BUSI 4350 Chapter 10
Economists Jan DeLoecker and Jan Eeckhart have found that average markups (amount above cost at which products are sold) have increased from 18 percent in 1980 to nearly what percent in 2014?
70
Identify the antitrust concerns raised by tying arrangements. (Check all that apply.)
A party who already enjoys market power over the tying product is able to extend that power into the tied product market. A competitor in the tied product market is foreclosed from equal access to that market.
Identify an example of a horizontal group boycott.
A soft drink company and its competitors agree not to purchase bottles from a particular bottle manufacturer.
Carmen Inc., a telecommunications company, sells new connections to its customers only if they also subscribe to a monthly data plan for one year. This is an example of which of the following?
A tying arrangement
An agreement in which a buyer commits itself to deal only with a specific seller, thereby cutting competing sellers out of that share of the market is known as a(n):
An exclusive dealing contract
Match the types of contracts (in the left column) with their buyer-seller relationships (in the right column).
An exclusive dealing contract + It is an agreement in which a buyer commits to deal only with a specific seller. A requirements contract + It is an agreement in which a seller agrees to supply all of a buyer's needs.
The Federal Trade Commission (FTC) was created by the Federal Trade Commission Act to eliminate which of the following?
Anticompetitive practices in American commerce
In order to establish market power in the tying product, a court must consider the geographic market, which is where the product is sold in which of the following quantities?
Commercially significant
Regarding the parallel conduct of businesses, why is conscious parallelism fully lawful?
Competing firms have not agreed either implicitly or explicitly to follow the same course of action
Which of the following is not an available remedy under the Clayton Act?
Criminal sanctions
Which federal agency was designed to prevent anticompetitive trade practices?
FTC
True or false: Vertical territorial and customer restraints enable and facilitate intrabrand competition.
False
Match the types of market (in the left column) with their descriptions (in the right column).
Geographic market + Products are sold here in commercially significant quantities. Product market + Products sold here are interchangeable, and they compete with each other.
Which of the following is correct regarding the intellectual property holder?
He is restricted from growing this privilege into an unlawful monopoly.
Match the types of trade restraints (in the left column) with their descriptions (in the right column).
Horizontal restraints + They arise from agreements among competitors in the market. Vertical restraints + They are restraints imposed by suppliers on buyers.
Critics are particularly concerned that healthy market competition is being thwarted by which of the following?
Increasing corporate concentration
Which of the following leads to conscious parallelism?
Independent business judgment
Identify the true statements about price discrimination. (Check all that apply.)
It harms competition between competing firms. It is legally acceptable for seasonal goods or perishables.
Which of the following is correct regarding establishing the presence of an unlawful price-fixing arrangement?
It is difficult to do.
Which of the following was an early goal of antitrust law?
It was designed to provide free and open markets.
Identify the true statements about antitrust law. (Check all that apply.)
It was intended to provide an avenue for ordinary businesses to compete against giant corporations. It was designed to prevent individual companies from greatly influencing the political and social power of the government.
Through which of the following have states developed their own antitrust laws?
Legislation and judicial decisions
Identify the true statements about vertical territorial restraints of trade. (Check all that apply.)
Manufacturers may prevent distributors from selling to some classes of customers. Manufacturers impose non-price restraints, including where and to whom their product may be resold.
By its nature, an exclusive deal results in which of the following?
Market foreclosure
Exclusive dealing and requirements contracts could result in competitors being denied a source of supply or a market for sale which is referred to as:
Market foreclosure
All but which of the following offer limited, government-granted, government-shielded market strength?
Monopolization
Regarding the Sherman Antitrust Act, identify the correct statements about the enforcement options available to the federal government. (Check all that apply.)
People harmed by a violation may bring a civil action seeking injunctive relief. Violations of the Sherman Act potentially subject defendants to criminal penalties.
Antitrust violations that are so injurious to competition that their mere existence ordinarily constitution unlawful conduct are known as which of the following types of violations?
Per se
Palo, Inc., a cell phone manufacturer, reduced the prices of its products below operating costs, which led to the elimination of smaller, rival firms from the market. It subsequently increased its prices to recoup the initial losses. This is an example of which of the following?
Predatory pricing
Which of the following refers to a dominant firm reducing prices below operating costs until a competitor drops out of the market and then raising those prices to monopoly levels?
Predatory pricing
Which of the following refers to the sale of substantially identical goods and services in a particular period of time to different buyers at different prices?
Price discrimination
Which of the following does the Clayton Act forbid? (Check all that apply.)
Price discrimination Mergers that restrain commerce Mergers that tend to create a monopoly
Identify the true statements about proof of the basic tying violation test. (Check all that apply.)
Proof of all four (4) elements of the basic tying violation test establishes per se illegality. When all four (4) elements of the basic tying violation test cannot be satisfied, the analysis proceeds on a rule of reason basis.
In the American Needle case, the National Football League (NFL) was accused of restraint of trade for giving which of the following companies in 2000 an exclusive 10-year right to produce and market nearly all NFL-trademarked headware?
Reebok
Through which of the following do manufacturers specify the price at which customers can resell their products?
Resale price maintenance
Identify the effects of horizontal restraints of trade. (Check all that apply.)
Restricted output Divided market territories
Horizontal restraints of trade are governed by which of the following legislation?
Section 1 of the Sherman Act
Which of the following is the principal legislation addressing horizontal price-fixing?
Section 1 of the Sherman Act
Match the sections of the Sherman Antitrust Act (in the left column) with their descriptions (in the right column).
Section 1 of the Sherman Antitrust Act + It forbids restraints of trade. Section 2 of the Sherman Antitrust Act + It forbids monopolization of trade.
Horizontal group boycotts violate which federal legislation?
Sherman Act
Which of the following pieces of federal legislation prohibits restraints of trade, monopolization, attempts to monopolize and conspiracies to monopolize?
Sherman Act
Which of the following is correct regarding state enforcement of antitrust?
Some states have recently become more attentive to antitrust enforcement.
In which of the following cases to the United States Supreme Court articulate the rule of reason test regarding restraints of trade?
Standard Oil
Which of the following must the plaintiff prove in order to win a per se antitrust violation case?
That the violation in question occurred
Which of the following is correct regarding the various court decisions in the American Needle case?
The NFL won at both the trial and federal court of appeals levels.
Which of the following is a federal administrative agency responsible for antitrust enforcement?
The United States Justice Department
Which of the following is incorrect regarding antitrust enforcement?
The United States Justice Department prefers strict application of antitrust law.
Which of the following is not a plus factor in proving horizontal price-fixing?
The plaintiff's assumption of the risk
Antitrust advocates have historically been concerned with all of the following except:
The preservation of monopolies
Why do manufacturers and distributors influence the price at which a product is resold? (Check all that apply.)
To prevent free riding To establish a minimum price to enhance the product's reputation
True or false: Criminal law remedies are not available under the Clayton Act.
True
True or false: Proof of a contract, combination, or conspiracy is a threshold requirement for proving price-fixing and all other Sherman Act Section 1 violations.
True
True or false: The Federal Trade Commission's (FTC's) primary enforcement device is the cease and desist order.
True
An arrangement that permits a customer to buy or lease a desired product only if the customer also buys or leases another, less desirable product is referred to as a:
Tying arrangement
Which of the following permit a customer to purchase a desired product only if the customer also buys or leases another product?
Tying arrangements
In its 1911 Standard Oil decision, the United States Supreme Court articulated the rule of reason test, which essentially provides that the Sherman Act forbids only which of the following restraints of trade?
Unreasonable
Match the types of trade restraints (in the left column) with their characteristic features (in the right column).
Vertical restraints + They may either be harmful or beneficial to competition. Horizontal restraints + They eliminate competition in the market.
Which of the following is a restraint imposed by suppliers on their buyers?
Vertical restraints of trade.
When does a horizontal group boycott occur?
When competing organizations agree to not deal with a particular supplier, customer, or competitor
Tying arrangements are also known as ________.
bundling
When competitors fix prices, restrict output, and divide territories among themselves, they are engaging in:
horizontal restraints of trade.
Pricing below cost and a "dangerous probability" of recouping the losses suffered from the below-cost pricing are the two elements for establishing:
predatory pricing.
Selling substantially identical goods at reasonably contemporaneous times to different purchasers at a different price, where the effect is to harm competitors, is:
price discrimination.
A ________ contract is where a seller agrees to supply all of a buyer's needs, or a buyer agrees to purchase all of a seller's output, or both.
requirements
An agreement between two or more members of a supply chain is labeled a(n) _________ restraint on trade.
vertical
