Free New Mexico Contractor Business and Law Examination Practice Questions

Sample Practice Questions

Try these 10 sample questions from the New Mexico Contractor Business and Law Examination practice bank. Each includes the answer and explanation. Continue with the interactive practice above to review the full question set.

1. 1A New Mexico contractor is licensed in one classification and wants to accept work in another. What determines the contracting authority granted by the existing license?

   1. A.The classifications held by any subcontractors it hires
   2. B.The classifications specified on its license and qualifying party certificateCorrect answer: B
   3. C.The construction experience of its majority shareholder
   4. D.The classifications requested in its original business plan

   Explanation: The rule grants "only the authority to engage in contracting in the classification specified on the license issued to the entity, and on the certificate issued to its qualifying party;" so experience or subcontractor credentials do not expand the existing license.

   Reference: New Mexico Contractor Licensing Requirements, 14.6.3 NMAC — 14.6.3.8(A)(3)(b)

2. 2An estimator divides a construction project into a hierarchy of deliverables so that the entire scope can be assigned and estimated. Which tool serves this purpose?

   1. A.Work breakdown structureCorrect answer: A
   2. B.Organization chart
   3. C.Bar chart schedule
   4. D.Responsibility assignment matrix

   Explanation: The guide states "A work breakdown structure (WBS) deconstructs a program’s end product into smaller specific elements that are suitable for management control." The WBS decomposes deliverable scope. An organization chart arranges people, a bar chart places activities in time, and a responsibility matrix assigns roles rather than decomposing the project deliverables.

   Reference: GAO Cost Estimating and Assessment Guide — Chapter 7, introductory paragraph, p. 56

3. 3How does a sole proprietorship generally affect the owner's liability for business debts?

   1. A.Business debts are limited to a separate corporate entity.
   2. B.The owner may be personally liable for business obligations.Correct answer: B
   3. C.Only the owner's original capital contribution is at risk.
   4. D.Business debts are automatically shared with customers.

   Explanation: The source states "Sole proprietorships do not produce a separate business entity." The business is not separate from its owner; unlike a corporation or limited-liability entity, it generally exposes the proprietor personally to business debts.

   Reference: SBA — Launch your business — Choose a business structure — Sole proprietorship

4. 4What type of federal return does a partnership generally file to report the business's income information?

   1. A.A partnership information returnCorrect answer: A
   2. B.A C corporation income tax return
   3. C.An individual employee withholding return
   4. D.A federal unemployment tax return only

   Explanation: The agency states "Partnerships file an information return." A partnership files an information return. The C corporation return belongs to a different entity type, and payroll or unemployment returns do not replace partnership income reporting.

   Reference: IRS — Business Taxes — Income tax

5. 5A covered, nonexempt construction employee works 46 hours in one workweek at a regular rate of $24 per hour, with no other compensation or exclusions. What is the minimum total pay under the FLSA?

   1. A.$1,104
   2. B.$1,248
   3. C.$1,656
   4. D.$1,176Correct answer: D

   Explanation: The agency explains "employees covered by the Act must receive overtime pay for hours worked in excess of 40 in a workweek at a rate not less than time and one-half their regular rates of pay." Straight time for 40 hours is 40 × $24 = $960. Six overtime hours at $36 produce $216, totaling $1,176. $1,104 pays all hours straight time; $1,248 adds a full extra rate to overtime; $1,656 pays every hour at 1.5 times.

   Reference: DOL Fact Sheet #23 — Overtime Pay — Requirements

6. 6In a logically linked construction schedule, which path determines the earliest project completion date?

   1. A.The path with the fewest activities
   2. B.The path with the largest material budget
   3. C.The path containing the most subcontractors
   4. D.The path with the longest durationCorrect answer: D

   Explanation: The guide states "the program’s critical path—the path of longest duration through the sequence of activities." Duration through the linked activity sequence, rather than activity count, price or number of firms, identifies the critical path that drives earliest completion.

   Reference: GAO Cost Estimating and Assessment Guide — Chapter 18, scheduling best practices, p. 229

7. 7A federal construction contract is firm-fixed-price, with no applicable change or price-adjustment clause triggered. The contractor's actual labor costs exceed its estimate. Who bears that cost overrun under this pricing type?

   1. A.The contractor bears the resulting cost risk.Correct answer: A
   2. B.The owner must reimburse the overrun automatically.
   3. C.The surety must pay it as a progress payment.
   4. D.The subcontractors must absorb it in equal shares.

   Explanation: The regulation states "This contract type places upon the contractor maximum risk and full responsibility for all costs and resulting profit or loss." A firm fixed price does not adjust merely because actual cost exceeds the estimate. Neither the owner, surety nor subcontractors automatically take that cost risk.

   Reference: Federal Acquisition Regulation — 16.202-1 — FAR 16.202-1, Description

8. 8What bond amount does 14.6.3.8(C)(1) require as proof of financial responsibility for initial New Mexico contractor licensure and renewal?

   1. A.$5,000
   2. B.$10,000Correct answer: B
   3. C.$20,000
   4. D.$50,000

   Explanation: The source states "a bond in the amount of ten thousand dollars ($10,000)" The stated license bond amount is $10,000. This is not the price of an insurance premium or the amount of every project-specific performance bond.

   Reference: New Mexico Contractor Licensing Requirements, 14.6.3 NMAC — 14.6.3.8(C)(1)

9. 9Under OSHA's unprotected-side-or-edge construction rule, what is the lowest height above a lower level that triggers the stated fall-protection requirement on a walking/working surface?

   1. A.2 feet
   2. B.4 feet
   3. C.6 feetCorrect answer: C
   4. D.10 feet

   Explanation: The authority states "with an unprotected side or edge which is 6 feet (1.8 m) or more above a lower level" The specified threshold is 6 feet. Higher heights also meet the rule, but the question asks its lowest triggering height for this particular exposure.

   Reference: OSHA — Duty to Have Fall Protection — 29 CFR 1926.501(b)(1)

10. 10A contractor proposes to lend its New Mexico license to a separately owned business for a month. How does the licensing rule treat that proposal?

    1. A.It is permitted if both businesses sign a temporary agreement.
    2. B.It is permitted if the license holder reviews the final invoice.
    3. C.It is prohibited because the license is not transferable.Correct answer: C
    4. D.It is permitted if the second business carries liability insurance.

    Explanation: Licenses are "not transferable and may not be used by any person other than the entity to which it is issued". An agreement, invoice review or insurance does not authorize another entity to use the license.

    Reference: New Mexico Contractor Licensing Requirements, 14.6.3 NMAC — 14.6.3.8(A)(3)(c)