have written guaranties.

B) on products costing over $15 that offer a warranty, printed warranties must be available previous to purchase.

C) each state regulates its own rules on warranties.

D) replacement products for defective products covered under a written warranty must be available in 30 days.

43. Which of the following types of warranties is a specific agreement created by the seller or manufacturer?

A) express

B) implied

C) full

D) contingent

E) limited

44. Howard Ramsell recently became aware of implied warranties that exist for consumer purchases. An implied warranty exists as a result of

A) a stated intent of the seller.

B) actions by consumers.

C) the intended use of a product.

D) rulings of federal consumer agencies.

E) a written statement from the manufacturer. 

45. The major criticism of service contracts is

A) poor service from repair companies.

B) limited coverage of repairs.

C) weak government regulation of service contract companies.

D) high costs and a low chance of need.

E) that few places are available for repairs.

 

46. The purpose of a service contract is to

A) prevent legal action due to a defective product.

B) protect a product owner from expensive repairs.

C) reduce the chance of repairs of an appliance.

D) obtain regular maintenance on a product.

E) have legal assistance for consumer complaints.

47. Most consumer complaints are resolved by

A) legal action.

B) assistance from a government agency.

C) contacting a company's headquarters.

D) returning to the place of purchase.

E) obtaining help from an action line.

48. Pam McNally is planning to use the services of the Better Business Bureau. A major purpose of the BBB is to

A) recommend reputable companies in an area.

B) resolve consumer complaints.

C) lobby for improved consumer protection laws.

D) evaluate products and services for quality.

E) represent business in government hearings. 

49. A government agency designed to provide consumer information and assist with consumer complaints is the

A) Better Business Bureau.

B) Consumers Union.

C) Underwriters Laboratories.

D) Federal Trade Commission.

E) Consumer Action.  

50. The process of resolving consumer complaints with the use of a third party who suggests a solution through discussion and negotiation is

A) mediation.

B) arbitration.

C) a class action suit.

D) the legal aid society.

51. is the settlement of a difference by a third party whose decision is legally binding.

A) A legal aid society

B) Mediation

C) Arbitration

D) A consumer action panel

E) Cooperative action

52. Arbitration differs from mediation in that arbitration

A) involves government officials.

B) requires the use of a lawyer.

C) is only available in certain states.

D) allows compromise through negotiation.

E) is legally binding.

53. The purpose of small claims court is to

A) regulate fair business activities.

B) provide hearing on proposed consumer protection laws.

C) allow consumers with similar complaints to take action as a group.

D) resolve minor consumer complaints.

E) assist low-income consumers who need legal help.

 

54. Small claims court requires a person to have

A) written testimony.

B) a case involving less than a set amount.

C) representation by an attorney.

D) evidence screened in advance of the hearing 

55. Recently, Jim Dahl was on a bus tour in a mountain area. The bus broke down forcing the group to stay overnight. Group members had to pay for their own hotel bills. Jim believes that the hotel cost for the group should be paid by the tour company. Which legal action would be most appropriate?

A) small claims court

B) mediation

C) legal aid society

D) arbitration

E) class action suit

56. For a class action suit to be valid, it must

A) involve several people with the same problem.

B) cover an amount less than the limit set by the state.

C) be a case that would not be handled by an attorney.

D) involve low-income individuals.

E) be a legal problem against a government agency. 

57. Which of the following legal techniques best serves low-income consumers?

A) mediation

B) class action suits

C) legal aid societies

D) small claims court

E) consumer action panels

 

58. If you desire some assurance of quality when buying a used car, the best warranty is usually offered by a(n)

A) auction company.

B) private party.

C) used car dealer.

D) fleet sales company.

E) new car dealer.

59. Federal Trade Commission regulations require that

A) all used cars be sold with a warranty.

B) used car buyers be informed if the vehicle comes with a warranty.

C) used cars over 100,000 miles cannot be sold.

D) major repairs must be made on all used cars offered for sale.

E) the seller must pay for one-half of major repairs on a defective used car.

60. An implied warranty that comes with a used car is that

A) major repairs are the responsibility of the seller.

B) government agencies will repair safety defects.

C) the vehicle must be in operating condition.

D) hidden defects will be repaired at no cost to the buyer.

E) a vehicle must operate properly for at least one year.

61. A vehicle sold "as is" has

A) a limited warranty.

B) no express warranty.

C) a 30-day guarantee.

D) a full warranty on parts but not labor.

E) no implied warranties.

62. Most cars bought from private parties have

A) no implied warranties.

B) a 30-day return privilege.

C) a limited warranty.

D) no express warranty.

E) a government-supported repair guarantee.

63. The purpose of the Official Used Car Guide is to

A) monitor safety problems of existing vehicles.

B) provide price data.

C) reduce sales of stolen vehicles.

D) list cars available for sale from government agencie 

64. The sticker price of a car refers to

A) the amount of government taxes on a new car.

B) the cost of repairing a used car which is for sale.

C) the list of optional equipment that may be added to a car.

D) the suggested retail price of a new car.

E) a comparison of costs and performance of comparable cars.

65. The purpose of the invoice price is to inform customers of the

A) sales tax on the vehicle.

B) suggested retail price.

C) sticker price.

D) charge for optional extras.

E) dealer's costzzz 

66. The purpose of an automobile service contract is to

A) reduce operating costs of the vehicle.

B) cover regular maintenance.

C) provide automobile insurance at a discount.

D) repair major problems after the warranty expires.

E) stay informed of government safety recalls.

67. A disadvantage of leasing an automobile would be the

A) unexpected costs with a closed-end lease.

B) responsibility for repair costs.

C) poor expense records for tax purposes.

D) limited mileage in the lease agreement.

68. Mike Jocobs is planning to lease an automobile. In an effort to minimize the price of the vehicle being leased, Mike should compare the at different leasing companies.

A) down payment

B) capitalized cost

C) money factor

D) residual value

E) number of payments

69. Which of the following is usually the largest fixed expense for a new vehicle?

A) insurance

B) gasoline

C) registration, license, and fees

D) parking

E) depreciation

 

70. is considered a variable operating expense of an automobile.

A) Depreciation

B) Interest on auto loan

C) Insurance

D) Registration fee

E) Maintenance

Essay Questions

71. What factors influence most people's buying decisions?

72. What are the main sources of consumer information?

73. Steve Franklin recently purchased a stereo system. After a few weeks it overheated, causing a small fire and some minor damage. What actions would you recommend to Steve to resolve his consumer complaint? What legal actions might Steve consider for this situation?

74. What legal actions are available when assistance is needed to resolve a consumer or investment problem?