Weeks 3-4

A company charges different buyers different prices for identical goods, so the company's prices are subject to evaluation under: a. the Clayton Act. b. the Federal Trade Commission Act. c. the Sherman Act. d. no antitrust law.

A

A court deems an agreement to be a per se violation of the Sherman Act. The court is: a. prevented from determining whether the agreement's benefits outweigh its anticompetitive effects. b. required to unanimously decide whether the agreement's benefits outweigh its anticompetitive effects. c. required to apply the rule of reason. d. required to issue a formal complaint against the firms in the agreement.

A

A manufacture requires all distributors of its products to sell them at a specified minimum price. Under the Sherman Act, this is a violation: a. if the anticompetitive effects outweigh the competitive benefits. b. if the competitive benefits outweigh the anticompetitive effects. c. under any circumstances. d. under no circumstances.

A

A suit is filed against StudioFurniture, Inc., alleging that the firm has committed the offense of monopolization. To determine whether Studio has committed this offense, the court will consider the extent of Studio's market power and: a. how Studio acquired its power. b. how Studio makes its products. c. Studio's customers. d. Studio's suppliers.

A

A unilateral refusal to deal can violate antitrust laws if the refusal: a. is likely to have an anticompetitive effect on a particular market. b. results in lower prices for consumers. c. provides no economic benefits for consumers. d. is likely to increase competition.

A

An antitrust action alleging the offense of attempted monopolization is brought against a company. To be guilty of this offense, the company's attempt must have: a. a dangerous probability of success. b. a deadly guaranty of success. c. a distant possibility of success. d. a distinct improbability of success.

A

Fly-By-NightComponents, Inc., a maker of vehicle parts, refuses to sell to SuperSonicFix-It, Inc., a national vehicle service firm. Fly-By-Night convinces TurboMotor Parts Company, a competitor, to do the same. This is: a. a group boycott. b. a market division. c. a joint venture. d. an exclusive-dealing contract.

A

Organic Markets, Inc., From the Farm Foods Co., and Whole HealthFoods, Inc. organize together to exchange information and share advertising. This is an example of a: a. trade association. b. resale price maintenance agreement. c. monopoly. d. territorial restriction.

A

Rare Earth Corp., a raw materials vendor, sells its commodities in certain quantities to Rock Refining Company for a certain price but charges Gold Diggers, Inc., a Rock competitor, a higher price. This is most likely a violation of: a. the Clayton Act. b. the Federal Trade Commission Act. c. the Sherman Act. d. no antitrust law.

A

Special Cycles, Inc., makes Special-brand motorcycles and accessories, which are distributed to authorized dealers, including 'Round the World Cycles, Inc. 'Round the World operates dealerships in several locations. Special imposes restrictions on 'Round the World to limit the areas in which they sell the bikes and insulate other dealers from direct competition. This is: a. a territorial restriction. b. a resale price maintenance agreement. c. a refusal to deal. d. a price-fixing agreement.

A

To fall under the Sherman Act, an activity must: a. substantially affect interstate commerce. b. involve monopolization. c. promote competition. d. involve international trade.

A

A company refuses to sell its products to a particular buyer. This is: a. an exclusive-dealing contract. b. a horizontal market division. c. attempted monopolization. d. a unilateral refusal to deal.

D

A manufacturer refuses to sell its products to a particular retailer. This is: a. "an unfair or deceptive act or practice." b. a per se violation. c. not a violation. d. subject to analysis under the rule of reason.

D

To determine whether a company has monopoly power requires a court to look at: a. the definition of monopoly in the Sherman Act. b. the company's size alone. c. the company's production methods and marketing techniques. d. the relevant market.

D

To drive its competitors out of a certain geographic segment of its market, a company sets the prices of its products below cost for the buyers in that area. This is: a. a refusal to deal. b. business acumen. c. predatory bidding. d. price discrimination.

D

WellHeart, Inc. makes and sells Drawdown, the most prescribed name-brand heart medication. Big DrugCorporation has the potential to make a generic version of the same drug. Well Heart pays Big Drug not to sell its product. This is[hint: look at Case Example 32.2]: a. a customer restriction. b. a joint venture. c. an exclusive-dealing contract. d. a price-fixing agreement.

D

T or F: Predatory pricing involves selling a product at prices substantially above the fair market value.

F; below fair value

T or F: Price-fixing agreements are analyzed under the rule of reason.

F; per se

T or F: A group boycott is nota per se violation.

False

T or F: Market concentration refers to the number of firms in the market.

False

T or F: Monopoly power is a minor amount of market power.

False

T or F: No person may be a director for two competing corporations at the same time.

False

T or F: The DOJ or the FTC may ask the courts to impose various remedies in antitrust cases, but courts cannot order divestiture as a remedy.

False

T or F: The offense of monopolization does not require the intent to monopolize.

False

T or F: The primary measure of monopoly power is a competitor's assessment of the acts of a firm under review.

False

T or F: The rule of reason is a test used to determine whether an anticompetitive agreement constitutes an unreasonable restraint on trade.

False

T or F: Under an exclusive-dealing contract, a seller promises a buyer a certain territory in which the buyer will have no direct competition.

False

T or F: Territorial and consumer restrictions are per se violations.

False; Rule of Reason

T or F: Businesses in the same general industry or profession frequently organize into horizontal market divisions to pursue common interests.

False; Trade Association

T or F: A monopoly has the least degree of market power.

False; greatest

T or F: Territorial and customer restrictions are considered per se violations ofSection 1.

False; not since 1977

T or F: Section 1 of the Sherman Act condemns monopolization.

False; section 2

T or F: A divestiture is an order to a company to cease, or divest itself of, its anticompetitive conduct.

False; selling one of its operating functions

T or F: An agreement that is deemed a per se violation will be examined by a court to determine whether the agreement's benefits outweigh its anticompetitive effects.

False; they determine whether they constitute reasonable restraints of trade.

T or F: Conditioning the sale of one product on the purchase of another is an exclusive-dealing contract.

False; tying arrangement

An agreement by two or more sellers to refuse to deal with a particular person or firm is a(n) ______________________________(2 words).

Group Boycott

A(n) ____________________ merger is a merger between two firms that are competing in the same market.

Horizontal

The essence of the activity that is prohibited under Section 1 of the Sherman act is the act of______________________________(2words).

Joining together

The power of a firm to control or affect the market price of its product is ______________________________ power.

Market

A market in which there is a single seller or a very limited number of sellers is a(n)____________________.

Monopoly

A violation ofSection 2 requires that both ____________________ power and a(n) _______________ to monopolize be established.

Monopoly Intent

________________________________________(2words)is the ability of a monopoly to dictate what takes place in a given market.

Monopoly Power

Manufact Corp.conditions shipments of its products to Super Stores on Super's agreement not to buy products from Regal Co., Manufact's competitor. This is: a. an exclusive-dealing contract. b. a tying arrangement. c. price discrimination. d. a unilateral refusal to deal.

Not B

A restraint of trade that is so anticompetitive that it is deemed inherently illegal or illegal on its face is a(n) ____________________(2 words) violation.

Per Se

Any agreement that restricts output or artificially fixes price is a(n)_________________________(2 words) violation ofSection 1of the Sherman Antitrust Act.

Per Se

Spa-Cious Company makes and sells spa supplies. By selling its products at prices substantially below the normal cost of production, Spa-Cious hopes to drive its competitors from the market. This is: a. market power. b. predatory pricing. c. price discrimination. d. price-fixing.

Predatory Pricing

Monopolization is the possession of monopoly power in the ____________________ market and the _______________ acquisition or maintenance of that power, which is distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.

Relevant Willful

An agreement between a manufacturer and a distributor or retailer in which the manufacturer specifies the retail prices of its products is referred to as a(n)_____________________________________________(3 words)agreement.

Resale Price Maintenance

A horizontal restraint is any agreement that restrains competition between _______________ firms competing in the _______________ market.

Rival Same

The types of______________________________(2 words)that Section 1 of the Sherman Act prohibits generally fall into two broad categories: horizontal restraints and vertical restraints

Trade Restraints

T or F: A market division by class of customer between rival firms violates antitrust law.

True

T or F: A restraint of trade is an agreement between firms that has the effect of reducing competition in the marketplace.

True

T or F: A single seller acting unilaterally is free to deal, or not to deal, with anyone it chooses.

True

T or F: A trade association practice or agreement that restrains trade is analyzed under the rule of reason.

True

T or F: An act must substantially affect interstate commerce to violate antitrust law.

True

T or F: Antitrust legislation was created because of the belief that competition leads to lower prices.

True

T or F: Charging different prices to different buyers for identical goods is price discrimination.

True

T or F: Cooperative research by small-business firms is exempt from antitrust law.

True

T or F: For products that are sold nationwide, the relevant geographic market encompasses the entire United States.

True

T or F: If individuals serve as directors on the boards of two or more competing companies simultaneously, this is an interlocking directorate.

True

T or F: In determining the legality of a merger, a crucial consideration is market concentration.

True

T or F: In the United States, concern over monopolistic practices arose after the Civil War where large corporate enterprises legally tied themselves together in business trusts in an effort to thwart competition.

True

T or F: Insurance companies are exempt from antitrust laws whenever state regulation exists.

True

T or F: Labor unions can organize and bargain without violating antitrust law.

True

T or F: Monopoly power may be proved by evidence that a firm used its power to control prices.

True

T or F: Predatory pricing is a form of anticompetitive conduct that could be used by firms that are attempting to monopolize.

True

T or F: Resale price maintenance agreements are subject to analysis under the rule of reason.

True

T or F: Section 1 has been violated if it can be demonstrated that the boycott or joint refusal to deal was undertaken with the intention of eliminating competition or preventing entry into a given market.

True

T or F: Section1 of the Sherman Antitrust Act focuses on agreements that are restrictive or that have a wrongful purpose whereas Section 2 of the Act addresses the misuse of monopoly power in the marketplace.

True

T or F: Size alone does not determine whether a firm is a monopoly.

True

T or F: The Clayton Act prohibits certain classes of price discrimination.

True

T or F: The Internet is changing the notion of the size and limits of a relevant geographic market.

True

T or F: The agencies that enforce the federal antitrust laws are the U.S. Department ofJustice and the Federal Trade Commission.

True

T or F: The basic purpose of antitrust law is to regulate economic competition.

True

T or F: The legality of a tying arrangement depends, to some degree, on the purpose of the agreement and its likely effect on competition in the relevant markets.

True

T or F: The relevant market requires two elements: a relevant product market and a relevant geographic market.

True

T or F: TheSherman Act, the Clayton Act and the Federal Trade Commission Act are all examples of legislation designed to curb anticompetitive business practices.

True

T or F: The possession of monopoly power alone does not constitute the offense of monopolization.

True; also needs intent

A restraint of trade created by an agreement between firms at different levels in the manufacturing and distribution process is a(n) _________________________ restraint.

Vertical

A(n) ____________________ merger is the acquisition by a company at one stage of production of a company at a higher or lower stage of production.

Vertical

A major wholesale distributor of software in the state of New Jersey agrees with its closest competitor, another New Jersey firm, that one will operate in south New Jersey and the other will operate in north New Jersey. This is[Hint: see Example 32.3]: a. a group boycott. b. a market division. c. a joint venture. d. an exclusive-dealing contract.

B

A trade association: a. is always a per se violation of Section 1 of the Sherman Act. b. may be legal if it is sufficiently beneficial to both the association and the public. c. is an innovative, legally efficient approach to doing business. d. always creates illegal territorial or customer restrictions.

B

Congress enacts a statute to outlaw a specific type of anticompetitive business agreement. Like other laws that regulate economic competition, this law is referred to as: a. a federal trade commission act. b. an antitrust law. c. an interstate commerce act. d. a suppressive restraint on trade.

B

Southern Coal MinesCompany and North ExcavationCompany agree to abide by the decisions of Eastern SeaboardFinancial Corporation as to their respective levels of production, markets, and prices, effectively reducing competition and increasing profits. This is most likely: a. a common, legal, time-honored type of business arrangement. b. an illegal restraint on trade. c. an innovative, legally efficient approach to doing business. d. an outdated, but legal business trust.

B

The Federal Trade Commission has the power to act against unfair trade practices under: a. the Clayton Act. b. the Federal Trade Commission Act. c. the Sherman Act. d. no law.

B

The acquisition of monopoly power is an antitrust violation when a dominant market share is the result of: a. the development of a superior product b. predatory pricing c. business acumen d. a historic accident

B

LED Corp., which controls 40 percent of the computer-chip market in the United States, merges with MicronPro, Inc., which controls 15 percent of the same market. This merger is a violation: a. only if the result more clearly concentrates the market. b. only if the result makes it more difficult for potential competitors to enter the market. c. if the result more clearly concentrates the market and makes it more difficult for potential competitors to enter the market. d. under no circumstances.

C

Some agreements are so blatantly and substantially anticompetitive that they are deemed illegal per se under Section 1 of the Sherman Act. Which of the following is nota per se violation?: a. A price-fixing agreement b. A group boycott c. A trade association d. A market division

C

To acquire monopoly power in its market, a company sets its prices lower than its competitors. Under the Sherman Act, this is: a. a per se violation. b. a violation if its competitors make similar deals. c. a violation if it thereby acquires monopoly power. d. not a violation.

C

WellHeart, Inc. makes and sells Drawdown, the most prescribed name-brand heart medication, and Well Heart pays Big Drug not to sell its product. A court would most likely rule that this agreement between Well Heart and Big Drug is[hint: look at Case Example 32.2]: a. a deal that neither restrains trade or harms competition. b. a legal restraint of trade. c. a per se violation of the Sherman Act. d. subject to analysis under the rule of reason.

C

When applying the rule of reason to determine whether an agreement violates Section 1 of the Sherman Act, a court will not consider: a. the purpose of the agreement. b. the parties' market ability to implement the agreement. c. the effect of the agreement on international trade. d. the potential effect of the agreement on competition.

C

T or F: A price-fixing agreement is an agreement by two or more sellers to boycott a particular person or firm.

F

Under Section _____ of the Clayton Act, sellers or lessors cannot condition the sale or lease of goods on the buyer's or lessee's promise not to use or deal in the goods of the seller's competitor.

3

T or F: A price-fixing agreement that is reasonable does not violate antitrust law.

F; Always does

Michaelis a very good businessman. He starts Michael's Cycles in the small town of Springfield, where there is one other bike store. Through good business management, Michael's Cycles obtains a great deal of market power in Springfield. This acquisition of monopoly power is: a. a per se violation of Section 1 of the Sherman Act. b. an illegal restraint on trade. c. not an antitrust violation. d. a per se violation of Section 2 of the Sherman Act.

A? Def not D

Laws that regulate economic competition in the United States and protect commerce from unlawful restraints and anticompetitive practices are known as ____________________ laws.

Antitrust

FruityCorp. believes that NuttyCo.engages in anticompetitive behavior in an attempt to drive Fruity and its other competitors out of the market. Antitrust laws can be enforced against Nutty by: a. Fruity and its competitors only. b. Fruity, its competitors, and the Federal Trade Commission only. c. Fruity, its competitors, the Federal Trade Commission, and the U.S. Department of Justice.

C

Hot Fuels, Inc., and Number One OilCorporation refine and sell gasoline and other petroleum products. To limit the supply of gas on the market and thereby raise prices, Hot Fuels and Number One Oil agree to buy "excess" supplies from dealers and "dispose" of it. This is: a. a deal that neither restrains trade or harms competition. b. a legal restraint of trade. c. a per se violation of the Sherman Act. d. subject to analysis under the rule of reason.

C

In weighing a challenge to a company's "monopolistic"prices, a court looks at the relevant geographic market. This encompasses: a. only areas in which the company does not have monopoly power. b. only areas in which the company has monopoly power. c. the area in which a company and its competitors sell, and their customers buy, the products. d. the entire United States in all cases.

C

JittersCaffeine Corporation makes and sells coffee under a variety of brand names. Jitters wants to merge with Coffee Beans Co., its main competitor. In weighing a challenge to the deal, a court looks at the relevant product market. This most likely includes coffee and[Hint: see Case Example 32.6]: a. no other products. b. products that are not identical but are related, such as spin-offs. c. products that are sometimes substituted for coffee. d. products with identical attributes only.

C