Question 1

Dig Inc.is the major wholesale distributor of heavy equipment in six states.Dig's closest competitor is Excavator Company.The two firms agree that Dig will operate in four of the states and Excavator in the other two.This is

Accepted Answer

This is a clear example of market division where two competitors agree to divide the market between themselves and operate in different geographical locations.

Question 2

Bio Med Corporation makes and sells Curative,the most prescribed name-brand pain-relief medication.Drugs Inc.has the potential to make a generic version of the same drug.Bio Med agrees to pay Drugs not to make or sell the generic.This agreement is most likely

Accepted Answer

This agreement between Bio Med Corporation and Drugs Inc. to pay Drugs not to make or sell the generic version of Curative is a per se violation of the Sherman Act. This is because it is a form of price-fixing, where Bio Med is essentially paying Drugs to not compete with them. Such agreements are considered inherently anticompetitive and therefore do not require any further analysis under the rule of reason.

Question 3

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

Accepted Answer

This agreement is an example of an exclusive-dealing contract, where Quality Motors Corporation agrees to buy additional pumps only from Pump Makers Inc. This limits competition and gives Pump Makers a monopoly over the sale of pumps to Quality Motors.

Question 4

Four grocery stores account for 80 percent of the retail food sales in Metro City.Two of the stores want to merge.In determining whether the merger violates the Clayton Act,the most crucial factor is

Accepted Answer

The most crucial factor in determining whether the merger violates the Clayton Act is the market shares of the firms in their market. The Clayton Act prohibits mergers and acquisitions that would substantially lessen competition in a particular market, and market share is a key factor in assessing the level of competition. If the merger would result in a significant increase in market share for the combined firm, it may be viewed as anti-competitive and prohibited under the Clayton Act.

Question 5

Edibles Inc.and Food Stuff Corporation are competitors.Each firm has capital,surplus,and undivided profits in excess of $40 million and competitive sales of more than $5 million.Gina and Hal serve as directors on both firms' boards.Under the Clayton Act's restriction concerning interlocking directorates,Gina and Hal are

Accepted Answer

The Clayton Act's restriction concerning interlocking directorates prohibits a person from serving as a director of two or more competing corporations if each corporation has capital, surplus, and undivided profits in excess of $40 million and sales in excess of $5 million. Gina and Hal serve as directors on both Edibles Inc. and Food Stuff Corporation's boards, which are competitors and meet the criteria under the act. Therefore, they are liable for failing to comply with the restriction.

Question 6

Fish Purveyors Corporation and Gill Netters Inc.are the principal suppliers of crustaceans in their market.They agree that Fish Purveyors will sell exclusively to retailers and Gill Netters will sell exclusively to wholesalers.This is most likely

Accepted Answer

This agreement between Fish Purveyors Corporation and Gill Netters Inc. is a per se violation of antitrust law as it involves an explicit agreement between competitors to divide the market by imposing the condition of selling exclusively to retailers and wholesalers, respectively. This agreement creates a restraint of trade and harms competition.

Question 7

Battery Corporation's production,distribution,and marketing methods are unique.Its capital value and size are greater than its competitors.A suit is filed against the firm,alleging the offense of monopolization.To determine whether Battery has monopoly power requires looking at

Accepted Answer

To determine if Battery Corporation has monopoly power, we need to look at the relevant market. This means examining the market in which the firm operates and identifying any substitutes for its products or services. Factors such as the firm's production methods and marketing techniques may be relevant in assessing market power, but they alone do not determine whether a firm has monopoly power. Likewise, the price of the firm's stock or its size may be suggestive of market power, but they do not provide conclusive evidence. It is the relevant market that ultimately determines whether a firm has market power.

Question 8

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

Accepted Answer

The answer of To drive its competitors out of a...

Question 9

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

Accepted Answer

To constitute attempted monopolization, the act must be likely to succeed. The fact that the attempt ultimately fails is not relevant; what matters is the potential for success. Therefore, choice A is the best answer.

Question 10

Components Inc. ,a maker of vehicle parts,refuses to sell to DIY Repair Inc. ,a national vehicle service firm.The maker convinces Engine Parts Company,a competitor,to do the same.This is

Accepted Answer

This is a group boycott, where two companies collaborate to refuse selling their products to another company, in this case, DIY Repair Inc.

Question 11

Cosmétique Inc.makes and sells cosmetics and related products.By selling its goods at prices substantially below the normal cost of production,the firm hopes to drive its competitors from the market.This is

Accepted Answer

This is an example of predatory pricing, which involves setting prices below cost in order to drive competitors out of the market. This strategy is often used by large firms with market power to gain even greater control over a market.

Question 12

Snowboards Inc.refuses to sell its products to Timber Winter Sports Stores,Inc. ,a retail snowboard dealership.This violates Section 2 of the Sherman Act if Snowboards has monopoly power and

Accepted Answer

Section 2 of the Sherman Act prohibits monopolization of a particular market. Snowboards Inc. refusing to sell its products to Timber Winter Sports Stores, Inc. could be considered anti-competitive behavior, as it could limit competition in the market. Therefore, the best choice is D as it states that the refusal has an anticompetitive effect on the market.

Question 13

Mountain Crest Inc.makes and distributes its branded products to authorized dealers.To prevent price-cutting by dealers in direct competition,the firm imposes limits on where each dealer can sell the products.This is

Accepted Answer

This is a territorial restriction, which is a common practice among manufacturers to avoid direct price competition among authorized dealers. It allows each dealer to have a designated geographical area where they can sell the products without interference from other dealers.

Question 14

When applying the rule of reason to an activity that allegedly violates the antitrust laws,a court will not consider

Accepted Answer

When applying the rule of reason, the court will consider the potential effect of the agreement on competition, the purpose of the agreement, and the parties' market ability to implement the agreement. However, the court will not consider whether the agreement is a per se violation, as per se violations are determined without considering the specific circumstances of the case.

Question 15

The Medical Device Makers Association does not include all manufacturers of medical and surgical instruments.The association refuses to deal with any parties who do not carry the products of its members.This is

Accepted Answer

The refusal to deal with parties who do not carry the products of its members can be considered a per se violation of antitrust law as it restricts competition by excluding certain manufacturers from the market.

Question 16

Dairy Cream Inc.makes and sells ice cream.Dairy Cream wants to merge with EZ Freeze Inc. ,its main competitor and a maker of ice cream and other frozen desserts.In a challenge to the deal on a charge of monopolization,the relevant product market includes ice cream and

Accepted Answer

The answer of Dairy Cream Inc.makes and sells ice cream.Dairy...

Question 17

Under a contract,Oil Shale Corporation forbids Petro Inc. ,a wholesale buyer of Oil Shale's products,to purchase products from the seller's competitors.This is prohibited

Accepted Answer

It is prohibited for Oil Shale Corporation to forbid Petro Inc. from purchasing products from its competitors if the effect is to substantially lessen competition. This type of restriction is often considered anti-competitive and violates antitrust laws.

Question 18

Fertile Acres Inc. ,Growers Farm Co-op,and Harvest Orchards agree to exchange information,conduct an advertising campaign,and set certain regulatory standards to govern their operations.This association is

Accepted Answer

The agreement between Fertile Acres Inc., Growers Farm Co-op, and Harvest Orchards may potentially have an impact on competition, therefore it would need to be analyzed under the rule of reason to determine if it violates antitrust laws. The rule of reason analysis considers the potential pro-competitive benefits of such agreements against the potential harm to competition.

Question 19

Road Tires Inc.conditions the sale of its products to Service Stores on the buyer's agreement to buy Road's tire-repair kits.Under the Clayton Act,this deal is

Accepted Answer

This is because tying agreements, which condition the sale of one product on the purchase of another, can be a violation of the Clayton Act depending on their purpose and effect on competition. In this case, it would need to be evaluated whether Road Tires is using the tie to gain market power or exclude competitors.

Question 20

Best View Corporation offers to sell LED screens to Computer & Video,Inc. ,only if the buyer also agrees to buy the seller's servicing of its products.This is

Accepted Answer

This is a tying arrangement, where the seller is conditioning the sale of LED screens on the buyer's agreement to also purchase the seller's servicing of its products.

Quiz 24: Antitrust Law and Promoting Competition