Free Business and Law Examination Practice Questions

Sample Practice Questions

Try these 10 sample questions from the 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 company plans to offer construction contracting services in New Mexico. What must it obtain before acting as a contractor?

   1. A. A contractor license issued to the entity
   2. B. Only a qualifying-party certificate held by an employee
   3. C. A homeowner permit for each project
   4. D. Only a New Mexico tax registration

   Answer: A

   Explanation: The entity itself needs the license. The rule states, "To act in the capacity of a contractor ... an entity must be issued a license."

   Reference: 14.6.3 NMAC — 14.6.3.8(A)(1) NMAC

2. 2When may a New Mexico licensee generally bid as prime contractor for an entire project?

   1. A. When the dollar-value major portion is within its licensed classification
   2. B. Whenever it plans to subcontract more than half the labor
   3. C. Whenever the owner signs a scope waiver
   4. D. Only when every portion is self-performed

   Answer: A

   Explanation: Prime bidding is allowed only when "the major portion of the work, based on dollar amount, is authorized" by the license classification.

   Reference: 14.6.6 NMAC — 14.6.6.8(B)(1) NMAC

3. 3A contractor compares the dollar benefits of buying estimating software with its recurring and one-time costs. Which analysis is being performed?

   1. A. Break-even analysis
   2. B. Cash-flow analysis
   3. C. Balance-sheet analysis
   4. D. Cost-benefit analysis

   Answer: D

   Explanation: SBA describes cost-benefit analysis as "a process that helps weigh the strengths and weaknesses of a business decision, and put potential recurring benefits and cost reductions in context." Comparing the software's costs with its dollar benefits is that analysis.

   Reference: Manage your business - Small Business Administration — Manage your finances, Cost-benefit analysis

4. 4For how long should a contractor retain federal employment-tax records after filing the fourth-quarter return for the year?

   1. A. One year
   2. B. Two years
   3. C. Three years
   4. D. At least four years

   Answer: D

   Explanation: The IRS directs employers to "Keep all records of employment taxes for at least four years after filing the 4th quarter for the year."

   Reference: Employment tax recordkeeping | Internal Revenue Service — Employment tax recordkeeping

5. 5Absent a higher applicable local rate, what statewide minimum wage does New Mexico currently identify?

   1. A. $10.50 per hour
   2. B. $11.50 per hour
   3. C. $12.00 per hour
   4. D. $15.00 per hour

   Answer: C

   Explanation: The DWS Investigations Manual states, "Section 50-4-22(A) of the MWA provides that the minimum wage for covered employment relationships is $12.00 per hour." Absent a higher local rate, the statewide amount is therefore $12.00.

   Reference: Dws Investigations Manual 2025 — Section 50-4-22(A) NMSA 1978; Wage Payment Requirements, page 23

6. 6A contractor knowingly starts permit-required work before obtaining the permit. What first-violation fee exposure should be included when evaluating that decision?

   1. A. One-half the usual permit fee
   2. B. The usual permit fee only
   3. C. Three times the inspection fee only
   4. D. Twice the usual permit and inspection fees

   Answer: D

   Explanation: For the first violation, the AHJ may assess "twice the usual permit and inspection fees."

   Reference: 14.5.2 NMAC — 14.5.2.16 NMAC

7. 7An estimate includes work outside the prime contractor's license classification. How must that work be handled if the prime accepts the project?

   1. A. The owner must self-perform it
   2. B. It must be subcontracted to a validly licensed contractor
   3. C. It may be performed under the prime's permit
   4. D. It must be removed from the written estimate

   Answer: B

   Explanation: The rule requires that "Any work outside the scope ... must be subcontracted to a validly licensed contractor."

   Reference: 14.6.6 NMAC — 14.6.6.8(B)(1) NMAC

8. 8What form of financial responsibility must an applicant provide for a New Mexico contractor license?

   1. A. A $10,000 bond underwritten by a corporate surety authorized in New Mexico
   2. B. A $5,000 cash deposit with the county
   3. C. A $25,000 letter of credit from any lender
   4. D. A $50,000 performance bond for each project

   Answer: A

   Explanation: The rule requires a $10,000 bond "underwritten by a corporate surety authorized to transact business in New Mexico."

   Reference: 14.6.3 NMAC — 14.6.3.8(C)(1) NMAC

9. 9Who must conduct frequent and regular inspections of construction job sites, materials, and equipment under OSHA's general construction provisions?

   1. A. Competent persons designated by the employer
   2. B. Qualified persons designated for equipment design
   3. C. Authorized employee representatives
   4. D. OSHA compliance safety and health officers

   Answer: A

   Explanation: OSHA provides, "Such programs shall provide for frequent and regular inspections of the job sites, materials, and equipment to be made by competent persons designated by the employers." Therefore, employer-designated competent persons perform the inspections.

   Reference: 1926.20 - General safety and health provisions. | Occupational Safety and Health Administration — 29 CFR 1926.20(b)(2)

10. 10An applicant entity is majority-owned by a 17-year-old. How does this affect eligibility for a New Mexico contractor license?

    1. A. Eligibility depends only on the qualifying party's age
    2. B. The entity is ineligible for licensure
    3. C. The entity may receive a provisional license
    4. D. The entity is eligible if it posts an additional bond

    Answer: B

    Explanation: The ownership fact controls. "No business entity, the majority of which is owned by an individual who is 17 years of age or younger, is eligible for licensure."

    Reference: 14.6.3 NMAC — 14.6.3.8(A)(2) NMAC