Deck 9: Antitrust: Economics, Law, and Politics

Question 1

The Federal Trade Commission cannot initiate its own investigations of practices it believes may violate antitrust laws.

Answer 1

False

Question 2

Horizontal practices that come under the antitrust laws are those involving firms in a supply arrangement or a channel of distribution.

Answer 2

False

Question 3

Under antitrust laws, the burden of proof to show that the act committed is not unreasonable is on the defendant.

Answer 3

False

Question 4

In addition to a cost difference defense, a firm can defend itself by arguing that the price discrimination was necessary to meet competition.

Question 5

Vertical practices under the antitrust laws involve allocation of territories by a manufacturer among distributors or retailers, refusals to deal, and tying.

Question 6

As a result of the agreement between the Department of Justice and the Federal Trade Commission, cases are allocated primarily by the nature of the complaint and secondarily by industry.

Question 7

A conglomerate merger involves two firms that do not operate in the same industries either as competitors or as part of a channel of distribution or supply.

Question 8

A defendant has two defenses under the rule of reason-the first is that defendant did not commit the crime and the second is that, although the defendant committed the act, it was not unreasonable to do so.

Question 9

Antitrust law includes only statutes and not the court decisions interpreting those statutes.

Question 10

Price discrimination practice is a vertical practice under antitrust laws.

Question 11

Fines cannot be imposed in civil cases except to compensate the government for actual damages when it is a purchaser of goods and services.

Question 12

A lens manufacturing firm convinces other manufactures in the industry to halt supplies to a distributor. Considering all things constant, the lens manufacturing firms are not liable to an antitrust suit.

Question 13

Exemptions are also provided under the antitrust laws.

Question 14

Monopolization is also addressed under the antitrust laws.

Question 15

A leading video game console manufacturer requires dealers to carry only its products. Considering all things constant, an antitrust suit may be filed against the manufacturer.

Question 16

Vertical merger involves two firms in the same industry.

Question 17

Individuals and managers cannot be subject to fines under the Antitrust Procedures and Penalties Act.

Question 18

Government enforcement of antitrust laws is more widespread than private enforcement.

Question 19

The Sherman Act allows private parties to bring lawsuits for practices that are illegal under the Act.

Question 20

Both the Department of Justice (DOJ) and the Federal Trade Commission (FTC) have the authority to enforce the Sherman Act and the Clayton Act, but only the FTC can enforce the Federal Trade Commission Act.

Question 21

The new IO approach to antitrust is derived from the economics of modern industrial organization.

Question 22

Only the ________ can bring criminal charges under the antitrust laws.

A) Federal Trade Commission
B) Department of Justice
C) Interstate Commerce Act
D) The Clayton Act

Question 23

Which of the following portrays a tying arrangement subject to antitrust scrutiny?

A) A manufacturer of flight navigation system requires retailers to sell at a price it specifies.
B) A manufacturer of flight communication systems requires dealers to carry only its parts.
C) Navigation system manufacturers of U.S refuse to sell such critical parts to a leading aircraft manufacturer.
D) A manufacturer of flight communication system grants exclusive rights to a distributing firm.

Question 24

Which of the following penalties is available in criminal cases?

A) injunctive relief
B) divestment of business units
C) dissolved contracts
D) fines

Question 25

Which of the following is not applicable to a consent decree?

A) involves judicial determination
B) binds only consenting parties
C) may remain in effect indefinitely
D) does not set a precedent for other cases

Question 26

The ________ pertains to unreasonable restraints of trade with a focus on joint conduct.

A) Federal Trade Commission Act
B) Robinson-Patman Act
C) Sherman Act
D) Clayton Act

Question 27

Which of the following is a horizontal practice subject to antitrust scrutiny?

A) A manufacturer of flight navigation system requires retailers to sell at a price it specifies.
B) A manufacturer of flight communication system grants exclusive rights to a distributing firm.
C) Navigation system manufacturers of U.S refuse to sell these critical parts to a leading aircraft manufacturer.
D) Two aircraft manufacturers announce a merger that would create a monopoly in the national aircraft manufacturing industry.

Question 28

As social policy, antitrust laws are________.

A) concerned with the structure of markets
B) focused on protecting competition and by doing so to benefit consumers
C) concerned with concentrations of economic power and the potential for abuse inherent in that concentration
D) concerned with the conduct of market participants

Question 29

The Clayton Act ________.

A) pertains to unreasonable restraints of trade with a focus on joint conduct
B) prohibits unfair methods of competition and unfair or deceptive acts
C) focuses on unilateral conduct and proscribes attempts to monopolize
D) addresses potentially anticompetitive actions

Question 30

Which of the following Acts does not provide for private lawsuits?

A) Federal Trade Commission Act
B) Robinson-Patman Act
C) Sherman Act
D) Clayton Act

Question 31

Antitrust policies are not concerned with ________.

A) conduct of market participants
B) structure of markets
C) protecting competition
D) protecting competitors

Question 32

Vertical practices subject to antitrust scrutiny involves ________.

A) resale price maintenance
B) predatory pricing
C) monopolization
D) allocation of customers

Question 33

Firms need to provide training and guidance to employees to deal with antitrust concerns.

Question 34

________ was the first federal antitrust statute.

A) Interstate Commerce Act of 1887
B) Sherman Act
C) Clayton Act of 1914
D) Federal Trade Commission Act

Question 35

The courts do not decide which rule is applicable on a case-by-case basis but instead hold that certain practices are per se illegal and others are not.

Question 36

The Industrial Organization school of thought believes that government intervention in markets is intended to improve economic performance.

Question 37

The structural school of thought to reasoning about antitrust believes that markets are resilient and imperfections can be addressed through incentives.

Question 38

The Chicago school of thought to reasoning about antitrust focuses on the ________.

A) functioning of markets and the nature of competition
B) conduct that may foreclose opportunities or diminish competition
C) social and political objectives of industries
D) implication of informational asymmetries among market participants

Question 39

The Federal Trade Commission Act ________.

A) addresses monopolization and restraints in their incipiency
B) prohibits unfair methods of competition and unfair or deceptive acts
C) focuses on unilateral conduct
D) pertains to unreasonable restraints of trade with a focus on joint conduct

Question 40

Which of the following portrays horizontal price fixing arrangement subject to antitrust scrutiny?

A) Three manufacturers with a large market share for printed circuit for cell phones agree to control the prices in the industry.
B) A cell phone hardware manufacturer requires dealers to carry only its parts.
C) A leading cell phone manufacturer requires retailers to sell at the price specified by the company.
D) Two manufacturers of printed circuit for cell phones announce a merger that would create a monopoly in the industry.

Question 41

Which of the following violations is not per se illegal in antitrust laws?

A) allocation of customers among competitors
B) maximum price resale maintenance
C) price fixing
D) output restraints

Question 42

What is antitrust policy? How do these laws represent social and economic policy?

Question 43

Describe the implication of antitrust policy on the management of a firm.

Question 44

Under the structural or traditional approach, collusion in concentrated industries _____________.

A) is possible with repeated encounters
B) is difficult to enforce
C) increases profits
D) reduces efficiency

Question 45

The Herfindahl-Hirschman Index (HHI) is used by the Department of Justice and Federal Trade Commission to measure the ________.

A) fine amount in antitrust lawsuits
B) amount of hard money available to a firm
C) market shares of a firm
D) concentration in an industry

Question 46

The new IO perspective on collusion and price fixing is that ________.

A) antitrust supervision is necessary
B) firms will collude when possible
C) it easier to sustain
D) it difficult to sustain

Question 47

Write a short note on antitrust laws.

Question 48

What are barriers to entry?

Question 49

TRUEware is a leading computer hardware manufacturer based in California. Two dealers of TRUEware compete against each other to make higher sales and profit margin. Which of the following is applicable to this situation?

A) entry deterrence
B) intraband competition
C) interband competition
D) horizontal arrangement

Question 50

The Chicago school of thought to reasoning about antitrust concludes that predatory pricing ________.

A) provides incentives that allows firms to engage in such acts
B) can deter some entry that would be desirable from the perspective of economic efficiency.
C) can drive a competitor out of a market by cutting prices below the competitor's costs
D) is unlikely to be successful, so it will not be attempted

Question 51

Discuss compliance with antitrust laws from the perspective of firms.

Question 52

Which of the following portrays the new Industrial Organization view of markets?

A) markets are fragile and prone to failure
B) market power can only arise from horizontal power
C) markets are resilient and imperfections can be addressed through incentives
D) most markets are resilient and strategic behavior can limit efficiency

Question 53

Under the Chicago school of thought, the purpose of antitrust policy is ________.

A) maximization of producers' plus consumers' surplus.
B) focuses on the opportunities for strategic behavior
C) focuses on the objectives of static and dynamic efficiency
D) is intended to improve economic performance and further the social objective of limiting economic power.

Question 54

Mergers ________.

A) encourage competition in supply and distribution channels
B) eliminate inefficient cross-subsidization
C) yields cost inefficiencies that bring losses to customers
D) remove effective management

Question 55

The ________ prohibits price discrimination not justified by cost differences in serving customers.

A) Federal Trade Commission Act
B) Clayton Act
C) Robinson-Patman Act
D) Sherman Act