Deck 46: Antitrust Law

Question 1

A restraint of trade is an agreement between firms that has the effect of reducing anticompetitive business practices.​

Answer 1

False

Question 2

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

Answer 2

True

Question 3

An agreement that is deemed a per se violation will be examined by a court to determine whether the agreement actually constitutes a reasonable restraint of trade.​

Answer 3

False

Question 4

Market power is the ability of a firm to enter a given market.​

Question 5

A firm is not a monopolist unless it is the sole seller in a market.​

Question 6

A group boycott that is intended to eliminate competition is legal.​

Question 7

The primary measure of monopoly power is a competitor's assessment of the acts of a firm under review.​

Question 8

An act must substantially affect interstate commerce to violate antitrust law.​

Question 9

Unilateral conduct can result in a violation of antitrust law.​

Question 10

Resale price maintenance agreements are per se violations of the Sherman Act.​

Question 11

Joint refusals to deal are not subject to scrutiny under the Sherman Act.​

Question 12

The Sherman Act is an example of legislation designed to curb anticompetitive business practices.​

Question 13

The purpose of antitrust legislation is to prevent competition.​

Question 14

Monopoly power may be proved by evidence that a firm used its power to control prices.​

Question 15

Section 1 of the Sherman Act condemns monopolization.​

Question 16

Territorial and customer restrictions are judged under the rule of reason.​

Question 17

An agreement among competitors to fix prices is a per se violation of Section 1 of the Sherman Act.​

Question 18

Predatory pricing involves selling a product at prices substantially above the fair market value.​

Question 19

Monopoly power is an extreme amount of market power.​

Question 20

A market division by class of customer between rival firms does not violate antitrust law.​

Question 21

Insurance companies are exempt from antitrust laws whenever state regulation exists.​

Question 22

A contract under which a seller forbids a buyer to purchase products from the seller's competitors is a tying arrangement.​

Question 23

A court deems an agreement between BioTech Inc. and ChemCorp to be a per se violation of the Sherman Act. With respect to this agreement, the court can​

A) ​not determine whether its benefits outweigh its anticompetitive effects.
B) ​considers its benefits to the firms' customers.
C) ​apply the rule of reason.
D) ​review its effect on the relevant market.

Question 24

The U.S. Department of Justice can prosecute violations of all of the antitrust laws.​

Question 25

Any action challenged as an attempt to monopolize must have been specifically intended to exclude competitors and garner monopoly power.​

Question 26

Gas, Inc., and Oil Corporation refine and sell gasoline. To limit the supply of gas on the market and thereby raise prices, Gas and 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.

Question 27

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

Question 28

Size alone determines whether a firm is a monopoly.​

Question 29

Labor unions can organize and bargain without violating antitrust law.​

Question 30

The market-share test measures a firm's percentage share of a market.​

Question 31

Any conspiracy-even if it occurs outside the United States-that has a substantial effect on U.S. commerce is within the reach of the Sherman Act.​

Question 32

It is in society's interest to condemn every firm that acquires a position of power.​

Question 33

Price discrimination occurs when a seller charges different prices to competing buyers for identical goods or services.​

Question 34

Omni Discount Company and Price-Lo Stores, Inc., agree to abide by the decisions of Quality Marketing 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.

Question 35

The Clayton Act prohibits price discrimination.​

Question 36

For products that are sold nationwide, the relevant geographic market is the entire globe.​

Question 37

Soft Drink Corporation is charged with violating the Sherman Act through conduct subject to the rule of reason. When applying the rule of reason in this situation, 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.

Question 38

Consumers Retail Corporation may be engaging in conduct that violates the Sherman Act. To bring an action against the firm requires that its conduct have a significant impact on​

A) ​international commerce.
B) ​Internet commerce.
C) ​interstate commerce.
D) ​intrastate commerce.

Question 39

In determining the legality of a merger, market concentration has no significance.​

Question 40

Monopoly power in and of itself constitutes the offense of monopolization.​

Question 41

Fact Pattern 46-1​
Pharma Corporation makes and sells QualMed, the most prescribed name-brand blood pressure-lowering medication. Renew Drugs, Inc., has the potential to make a generic version of the same drug.
Refer to Fact Pattern 46-1. A court would most likely rule that the agreement between Pharma and Renew 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.

Question 42

To acquire monopoly power in its market, Sugar, Inc., sets its prices substantially below the costs of production. Under antitrust law, this is​

A) ​a per se violation.
B) ​a violation if the firm's competitors set similar prices.
C) ​a violation if the firm thereby acquires monopoly power.
D) ​not a violation.

Question 43

Fact Pattern 46-1​
Pharma Corporation makes and sells QualMed, the most prescribed name-brand blood pressure-lowering medication. Renew Drugs, Inc., has the potential to make a generic version of the same drug.
Refer to Fact Pattern 46-1. Pharma pays Renew not to sell its product. This is​

A) ​a market division.
B) ​a refusal to deal.
C) ​an exclusive-dealing contract.
D) ​a price-fixing agreement.

Question 44

Sunrich Company can process solar energy into an inexpensive fuel for internal combustion engines. As an innovator in its market, Sunrich currently has the power to affect the price of its product. This is​

A) ​market power.
B) ​predatory pricing.
C) ​price discrimination.
D) ​monopsony power.

Question 45

Smart Tablets, Inc., requires all distributors of its products to sell them at a specified minimum price. This is a violation of antitrust law​

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.

Question 46

Frozen Confections Corporation makes and sells ice cream under a variety of brand names. Frozen Fruit wants to merge with Grocers Iced Products Company, its main competitor. In weighing a challenge to the deal, a court looks at the relevant product market. This most likely includes ice cream and​

A) ​no other products.
B) ​products that are not identical but are related, such as spin-offs.
C) ​products that are reasonably interchangeable.
D) ​products with identical attributes only.

Question 47

Speedee Snoboards, Inc., refuses to sell its products to Timber Mountain WinterSports Stores, Inc., a retail snowboard dealership. This is​

A) ​an exclusive-dealing contract.
B) ​a territorial restriction.
C) ​attempted monopolization.
D) ​a unilateral refusal to deal.

Question 48

Gearbox, Inc., a manufacturer of vehicle parts, refuses to sell to Motor Repair & Replace, Inc., a national vehicle service firm. Gearbox convinces Cam & Cylinder Company, a competitor, to do the same. This is​

A) ​a group boycott.
B) ​an exclusive-dealing contract.
C) ​a tying arrangement.
D) ​a market division.

Question 49

Fresh Vegetables, Inc., a wholesaler, refuses to sell its produce to Good Foods Marketplace, Inc., a 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.

Question 50

Trail Bikes, Inc., makes and distributes Trail-brand bicycles and accessories to authorized dealers. To prevent price-cutting by dealers in direct competition, Trail Bikes imposes limits on where each dealer can sell Trail products. This is​

A) ​a territorial restriction.
B) ​a resale price maintenance agreement.
C) ​smart marketing.
D) ​a price-fixing agreement.

Question 51

An antitrust action is brought against Carrier Freight Company, alleging that a certain act constitutes the offense of attempted monopolization. To qualify, the act must have had​

A) ​a dangerous probability of success.
B) ​a definite guaranty of success.
C) ​a preponderant possibility of success.
D) ​a reasonable probability of success.

Question 52

Spa Company makes and sells beauty salon supplies. By selling its products at prices substantially below the normal cost of production, Spa hopes to drive its competitors from the market. This is​

A) ​predatory bidding.
B) ​predatory pricing.
C) ​price discrimination.
D) ​price-fixing.

Question 53

Fiesta Food Company, Gourmet Cheeses, Inc., and Healthy Eats, Inc. agree to exchange information and share advertising. This trade association agreement is​

A) ​a deal that inherently neither restrains trade nor harms competition.
B) ​a legal restraint of trade.
C) ​a per se violation of antitrust law.
D) ​subject to analysis under the rule of reason.

Question 54

A suit is filed against DrillBits Corporation, alleging that the firm committed the offense of monopolization. To determine whether DrillBits has monopoly power requires looking at​

A) ​the price of a share of DrillBits' stock.
B) ​DrillBits' size alone.
C) ​DrillBits' production methods and marketing techniques.
D) ​the relevant market.

Question 55

Through smart business management, Harvest Bakery obtains monopoly power in its market. This 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.

Question 56

Pads & Pods Corporation requires all distributors of its products to sell the products at specified minimum prices. This resale price maintenance agreement is​

A) ​a per se violation of antitrust law.
B) ​a legal restraint of trade.
C) ​subject to evaluation under the rule of reason.
D) ​not subject to antitrust law.

Question 57

The Association of Organic Food Growers, which does not include all organic farmers and ranchers, refuses to deal with any parties who do not carry the products of its members. This group boycott is​

A) ​a situation that neither restrains trade nor harms competition.
B) ​a legal restraint of trade.
C) ​a per se violation of antitrust law.
D) ​subject to analysis under the rule of reason.

Question 58

Agreements that are deemed per se violations of Section 1 of the Sherman Act include all of the following except​

A) ​a price-fixing agreement.
B) ​a group boycott.
C) ​a trade association.
D) ​a market division.

Question 59

Friction-Lube Corporation and Grease Inc. are the principal suppliers of their products in their market. They agree that Friction-Lube will sell exclusively to retailers and Grease will sell exclusively to wholesalers. Under antitrust law, this market division is most likely​

A) ​a per se violation.
B) ​a violation only if their competitors make similar deals.
C) ​a violation only if their customers agree to honor the deal.
D) ​not a violation.

Question 60

Able Excavators, Inc., is the major wholesale distributor of heavy equipment in the state of Georgia. Its closest competitor is Big Machine Company, another Georgia firm. The two firms agree that Able will operate in southern Georgia and Big will operate in northern Georgia. This is​

A) ​a group boycott.
B) ​a market division.
C) ​a price-fixing agreement.
D) ​a tying arrangement.

Question 61

To drive its competitors out of a certain geographic segment of its market, Drones, Inc., sets the prices of its products below cost for the buyers in that area. This is​

A) ​price-fixing.
B) ​smart marketing.
C) ​predatory pricing.
D) ​price discrimination.

Question 62

Clear View Corporation offers to sell its flat-panel display monitors to Best Computer & Video, Inc., only if Best agrees to buy Clear View's servicing of its products along with the monitors. This is​

A) ​an exclusive-dealing contract.
B) ​a tying arrangement.
C) ​price discrimination.
D) ​business acumen.

Question 63

Disc & Shoe Brakes Corporation, a brake manufacturer, sells its products to Eastside Motors, a retailer, at lower prices than it charges Fast Brake, a competitive retailer. This price discrimination is legal​

A) ​under any circumstances.
B) unless its effect is to cause a competitor a loss of any business.​
C) ​unless its effect is to substantially lessen competition.
D) ​unless there is no effect on a competitor.

Question 64

Domestic Oil Company joins with a foreign cartel to control the price of oil. The cartel has a substantial effect on U.S. commerce. A suit for violation of U.S. antitrust laws can be brought against​

A) ​Domestic Oil and the foreign cartel.
B) ​the foreign cartel.
C) ​Domestic Oil.
D) ​all of the choices.

Question 65

Under what circumstances would Small's Market, a little store in Rustic, an isolated town, be considered a monopoly? If Small's Market is a monopoly, is it in violation of antitrust law?​

Question 66

Pump Makers Inc. makes pumps for fire trucks and conditions shipments of its products to Quality Motors Corporation-a maker of fire trucks-on Quality's agreement to buy additional pumps only from Pump Makers. This is​

A) ​an exclusive-dealing contract.
B) ​a tying arrangement.
C) ​price discrimination.
D) ​a group boycott.

Question 67

Earthgro, Inc., is one of many producers of cut flowers. Earthgro refuses to sell its products to Florist Shops Corporation. Under antitrust law, this refusal is most likely​

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.

Question 68

Precision Parts Corporation and Aligned Gears, Inc., are competitors selling certain machine parts that are otherwise generally unattainable in their geographic market. This market includes the states of Minnesota, North Dakota, and South Dakota. Precision Parts and Aligned Gears agree that Precision Parts will no longer sell in Minnesota and that Aligned Gears will no longer sell in North and South Dakota. Have Precision Parts and Aligned Gears violated any antitrust law? If so, which one? Explain. If they had divided their market by type of customer rather than geographic are, would the result be the same? Why or why not?

Question 69

Ranchland Supplies Corporation believes that Stock & Equipment Corporation engages in anticompetitive behavior in an attempt to drive Ranchland, its chief competitor, out of the market. Antitrust laws can be enforced against Stock & Equipment by​

A) ​only a disinterested third party.
B) ​Congress.
C) ​Ranchland.
D) ​none of the choices.

Question 70

By contract, Oil Shale Corporation forbids Petro, Inc., a wholesale buyer of Oil Shale's products, from purchasing the products of its competitors. This exclusive-dealing contract is allowed​

A) ​under any circumstances.
B) ​if its effect is to cause a competitor a loss of any business.
C) ​if its effect is to substantially lessen competition.
D) ​unless there is no effect on a competitor.

Question 71

HVAC Parts Company charges different buyers different prices for identical goods. HVAC'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.

Question 72

To prevent its competitors from obtaining sufficient supplies to make their products, Continental Steel, Inc., uses its market power to increase the prices of those supplies. This is​

A) ​price discrimination.
B) ​business judgment.
C) ​predatory bidding.
D) ​predatory pricing.