Question 1

If four large commercial contractors meet and agree that only one of the four contractors will submit a bid on a large government road contract, this is best defined as_______ .

Accepted Answer

The answer of If four large commercial contractors meet and...

Question 2

If three pizza delivery companies agree that one company will service only the rural areas of a state, one only suburban areas, and the one only the urban areas, this is an example of_______ .

Accepted Answer

This scenario is an example of market division, where three companies agree to divide the market based on geographic areas. This can limit competition and choice for customers in each area. Bid rigging involves colluding to manipulate bidding processes, price fixing involves agreeing on prices to charge customers, and monopolization involves a single company dominating and controlling a market.

Question 3

If a book publishing company sells its books to retailers with the explicit condition that the retailers may not resell the books below a specified price, this is an example of_______ _ and_______ it illegal per se.

Accepted Answer

Resale price maintenance is when manufacturers set the minimum prices at which retailers can sell their products. It is not illegal per se, but it can be challenged under antitrust laws if it is deemed to have anticompetitive effects.

Question 4

If four quick oil change service companies agree to reduce the number of cars they service each month in an effort to raise the price for the service, this is an example of ________.

Accepted Answer

This is an example of output restrictions, where the companies are agreeing to reduce the number of cars they service each month in order to limit the supply of the service, which can lead to increased prices due to higher demand. This is a violation of antitrust laws as it restricts competition and harms consumers.

Question 5

Resale price maintenance can prevent showrooming.

Accepted Answer

Resale price maintenance involves setting a minimum price for a product and preventing retailers from discounting it. This can prevent showrooming, where customers view a product in-store but then purchase it online for a lower price. By preventing retailers from offering discounts, customers may be more likely to purchase the product in-store, rather than seeking out a cheaper option online.

Question 6

Section 2 of the Sherman Act prohibits ________.

Accepted Answer

Section 2 of the Sherman Act specifically addresses the issue of attempts to monopolize, monopolization, or conspiracies to monopolize through exclusionary or predatory conduct.

Question 7

If a firm engaged in a price- fixing agreement first reports the activity to the Department of Justice, the company still faces substantial fees because price- fixing is illegal per se.

Accepted Answer

Under the Antitrust Division's Leniency Program, a company that first reports its involvement in a price-fixing agreement and cooperates with the Department of Justice (DOJ) investigation may receive immunity from criminal charges and fines, significantly reducing or eliminating its financial penalties.

Question 8

As a general rule, antitrust authorities refer to any firm with a market share above_______ percent as a monopoly even though it is technically a dominant firm.

Accepted Answer

Antitrust authorities refer to any firm with a market share above 75 percent as a monopoly even though it is technically a dominant firm. This is because a market share above 75 percent is considered to be large enough to allow the firm to have significant market power and potentially harm competition.

Question 9

If an up- scale jewelry maker sells its products to retailers with the explicit condition that the retailers may not resell the products below a specified price, the jewelry maker is likely concerned about_______ .

Accepted Answer

The jewelry maker is likely concerned about its reputation. By ensuring that retailers do not sell the products below a specified price, the maker aims to maintain the brand's luxury status and perceived value, which are crucial for an upscale brand's image and customer perception.

Question 10

Foreign firms and foreign citizens are exempt from U.S. antitrust laws.

Accepted Answer

Foreign firms and foreign citizens are not exempt from U.S. antitrust laws. These laws apply to all entities that engage in business activities within the United States, regardless of their nationality or country of origin.

Question 11

Sail Away is competing in the sailboat market with Best Sails. Sail Away drops its price below its cost and, in doing so, drives Best Sails out of the market. Once Sail Away is a monopoly, they raise their price and enjoy economic profit. This is an example of .

Accepted Answer

This scenario is an example of predatory pricing, which is a tactic used to drive competitors out of the market by temporarily lowering prices below cost. Once the competition is eliminated, the company can then raise prices to enjoy economic profit as a monopoly.

Question 12

Bid rigging is analogous to price fixing.

Accepted Answer

Bid rigging and price fixing are both illegal practices that involve collusion between competitors to manipulate the market and eliminate competition. In bid rigging, competitors agree to submit non-competitive bids or to take turns submitting the winning bid in order to allocate contracts and maintain artificially high prices. Similarly, in price fixing, competitors agree to set a certain price for their products or services, eliminating the need for competition and creating a monopoly.

Question 13

If an up- scale jewelry maker sells its products to retailers with the explicit condition that the retailers may not resell the products below a specified price, this is an example of ________ .

Accepted Answer

This is an example of resale price maintenance, which is when a manufacturer or distributor sets a minimum price that retailers must sell their product for. This is often done to maintain the perceived value of the product and prevent discounting that could damage the brand's reputation. It is illegal in some countries, including the United States.

Question 14

Happy Campers is competing in the camping market with Camping R Us. Happy Campers drops its price below its cost and, in doing so, drives Camping R Us out of the market. Once Happy Campers is a monopoly, they raise their price and enjoy economic profit. This is an example of_______ .

Accepted Answer

This scenario describes predatory pricing, where Happy Campers sets prices below the cost to force Camping R Us out of the market and become a monopoly, ultimately raising prices and enjoying economic profit. Market division involves dividing up the market with competitors, bid rigging involves colluding with competitors to set prices, and resale price maintenance involves dictating the price at which resellers can sell a product.

Question 15

If a firm has a market share that exceeds_______ percent, most courts will conclude that the firm is a monopoly and if the market share exceeds _______percent, the courts are likely to conclude that the firm is coming "dangerously close" to being a monopoly.

Accepted Answer

A firm with a market share exceeding 75% is often considered a monopoly, while a market share above 50% suggests the firm is nearing monopoly status.

Question 16

If three residential cleaning service companies agree to reduce the number of homes they clean each month in an effort to raise the price for the service, this is an example of_______ .

Accepted Answer

The agreement between the cleaning service companies to reduce the number of homes they clean each month is an example of output restrictions, where the companies limit the amount of output in order to increase prices. This is a violation of antitrust laws as it can lead to anti-competitive behavior and harm consumers.

Question 17

If an illegal per se act has been proven to have occurred, there is no defense possible.

Accepted Answer

If an illegal per se act has been proven, it means that it is a violation of the law without any need for further proof of impairment or harm. Therefore, there is no defense available.

Question 18

Resale price maintenance is a kind of _______restraint and it_______ legal.

Accepted Answer

Resale price maintenance is a vertical restraint because it involves an agreement between a manufacturer and a distributor or retailer. The legality of this restraint depends on the jurisdiction, as some countries (such as the United States) view it as illegal while others (such as the European Union) view it as legal under certain circumstances.

Question 19

If two quick oil change companies agree that one company will purchase locations in rural and suburban areas and the other company will purchase locations in the urban areas, this is an example of_______ .

Accepted Answer

This is an example of market division, where two companies agree to divide the market among themselves based on geographic areas. This is an illegal practice as it restricts competition and can lead to higher prices for consumers. Bid rigging involves conspiring to manipulate the bidding process, price fixing involves setting prices at an agreed upon level, and output restrictions involve agreeing to limit the amount of products or services offered. None of these practices are present in the scenario described.

Question 20

To prevail in a Section 2 case of the Sherman Act, the plaintiff must satisfy all of the following requirements except which one?

Accepted Answer

Section 2 of the Sherman Act focuses on anticompetitive practices and monopolization, not on competing based on product desirability. The other options are relevant to proving a violation of Section 2, such as defining the market, demonstrating anticompetitive conduct, and establishing a large market share.

Quiz 9: A Managers Guide to Antitrust Policy