Deck 23: Antitrust Law and Promoting Competition

Question 1

A market division by class of customer between rival firms violates antitrust law.

Answer 1

True

Question 2

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

Answer 2

False

Question 3

The basic purpose of antitrust law is to regulate economic competition.

Answer 3

True

Question 4

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

Question 5

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

Question 6

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

Question 7

Monopoly power is a minor amount of market power.

Question 8

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

Question 9

Territorial and consumer restrictions are per se violations.

Question 10

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

Question 11

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

Question 12

Section 1 of the Sherman Act condemns monopolization.

Question 13

A price-fixing agreement that is reasonable does not violate antitrust law.

Question 14

A group boycott is not a per se violation.

Question 15

Resale price maintenance agreements are subject to analysis under the rule of reason.

Question 16

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.

Question 17

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

Question 18

The Sherman Act, the Clayton Act and the Federal Trade Commission Act are all examples of legislation designed to curb anticompetitive business practices.

Question 19

Size alone does not determine whether a firm is a monopoly.

Question 20

Antitrust legislation was created because of the belief that competition leads to lower prices.

Question 21

Cooperative research by small-business firms is exempt from antitrust law.

Question 22

Charging different prices to different buyers for identical goods is price discrimination.

Question 23

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

Question 24

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.

Question 25

Labor unions can organize and bargain without violating antitrust law.

Question 26

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

Question 27

To fall under the Sherman Act, an activity must

A)substantially affect interstate commerce.
B)involve monopolization.
C)promote competition.
D)involve international trade.

Question 28

The possession of monopoly power alone does not constitute the offense of monopolization.

Question 29

The Clayton Act prohibits certain classes of price discrimination.

Question 30

The Internet is changing the notion of the size and limits of a relevant geographic market.

Question 31

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

Question 32

Market concentration refers to the number of firms in the market.

Question 33

The offense of monopolization does not require the intent to monopolize.

Question 34

North Mining Company and South Excavation Company agree to abide by the decisions of East Coast Financial 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

In determining the legality of a merger, a crucial consideration is market concentration.

Question 36

Thermo Gas, Inc., and Uno Oil Corporation refine and sell gasoline and other petroleum products.To limit the supply of gas on the market and thereby raise prices, Thermo Gas and Uno 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 37

No person may be a director for two competing corporations at the same time.

Question 38

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.

Question 39

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

Question 40

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

Question 41

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.

Question 42

Listen Up! Corporation books and promotes concerts and other entertainment events, for which Listen Up! also sells tickets.In weighing a challenge to Listen Up!'s "monopolistic" ticket prices, a court looks at the relevant geographic market.This encompasses

A)only areas in which Listen Up! does not have monopoly power.
B)only areas in which Listen Up! has monopoly power.
C)the area in which Listen Up! and its competitors sell, and their customers buy, the tickets.
D)the entire United States in all cases.

Question 43

Rally Speedboat Corporation refuses to sell its products to Super Weekends, Inc., a recreational water products dealership.This is

A)an exclusive-dealing contract.
B)a horizontal market division.
C)attempted monopolization.
D)a unilateral refusal to deal.

Question 44

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

A)the definition of monopoly in the Sherman Act.
B)Adroit's size alone.
C)Adroit's production methods and marketing techniques.
D)the relevant market.

Question 45

Gourmet Foods, Inc., 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.

Question 46

Marvin starts Marvin's Bike Company in Wheatland, South Dakota.There is one other bike store in Wheatland.Through good business management, Marvin's Bike Company obtains a great deal of market power in Wheatland.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.

Question 47

Gulf Air, Inc., is the major wholesale distributor of software in the state of Florida.Its closest competitor is Fluid Systems Company, another Florida firm.The two firms agree that Gulf Air will operate in south Florida and Fluid Systems will operate in north Florida.This is

A)a group boycott.
B)a market division.
C)a joint venture.
D)an exclusive-dealing contract.

Question 48

An antitrust action is brought against Tri-State Transport Company, alleging the offense of attempted monopolization.To be guilty of this offense, Tri-State'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.

Question 49

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 not a per se violation?

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

Question 50

Lightning Cycles, Inc., makes Lightning-brand motorcycles and accessories, which are distributed to authorized dealers, including Macho Motors, Inc.Macho operates dealerships in several locations.Lightning imposes restrictions on Macho 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.

Question 51

Master Manufacturing Corporation has exclusive control over the market for its product.Under the Sherman Act, this is

A)a per se violation.
B)a violation if it acquired this power through "business acumen."
C)a violation if it acquired this power through "anticompetitive means."
D)not a violation.

Question 52

A suit is filed against Dormroom Furniture Unlimited, Inc., alleging that the firm has committed the offense of monopolization.To determine whether Dormroom has committed this offense, the court will consider the extent of Dormroom's market power and

A)how Dormroom acquired its power.
B)how Dormroom makes its products.
C)Dormroom's customers.
D)Dormroom's suppliers.

Question 53

A court deems an agreement between Silver Saddles Saddlery and Time Tested Tack, Inc.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 Silver Saddles and Time Tested Tack.

Question 54

Imperio Caffeine Corporation makes and sells coffee under a variety of brand names.Imperio wants to merge with Java Company, its main competitor.In weighing a challenge to the deal, a court looks at the relevant product market.This most likely includes coffee and

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.

Question 55

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

A)market power.
B)predatory pricing.
C)price discrimination.
D)price-fixing.

Question 56

Fact Pattern 39-1
Cardio, Inc., makes and sells Drawdown, the most prescribed name-brand heart medication.Emitate Corporation has the potential to make a generic version of the same drug.
Refer to Fact Pattern 39-1.A court would most likely rule that the agreement between Cardio and Emitate 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 57

To acquire monopoly power in its market, Perfect Plastics, Inc., 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.

Question 58

Fact Pattern 39-1
Cardio, Inc., makes and sells Drawdown, the most prescribed name-brand heart medication.Emitate Corporation has the potential to make a generic version of the same drug.
Refer to Fact Pattern 39-1.Cardio pays Emitate not to sell its product.This is

A)a customer restriction.
B)a joint venture.
C)an exclusive-dealing contract.
D)a price-fixing agreement.

Question 59

Organic Cheeses, Inc., Fine & Fresh Foods Company, and Healthy Whole Foods, 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.

Question 60

Edgy Engine Components, Inc., a maker of vehicle parts, refuses to sell to Fidgety Fix-It, Inc., a national vehicle service firm.Edgy Engine convinces Greasy Motor 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.

Question 61

City Manufacturing Corporation conditions shipments of its products to Exurb Stores, Inc., on Exurb's agreement not to buy products from Regional Works Company, City's competitor.This is

A)an exclusive-dealing contract.
B)a tying arrangement.
C)price discrimination.
D)a unilateral refusal to deal.

Question 62

Fresh Vegetables, Inc., a wholesaler, refuses to sell its produce to Good Mart Stores, 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 63

Global Services Corporation engages in trade practices that may violate antitrust law.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.

Question 64

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.

Question 65

Precious Metals Corporation, a raw materials vendor, sells its commodities in certain quantities to Quarry Refining Company for a certain price but charges Rich Assets, Inc., a Quarry 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.

Question 66

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 67

Big U.S.Oil Company joins with a foreign cartel to control the price of oil.If the cartel has a substantial effect on U.S.commerce

A)both Big U.S.Oil and the foreign cartel can be sued for violation of U.S.antitrust laws.
B)neither Big U.S.Oil nor the foreign cartel can be sued for violation of U.S.antitrust laws.
C)only Big U.S.Oil can be sued for violation of U.S.antitrust laws.
D)only the foreign cartel can be sued for violation of U.S.antitrust laws .

Question 68

Mango Corporation believes that Melon Corporation engages in anticompetitive behavior in an attempt to drive Mango and its other competitors out of the market.Antitrust laws can be enforced against Melon by

A)Mango and its competitors only.
B)Mango, its competitors, and the Federal Trade Commission only.
C)Mango, its competitors, the Federal Trade Commission, and the U.S.Department of Justice.
D)the Federal Trade Commission and U.S.Department of Justice only.

Question 69

To drive its competitors out of a certain geographic segment of its market, Fryin' Potatoes, Inc., 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.

Question 70

Luminescent Silicon Corporation, which controls 40 percent of the computer-chip market in the United States, merges with Micro Processors, Inc., which controls 15 per-cent 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.

Question 71

Bubbly Bottling Company is engaged in the soft-drink bottling and distribution industry in the states of New York and New Jersey.The firm currently has about 40 percent of the market for these products and related services.Carbonate Distribution Corporation competes with Bubbly in the same states.Carbonate has about 35 percent of the market.If Bubbly were to acquire the stock and assets of Carbonate, would Bubbly be in violation of any of the antitrust laws? If so, which one? Discuss fully.

Question 72

Java Bean Company imports coffee beans and sells them under two-year contracts to Mellow Roast, Inc., and other coffeemakers.The contracts require that during the two-year term a coffeemaker not buy beans from Java Bean's competitors.The contracts do not limit the coffeemakers' purchase of tea or other beverage ingredients from other suppliers, however.In the second year of the contract, Mellow Roast protests that this arrangement violates antitrust law.Is Mellow Roast correct? If not, why not? If so, under which antitrust statute, or statutes, could these contracts be held illegal?