Chapter 16 Exam 2

It is legal for small competitors to engage in price fixing to allow them to compete with larger competitors. True False

False

Private parties may bring criminal suits seeking monetary damages or injunction as a means of enforcing antitrust laws. False True

False

Sherman Act cases need not satisfy an interstate commerce element to be constitutionally valid. True False

False

The goal of the Sherman Act is to eliminate competition. False True

False

Investigating agencies use the _________to measure market concentration and determine the impact of a proposed merger. Herfindahl-Hirschman Index Dow Jones Industrial Average Federal Trade Commission Hart-Scott-Rodino Improvements Robinson-Patman Amendment

Herfindahl-Hirschman Index

Which of the following statements is true of monopoly power? Mere possession of monopoly power violates Section 1 of the Sherman Act. If monopoly power is thrust upon a firm, there is a violation Section 2 of the Sherman Act. Proof of monopoly power alone is insufficient to qualify as a violation of the Sherman Act. Monopoly power, which exists because of a patent or franchise, violates the Clayton Act. If a firm engages in conduct that has the effect of extending its monopoly power, it does not violate the Sherman Act.

Proof of monopoly power alone is insufficient to qualify as a violation of the Sherman Act.

The ______, announced by the Supreme Court in Standard Oil Co. v. United States, holds that contracts or conspiracies in restraint of trade are illegal only if they constituted undue or unreasonable restraints of trade and that only unreasonable attempts to monopolize are covered by the Sherman Act. rule of per se illegality Ker-Frisbie doctrine duty-to-deal doctrine rule of reason Parker v. Brown doctrine

Rule of reason

Courts develop the distinction between rule of reason and per se illegality on a case-by-case basis. False True

True

Horizontal price fixing is illegal per se and it is no defense that the prices fixed are fair or reasonable. False True

True

Maximum-price agreements are just as illegal as minimum-price agreements. True False

True

The Federal Trade Commission enforces the Clayton Act. True False

True

To analyze potential violations of the Sherman Act, the test of reasonableness asks whether challenged contracts or acts are unreasonably restrictive of competitive conditions. True False

True

When the federal government enforces antitrust laws it uses both the Department of Justice and the Federal Trade Commission. True False

True

A(n) ______ is one in which the businesses involved neither compete nor are related as customer and supplier in any given line of commerce. conglomerate merger horizontal pricing arrangement vertical merger vertical pricing arrangement arbitration merger

conglomerate merger

Fields Tech School decides to expand and open a new campus in another state. Rather than acquiring land and building new buildings, the school board decides to merge with an existing school, Fennelstate, which has similar programs in the other state. Fennelstate is a small commuter school with the majority of the students from the same state. The merger between Fields Tech School and Fennelstate is best described as a ______. freeze-out merger geographic extension merger horizontal merger product extension merger vertical merger

geographic extension merger

The Bike Shop and Road Warriors are fierce competitors in the national bike market. They compete in everything from parts to clothing to bicycles. Due to decreasing sales, the companies make an agreement to share product information and pricing to ensure that the market contains similar items at similar prices lower than their competitors. This action is most likely to be considered a reciprocal dealing agreement violating the Clayton Act. horizontal agreement in violation of the Sherman Act. vertical agreement in violation of the Sherman Act. tying agreement in violation of the Clayton Act. licensing agreement violating the Clayton Act.

horizontal agreement in violation of the Sherman Act.

The president of a bottling company agreed with a competitor to stop discounts to retailers, which earned him a jail sentence. Which of the following is indicated in this scenario? mixed-leader bundling predatory conduct product bundling horizontal price fixing variable pricing

horizontal price fixing

Lutite, a lighting corporation, acquires and merges with Castelle, a kitchen company in a billion-dollar merger. Lutite, prior to the merger, sold only lighting products. After the merger, Lutite sells lighting and kitchen products. The merger between Lutite and Castelle is an example of a ______. geographic extension merger freeze-out merger vertical merger product extension merger horizontal merger

product extension merger

One party offers to buy the other's goods but only if the second party buys other goods from the first party. This is known as a(n) ______. franchise arrangement reciprocal dealing arrangement tying arrangement exclusive dealing arrangement requirements arrangement

reciprocal dealing arrangement

Under the Sherman Act the following statement is true: the Sherman Act applies to both the sale of goods and the sale of services. an action is not considered to be price fixing if the prices fixed are fair or reasonable. maximum-price agreements are illegal, while minimum-price agreements are not illegal. the Sherman Act covers only goods, including those created by trade professions. price fixing in the service sector is permitted under the Sherman Act.

the Sherman Act applies to both the sale of goods and the sale of services.

In the context of antitrust sanctions, liability for triple-damages suits is based on _______law and is said to be joint and several. criminal corporate antitrust civil tort

tort

A ______ is one in which a product is sold or leased only on the condition that a buyer or lessee purchase a different product or service from a seller or lessor. tying contract reciprocal dealing arrangement licensing agreement executory contract exclusive dealing contract

tying contract

Louise Bouton, a designer and manufacturer, sells luxury shoes to stores across the nation including Lordstorms. Louise entered a contract with Lordstorms to price her shoes higher than any other shoes in the store and forced Lordstorms to lower the prices of similar luxury shoes. If a competitor files suit they would most likely allege Louise and Lordstorms engaged in a licensing agreement violating the Clayton Act. vertical agreement in violation of the Sherman Act. horizontal agreement in violation of the Sherman Act. reciprocal dealing agreement violating the Clayton Act. tying agreement in violation of the Clayton Act.

vertical agreement in violation of the Sherman Act.

Attempts by manufacturers to control the ultimate retail prices are known as ______. rational price fixing lateral price fixing congestion price fixing vertical price fixing transfer price fixing

vertical price fixing

Resale price maintenance is also called ______. linear price fixing vertical price fixing express price fixing resale price maintenance horizontal price fixing

vertical price fixing