Deck 5: Government Regulation of Competition and Prices

Question 1

The government can regulate not just businesses, but also business competition and prices.

Answer 1

True

Question 2

Governments may regulate prices but not credit terms.

Answer 2

False

Question 3

Each of the states and the federal government have statutes and regulations that prohibit unfair methods of competition.

Answer 3

True

Question 4

An agreement between real estate brokers to never charge a commission less than 6% is not an example of price fixing.

Question 5

Boycotts are always illegal, even when done with good intentions.

Question 6

A divestiture order is a decree ordering a defendant to dispose of excessive ownership or control of interests in competing enterprises.

Question 7

Price discrimination is not permitted even when it can be justified on the basis of a difference in grade, quality, or quantity.

Question 8

The Federal Trade Commission administers the law prohibiting unfair methods of competition.

Question 9

The Robinson-Patman Act guarantees a seller the right to refuse to deal with anyone for any reason or purpose.

Question 10

Having a large percentage of the market is not necessarily a monopoly.

Question 11

The Sherman Act applies only to buying and selling activities, not manufacturing and production activities.

Question 12

Market power under the Sherman Act is defined by both geographic and product markets.

Question 13

Nobel economist Milton Friedman believes that government regulation of business interferes with the free enterprise system.

Question 14

A manufacturer having a restriction on territories in the form of a sole outlet is a per se violation.

Question 15

Under the Robinson-Patman Act, wholesalers may give new distributors free advertising and other services to help them compete with other distributors who have been doing business for a number of years and have become firmly established.

Question 16

A price reduction to one customer is lawful when it is made because of the deteriorated condition of the goods sold to that customer.

Question 17

A state may prohibit a seller from selling below cost if the purpose is to harm competitors.

Question 18

Under the Sherman Act competitors are permitted to agree not to deal with certain buyers.

Question 19

An agreement to charge an agreed-upon price or to set maximum or minimum prices between or among competitors is called price fixing but it is not per se a violation of the Sherman Act.

Question 20

The Clayton Act prohibits price discrimination between different buyers of like commodities when the effect may be to substantially lessen competition.

Question 21

Criminal penalties are possible under the Sherman Act.

Question 22

The United States Supreme Court generally has held that vertical merger agreements should not automatically be condemned as an unlawful restraint of interstate commerce merely because they create the potential to monopolize it.

Question 23

Price discrimination is expressly permitted in all of the following except:

A) In differences involving product grade or quality.
B) When involving the cost of transportation.
C) When making good faith efforts to meet the competition.
D) In situations involving resale price maintenance.

Question 24

The Robinson-Patman Act:

A) prohibits charging different prices to different buyers when the margin costs are the same.
B) allows sellers to offer incentives and bonuses to certain customers.
C) allows sellers to refuse to deal with anyone for any reason.
D) prohibits boycotts among competitors.

Question 25

Under the Clayton Act, a divestiture order is:

A) notification from the Department of Justice that a merger is about to occur.
B) notification from the Department of Justice that a merger did not occur.
C) a decision by a court requiring a defendant to sell an enterprise.
D) an order by a court requiring an enterprise to dispose of its inventory.

Question 26

The Clayton Act prohibits:

A) all unfair methods of competition.
B) conspiracies in restraint of trade.
C) attempts to monopolize.
D) price discrimination between buyers of like commodities.

Question 27

__________ power relates to a firm's ability to control price and exclude competitors.

A) Market
B) Competitive
C) Product
D) Production

Question 28

Requiring buyers to purchase one product in order to get another is acceptable practice and not a violation of the Sherman Act.

Question 29

A person who is harmed by a conspiracy that violates the Sherman Antitrust Act may sue the wrongdoers for treble damages, which is four times the actual damages.

Question 30

The Sherman Act focuses on:

A) unfair methods of competition.
B) combinations or contracts in restraint of trade.
C) permitted price discriminations.
D) intrastate commerce.

Question 31

All of the following are true about tying, except:

A) tying is a violation of the Sherman Act.
B) tying occurs when sellers require buyers to purchase an unwanted product to get a wanted one.
C) tying prohibits price discrimination.
D) tying is the use of control over the product within a relevant market.

Question 32

A(n) _________occurs when the seller makes a buyer who wants to purchase one product buy an additional product that he or she does not want.

A) Resale price maintenance.
B) Tying arrangement.
C) Price discriminations.
D) Divestiture order.

Question 33

A "suggested retail price" is not a violation of the antitrust laws.

Question 34

Unfair competition is controlled by:

A) statutes.
B) administrative agencies.
C) administrative regulations.
D) all of these.

Question 35

The Sherman Act does not prohibit:

A) a company from engaging in purposeful conduct to exclude competitors.
B) a seller from dominating a market because of superior product or business.
C) competitors from agreeing not to deal with certain buyers.
D) contracts to fix prices.

Question 36

Under the Clayton Act, when large-scale enterprises plan to merge, they must in advance:

A) notify the New York Stock Exchange.
B) notify the President of the United States.
C) complete the necessary financing arrangements.
D) notify the Antitrust Division of the Department of Justice.

Question 37

Section __________ of the Sherman Act applies to agreements, conduct, or conspiracies to restrain trade, which can consist of price-fixing, typing, and monopolization.

A) A
B) B
C) 1
D) 2

Question 38

The Sherman Act applies to all of the following except:

A) buying activities.
B) selling activities.
C) production activities.
D) price discrimination.

Question 39

The attorney general of a state may bring a class action suit to recover damages for those injured by an antitrust violation which raised prices.

Question 40

Under the Sherman Act, any person who attempts to monopolize any part of the trade or commerce among the states shall be:

A) guilty of a misdemeanor.
B) guilty of a felony.
C) fined up to $500,000.
D) guilty of a conspiracy to be a monopoly

Question 41

In large cities talent agencies typically charge clients no more than a 10% commission. Tina's Talent, Amy's Actors & Models and the Barton Agency are the only three talent agents in a small city. Due to the limited amount of work available for actors and models in their city, the three talent agents have gotten together and agreed to never charge a commission below 15%. Discuss if this is acceptable under the Sherman Act.

Question 42

When the effect of an antitrust violation is to raise prices:

A) damages are automatically considered doubled.
B) each plaintiff must sue individually.
C) imprisonment for the guilty is mandatory.
D) the state attorney general may bring a class action suit for damages.

Question 43

Freezo Refrigerators are sold by various retailers. Most of the same retailers also sell Icy Refrigerators. The Freezo brand outsells Icy in some stores, but not in others. Freezo has decided to offer secret bonuses and discounts to retailers where the sale of Freezo Refrigerators lags behind the sale of Icy Refrigerators. Freezo sees this action as an advertising ploy to increase market share. Retail stores where Freezo is number one are not eligible for any of these bonuses and discounts. Discuss the implications of Freezo's advertising plan.

Question 44

Quickness Computer, Inc. is a manufacturer of computers. A Hollywood star indicated on national television that Quickness was his favorite computer. Buoyed by this comment, sales of Quickness computers surged. Since demand outpaced supply, Quickness decided to sell no more computers unless an accompanying software package was purchased. A competitor informed the Office of the Attorney General of this policy, asserting it was illegal. Decide.

Question 45

Vertical mergers:

A) occur between firms that have a competitor relationship.
B) occur between firms that have buyer and seller relationships.
C) are not covered by the Clayton Act.
D) are always protected by the federal government.

Question 46

For violation of the Sherman Act, the maximum fine that may be imposed on a natural person is:

A) $1 million.
B) $500,000.
C) $0.
D) $100 million.

Question 47

A person or enterprise harmed by a Sherman Act violation may bring an action for:

A) punitive damages only.
B) treble damages.
C) quadruple damages.
D) actual damages only.

Question 48

A violator of the Sherman Act may be subject to:

A) fine only.
B) imprisonment only.
C) both fine and imprisonment.
D) neither fine nor imprisonment.