Question 1

Antitrust penalties include:

Accepted Answer

Antitrust penalties can include structural remedies (such as divestitures), fines and imprisonment for individuals involved in antitrust violations, and triple damages, which are awarded to plaintiffs in private antitrust lawsuits.

Question 2

To establish guilt, a per se violation:

Accepted Answer

Per se violations, particularly in antitrust law, are considered inherently illegal no matter the effect on the market or the intentions of the firms involved. Proof of an agreement between firms to monopolize a market is sufficient to establish guilt without needing to demonstrate harm or anticompetitive effects.

Question 3

Suppose Firm A sells its product to Firm B on the condition that Firm B will not by a similar product from some other firm. This is a __________ arrangement and is considered _________.

Accepted Answer

Exclusive dealing arrangements, where a seller requires a buyer to purchase exclusively from them and not their competitors, are considered anticompetitive because they can limit competition and consumer choice in the market.

Question 4

What is the "30-60-90 rule"?

Accepted Answer

The "30-60-90 rule" is a guideline from a legal case that outlines how market share percentages relate to the definition or presumption of a monopoly.

Question 5

If two rival chains of gas stations join together to form a single business, then a _____________ merger has been made.

Accepted Answer

A horizontal merger occurs when two companies operating in the same industry, such as gas stations, join together to form a single business.

Question 6

The original federal antitrust statute is the:

Accepted Answer

The Sherman Act, enacted in 1890, is the original federal antitrust statute designed to combat anti-competitive practices, reduce market domination by individual corporations, and preserve unfettered competition as the rule of trade.

Question 7

The federal antitrust statute that prohibits specific activities, such as interlocking directorates, that substantially lessen competition, is the:

Accepted Answer

The Clayton Act specifically addresses practices that may substantially lessen competition or tend to create a monopoly, including interlocking directorates.

Question 8

When a firm must purchase Good A in order to also purchase Good B, this is called:

Accepted Answer

This is known as a tying contract, where the purchase of one product (Good A) is conditioned on the purchase of another product (Good B).

Question 9

Government regulation of worker safety and job discrimination is known as:

Accepted Answer

Social regulation includes government rules aimed at improving health, safety, and well-being of citizens, which encompasses worker safety and job discrimination laws.

Question 10

A joint venture occurs when two firms cooperate on a project that is limited in scope, a clear violation of the Sherman Act.

Accepted Answer

A joint venture is only illegal if it unreasonably restricts competition.

Question 11

Natural monopolies occur because of strong economies of scale in production and distribution.

Accepted Answer

Natural monopolies arise in industries where the fixed costs of the capital goods are so high that it is not profitable for more than one firm to produce the service, leading to economies of scale that prevent new competitors from entering the market efficiently.

Question 12

If Firm A and Firm B conspire to divide the U.S. into two parts so that Firm A sells only to the east of the Mississippi River and Firm B sells only to the west of the Mississippi River, then Firm A and B are guilty of price fixing.

Accepted Answer

They are guilty of territorial division.

Question 13

Price discrimination, where different buyers acquire the same product from the same seller at different prices, is a violation of the Robinson-Patman Act.

Accepted Answer

The Robinson-Patman Act prohibits certain forms of price discrimination, where the same seller sells the same product to different buyers at different prices, under specific conditions that might harm competition.

Question 14

The Celler-Kefauver Act is concerned with anticompetitive mergers and acquisitions.

Accepted Answer

The Celler-Kefauver Act, passed in 1950, specifically targets anticompetitive mergers and acquisitions by closing loopholes that allowed companies to acquire assets of competitors, thereby preventing the reduction of competition.

Question 15

Industry regulation, not social regulation, may involve the government determining prices and profits.

Accepted Answer

Industry regulation often involves direct government intervention in specific sectors, including setting prices and profit margins, to control monopolies, protect consumers, and ensure fair competition, whereas social regulation typically focuses on protecting public welfare, health, and safety across various industries.

Question 16

The 1970s were a period of deregulation, while the 1980s witnessed a resurgence of regulation.

Accepted Answer

The 1970s were a period of increased regulation the 1980s the opposite.

Question 17

If a market situation exists where it is more efficient to have the entire output produced by one firm, then a __________________________ exists.

Accepted Answer

The answer of If a market situation exists where it...

Question 18

A ____________ merger is a merger between two firms that are neither competitors, nor suppliers, nor distributors with one another.

Accepted Answer

The answer of A ____________ merger is a merger between...

Question 19

When the government regulates prices to ensure that they are sufficient to cover costs, the government is using ____-_____ _______.

Accepted Answer

The answer of When the government regulates prices to ensure...

Quiz 14: Government and the Markets