Deck 5: Government Regulation of Competition and Prices

Question 1

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

Answer 1

True

Question 2

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

Answer 2

True

Question 3

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

Answer 3

False

Question 4

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

Question 5

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

Question 6

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

Question 7

Governments may regulate prices but not credit terms.

Question 8

The federal government may regulate any area of business to advance the nation's economic needs.

Question 9

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

Question 10

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

Question 11

A manufacturer with distributors in New York City may give its newer distributors free advertising and other services to help them compete with the distributors who have been doing business for a number of years and have become firmly established.

Question 12

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

Question 13

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

Question 14

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

Question 15

State governments may regulate business in all of its aspects,even if such regulation imposes a burden on interstate commerce.

Question 16

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

Question 17

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

Question 18

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

Question 19

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

Question 20

When large-size enterprises plan to merge,they must give written notice to the Interstate Commerce Commission.

Question 21

A person who attempts to monopolize any part of the trade or commerce among the states:

A)is guilty of a misdemeanor.
B)is guilty of a felony.
C)can be fined up to $500,000.
D)none of the above.

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

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

Question 24

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 25

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

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

Question 26

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 27

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 28

Tying:

A)is a violation of the Sherman Act.
B)occurs when sellers require buyers to purchase an unwanted product to get a wanted one.
C)both of the above.
D)none of the above.

Question 29

Price regulations:

A)may be imposed by the national government.
B)may be imposed by state governments.
C)include rules regarding credit terms and other charges.
D)all of the above.

Question 30

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

Question 31

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)all of the above.

Question 32

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 33

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

Question 34

Criminal penalties are possible under the Sherman Act.

Question 35

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 36

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 37

The Sherman Act applies to:

A)buying activities.
B)selling activities.
C)production activities.
D)all of the above.

Question 38

Unfair competition is controlled by:

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

Question 39

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 40

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)all of the above.

Question 41

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 42

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 43

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 44

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.

Question 45

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 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

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.