CHAPTER 16

17. 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.

A. The Sherman Act applies only to the sale of goods.

22. 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. the prices were intended to drive competitors out of business followed by the wrongdoer recouping the initial losses.

21. 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. They reduce competition.

25. 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. Violations of the Sherman Act may be enjoined by the courts

16. 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. a violation of the Sherman Act.

19. 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. horizontal territorial agreement

20. 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. price fixing agreements between large companies

10. Agreements falling within the per se category have such a pernicious effect on competition that elaborate inquiry as to the precise harm they may cause or a business excuse for them is unnecessary. TRUE OR FALSE

TRUE

9. If an activity is deemed as illegal per se, proof of the activity is proof of a violation and proof that it is in restraint of trade. TRUE OR FALSE

TRUE

14. 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. horizontal agreement in violation of the Sherman Act.

13. 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. rule of reason

12. 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. A state attorney general may bring civil suits for damages under the Sherman Act.

23. 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. GameTech has monopoly power that does not violate the Sherman Act.

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

18. 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. manufacturers can announce their prices and refuse to deal with those who fail to comply.

1. The goal of the Sherman Act is to eliminate competition. TRUE OR FALSE

FALSE

2. Only the federal government plays a role in the enforcement of antitrust laws. TRUE OR FALSE

FALSE

3. Private parties may bring criminal suits seeking monetary damages or injunction as a means of enforcing antitrust laws. TRUE OR FALSE

FALSE

5. The Clayton Act is general in its terms and does not specifically set forth every act that would constitute a violation of the law. TRUE OR FALSE

FALSE

6. The Federal Trade Commission is an independent administrative agency charged with eliminating competition through the enforcement of the Sherman Act. TRUE OR FALSE

FALSE

4. The Federal Trade Commission enforces the Clayton Act. TRUE OR FALSE

TRUE

7. Section 1 of the Sherman Act prohibits contracts, combinations, and conspiracies in restraint of trade or commerce. TRUE OR FALSE

TRUE

8. 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 OR FALSE

TRUE

11. 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. holds legal title to property for benefit of another.

15. 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. horizontal price fixing