Business Law Chapter 16 Questions

[16-01] The Department of Justice alone has the power to bring criminal proceedings, but it shares its civil enforcement powers with the ______. A. Federal Trade Commission B. Treasury Department C. Department of Revenue and Taxation D. U.S. Supreme Court E. Department of Labor

A

[16-02] A ______ is one between a manufacturer and a dealer, which assigns the dealer an exclusive territory, and the manufacturer agrees not to sell to other dealers in that territory in exchange for an agreement by the dealer that it will not operate outside the area assigned. A. vertical territorial agreement B. conglomerate territorial agreement C. congeneric territorial agreement D. tying territorial agreement E. per se territorial agreement

A

[16-02] The University of Kay and Kaytech University are bitter cross-town rivals. They compete in everything from sports to academics. Due to decreasing enrollment, the schools make an agreement to give all incoming students free tuition for one semester before raising the existing rates the following semester. This action is most likely to be considered a A. horizontal agreement in violation of the Sherman Act. B. vertical agreement in violation of the Sherman Act. C. tying agreement in violation of the Clayton Act. D. reciprocal dealing agreement violating the Clayton Act. E. licensing agreement violating the Clayton Act.

A

[16-02] The use of ethical standards to avoid restrictions on price fixing is A. a violation of the Sherman Act. B. illegal per se under the Clayton Act. C. legal as long as relative-value scales are used. D. legal for services. E. only allowed for healthcare products.

A

[16-02] Vertical price fixing is also called ______. A. resale price maintenance B. predatory maintenance C. linear price fixing D. express price fixing E. gold fixing

A

[16-04] An individual found guilty under the Sherman Act may be fined up to ______. A. $1 million B. $5 million C. $100 million D. $50 million E. $30 million

A

[16-04] When a state acts in its sovereign capacity, ______. A. it is immune from federal antitrust scrutiny B. it can legalize bribery C. it can force defendants to civil suits to enter a plea of nolo contendere D. it is liable for triple damages E. it has the right to forgive corporations for violations of the Clayton Act

A

[16-04] A corporation found guilty under the Sherman Act may be fined up to ______ for each offense. A. $10 million B. $1 million C. $100 million D. $500 million E. $300 million

C

[16-04] Parker v. Brown doctrine is based on the reasoning that A. individuals cannot be fined for violations of the Sherman Act. B. concerted efforts to lobby government officials are not anticompetitive. C. the Sherman Act does not apply to state governments. D. not all independent actions by a manufacturer is a per se violation of the Sherman Act. E. only unreasonable attempts to monopolize a market were covered by the Sherman Act.

C

[16-04] Which of the following statements is true about the sanctions of the Sherman Act? A. Violations may be subject to criminal fines or imprisonment, but not both. B. Injured parties may collect a maximum of double damages. C. Violations of the Sherman Act may be enjoined by the courts. D. Its sanctions are only civil punishments and not criminal punishments. E. Crimes under the Sherman Act are misdemeanors.

C

[16-05] 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) ______. A. franchise arrangement B. exclusive dealing arrangement C. reciprocal dealing arrangement D. tying arrangement E. requirements arrangement

C

[16-05] The Robinson-Patman amendment gives the Federal Trade Commission jurisdiction and authority to A. control production amounts. B. regulate the retail price of products. C. regulate quantity discounts. D. control market share. E. enforce trade bans.

C

[16-05] The ______ that permits price differentials based on differences in the cost of manufacture, sale, or delivery of commodities is recognized by the Robinson-Patman amendment. A. good-faith meeting-of-competition defense B. mobile defense C. cost justification defense D. changing conditions defense E. position defense

C

[16-01] In 1914, Congress, recognizing that the Sherman Act needed to be more specific, enacted the ______ as an amendment to the Sherman Act. A. Clayton Act B. Fair Credit Billing Act C. Securities Act D. Truth in Lending Act E. Robinson-Patman Act

A

[16-04] To avoid the impact of a guilty plea or a conviction on a pending civil antitrust suit, a criminally accused defendant is most likely to plead ______. A. nolo contendere B. stare decisis C. voir dire D. res judicata E. obiter dicta

A

[16-04] Which of the following is an exemption from the Sherman Act that extends to concerted efforts to lobby government officials? A. Noerr-Pennington doctrine B. quick look doctrine C. state action doctrine D. per se illegality doctrine E. doctrine of inherency

A

[16-05] In 1976, the Hart-Scott-Rodino Antitrust Improvements Act was passed to provide for ______. A. premerger notification B. reciprocal dealing C. merger extension rights D. post-merger bailout E. full-line forcing

A

[16-05] Sifco Inc., a tire manufacturing company, stipulates that Rambox Corp. should buy its entire line of Roadgrip tires. Sifco has significant market power in a particular variety of Roadgrip tires for which no substitutes are available in the market. It uses this power to its advantage and does not agree to let Rambox buy less than the entire line of Roadgrip tires. The sales contract between Sifco and Rambox is an example of a ______. A. tying arrangement B. reciprocal dealing arrangement C. rescission contract D. premerger arrangement E. justification contract

A

[16-05] The ______ makes it a crime for a seller to sell at lower prices in one geographic area than elsewhere in the United States to eliminate competition or a competitor. A. Robinson-Patman amendment to the Clayton Act B. Federal Trade Commission Act C. Free Exercise Act D. Wheeler-Lea amendment to the Clayton Act E. Gramm-Rudman-Hollings Act

A

[16-05] Which of the following statements is true of the Clayton Act? A. The original Clayton Act contained no sanction for forfeiture of property. B. The original Clayton Act did not allow individuals to obtain injunctive relief. C. The Clayton Act permits price fixing. D. The Clayton Act has prohibited a plaintiff's claim to triple damages. E. The Clayton Act allows companies to extend their monopoly power.

A

[16-06] The primary function of the Federal Trade Commission is to A. prevent illegal business practices. B. award punitive damages for violations of the Sherman Act. C. award punitive damages for violations of the Clayton Act. D. prevent the formation of conglomerate mergers. E. facilitate the use of exclusive dealing contracts for trade agreements.

A

[16-02] Attempts by manufacturers to control the ultimate retail prices are known as ______. A. transfer price fixing B. vertical price fixing C. lateral price fixing D. congestion price fixing E. rational price fixing

B

[16-03] For a seller's pricing to be considered predatory conduct, there must be proof that A. the seller was selling the product at a price above the cost price. B. the prices were intended to drive competitors out of business followed by the wrongdoer recouping the initial losses. C. the prices were higher than those of all competitors within the same product group. D. the buyers were willing to buy a product at the seller's prices despite having a wide range of options. E. a buyer had other options in the same product line available in different price ranges.

B

[16-05] 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 ______. A. vertical merger B. geographic extension merger C. product extension merger D. horizontal merger E. freeze-out merger

B

[16-05] Joshua owns orange groves. He enters into a contract with the local food processing plant, Gram Corp., which stipulates that he will sell oranges only to Gram. In this scenario, the contract between Joshua and Gram Corp. is known as a(n) ______. A. instalment contract B. exclusive dealing contract C. reciprocal dealing contract D. tying contract E. franchise contract

B

[16-05] Mobi Telecom Inc. and Broadcom Inc. are manufactures of cell phones competing in the same markets. If Broadcom decides to acquire and merge with Mobi, the merger is most likely to be called a ______. A. vertical merger B. horizontal merger C. product extension merger D. geographic extension merger E. freeze-out merger

B

[16-06] Which of the following statements is true of the antitrust enforcement in the European Union (EU)? A. Fines for violating EU antitrust law are much less than those in the United States. B. The EU may impose fines for business practices that do not violate U.S. law. C. The EU can impose a maximum fine of 1 billion euros. D. The European Commission does not have the power to change business practices related to activities that do not violate U.S. law. E. The decisions of the European Commission must mirror that of the U.S. Government.

B

[16-02] For the purpose of giving each an exclusive territory, competing businesses may enter into a ______. A. bilateral territorial agreement B. vertical territorial agreement C. horizontal territorial agreement D. competitive territorial agreement E. congeneric territorial agreement

C

[16-02] 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. A. rule of per se illegality B. Parker v. Brown doctrine C. rule of reason D. duty-to-deal doctrine E. Ker-Frisbie doctrine

C

[16-02] Which of the following is a violation of the Sherman Act? A. market extension mergers between companies from different fields B. conglomerate mergers between small companies C. price fixing agreements between large companies D. gaining monopoly through the use of franchising agreements E. gaining monopoly due to the use of patent technology

C

[16-02] Which of the following statements is true of concerted activities? A. They are illegal as they are never beneficial to the society. B. They are only legal if a firm has monopoly power. C. They reduce competition. D. They are only legal when firms have a vertical territorial agreement. E. They are performed by state governments to restrict monopolization.

C

[16-03] In ______, the price of goods and services is limited to levels that tend to discourage new entry to markets. A. congestion pricing B. exemption pricing C. limit pricing D. per se pricing E. variable pricing

C

[16-03] ______ takes place when a seller sells at unreasonably low prices to drive out a competitor. A. Transfer pricing B. Translational pricing C. Congestion pricing D. Predatory pricing E. Psychological pricing

D

[16-01] Trusts are a legal arrangement in which a fiduciary A. forfeits his or her title to property. B. benefits from the profits of a company. C. acts as a bailor to another. D. provides financial support to another. E. holds legal title to property for benefit of another.

E

[16-02] 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? A. variable pricing B. product bundling C. mixed-leader bundling D. predatory conduct E. horizontal price fixing

E

[16-02] Under the Colgate doctrine, the Supreme Court recognizes that A. individuals are allowed to engage in horizontal price fixing. B. a franchisor can require that franchisees purchase all of its equipment and inventory. C. resale price maintenance is illegal. D. individuals are allowed to engage in horizontal price fixing for provision of services. E. manufacturers can announce their prices and refuse to deal with those who fail to comply.

E

[16-02] When competitors attempt to share some activities or join together in the performance of a function, they are performing ______. A. derivative activities B. appellate activities C. preemptive activities D. arbitrated activities E. concerted activities

E

[16-04] In a 1943 case known as Parker v. Brown, the Supreme Court created a ______ to the Sherman Act. A. limited liability exemption B. double tax exemption C. general action exemption D. merger monopoly exemption E. state action exemption

E

[16-05] If there are four firms in a market, each with a 25 percent share, the final Herfindahl- Hirschman Index is ______. A. 4000 points B. 2000 points C. 25 points D. 4 points E. 2500 points

E

[16-05] In ______, a form of tying arrangement, a seller compels a buyer or lessee to take a complete product range from the seller. A. reciprocal agreement B. med-arb forcing C. rescission contract D. restitution agreement E. full-line forcing

E

[16-05] In a(n) ______, a buyer agrees to purchase all of its needs of a given contract from a seller during a certain period of time. A. franchise contract B. installment contract C. reciprocal dealing contract D. tying contract E. requirements contract

E

[16-01] Which of the following statements is true of the role of state governments in enforcement of antitrust laws? A. State governments have made all forms of monopolies illegal to create a fair trade environment. B. State governments have prohibited private parties from bringing civil suits seeking injunction as a means of enforcing antitrust laws. C. A state high court may allow a company to fix its price as long as the price is low. D. A state attorney general may bring civil suits for damages under the Sherman Act. E. State legislators have banned the use of trust agreements.

D

[16-02] Which of the following statements is true of the Sherman Act? A. The Sherman Act applies only to the sale of goods. B. Price fixing in the service sector is permitted under the Sherman Act. C. Maximum-price agreements are illegal, while minimum-price agreements are not illegal. D. The Sherman Act covers services, including those performed by learned professions. E. An action is not considered to be price fixing if the prices fixed are fair or reasonable.

D

[16-03] Game designers Troy and Jeff have designed a new computer game system. This system is manufactured and sold by their company, GameTech Corp. The game system they devised uses new technology that they created and their system far exceeds the capabilities of any current gaming systems. This gives them a monopoly in the gaming market. Which of the following statements is true in this scenario? A. GameTech is guilty of engaging in predatory conduct. B. GameTech has monopoly power that violates the Sherman Act. C. GameTech has monopoly power that violates the Clayton Act but not the Sherman Act. D. GameTech has monopoly power that does not violate the Sherman Act. E. GameTech is guilty of monopoly that violates both the Clayton and Sherman Act.

D

[16-05] 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. A. executory contract B. exclusive dealing contract C. reciprocal dealing arrangement D. tying contract E. licensing agreement

D

[16-05] A(n) ______ is one in which the businesses involved neither compete nor are related as customer and supplier in any given line of commerce. A. arbitration merger B. horizontal pricing arrangement C. vertical pricing arrangement D. conglomerate merger E. vertical merger

D

[16-05] Bosh, an American corporation, acquires and merges with KnightD, a Belgian corporation, in a multibillion-dollar merger. Bosh, prior to the merger, sold beer only in the United States. After the merger, Bosh sells beer to most of the EU countries. The merger between Bosh and KnightD is an example of a ______. A. vertical merger B. horizontal merger C. freeze-out merger D. geographic extension merger E. product extension merger

D

[16-05] The ______, a measure of market concentration, squares the market share of each firm in a market and adds them together for a final number. A. Noerr-Pennington Index B. Producer Price Index C. Consumer Price Index D. Herfindahl-Hirschman Index E. Big Mac Index

D

[16-05] Which of the following statements is true of the good-faith meeting-of-competition defense as permitted by the Robinson-Patman amendment? A. It applies to a situation when sellers select their own customers in good faith and not in restraint of trade. B. It applies to a situation when there are price differentials based on differences in the cost of manufacture, sale, or delivery of commodities. C. It applies to a situation that involves the setting up of barriers to market entry around a product, brand, product line, market, or market segment. D. It applies to a situation when a seller in good faith meets the equally low price of a competitor. E. It applies to a situation when price changes are made in response to changing conditions such as sales in good faith in discontinuance of business in the goods concerned.

D

[16-03] Which of the following statements is true of monopoly power? A. Mere possession of monopoly power violates Section 1 of the Sherman Act. B. If monopoly power is thrust upon a firm, there is a violation Section 2 of the Sherman Act. C. Monopoly power which exists because of a patent or franchise violates the Clayton Act. D. If a firm engages in conduct that has the effect of extending its monopoly power, it does not violate the Sherman Act. E. Proof of monopoly power alone is insufficient to qualify as a violation of the Sherman Act.

E

[16-04] Which of the following statements is true of the triple damages awarded to the injured parties under the Sherman Act? A. Triple damages apply only to individuals, and not corporations or larger institutions. B. The government cannot directly or indirectly receive triple damages. C. Triple damages are only meant to compensate a plaintiff for actual injury. D. Only injured members of the general public can enforce the law. E. Legislation allows both federal and state governments to file a suit for triple damages.

E

[16-05] The ______ attempted to eliminate the advantage that a large buyer could secure over a small buyer solely because of the larger buyer's quantity-purchasing ability. A. monopoly leveraging B. buy and sell amendment C. Wheeler-Lea amendment D. Parker v. Brown doctrine E. Robinson-Patman amendment

E

[16-06] The ______ made unfair or deceptive acts or practices in commerce illegal under Section 5 of the Federal Trade Commission Act. A. Celler-Kefauver amendment B. Noerr-Pennington amendment C. Herfindahl-Hirschman amendment D. Robinson-Patman amendment E. Wheeler-Lea amendment

E