Question 1

U.S. antitrust laws may be applied to protect foreign consumers and competitors from violations committed by U.S. business firms.

Accepted Answer

A) True 
 B)False  True

Question 2

Fruit-of-the-Plant Seed Company is engaged in the agricultural seed industry in the Midwest. The firm currently has about 40 percent of the market for these products. GreatGro Seed Corporation competes with Fruit-of-the-Plant in the same states. Carbonate has about 35 percent of the market. If Fruit-of-the-Plant were to acquire the stock and assets of GreatGro, would Fruit-of-the-Plant be in violation of any of the antitrust laws? If so, which one? Discuss fully.

Accepted Answer

Section 7 of the Clayton Act prohibits the type of action by Bubbly suggested in this question-a horizontal merger that would increase market concentration. Other factors include the overall concentration of the relevant market, that market's history of tending toward concentration, and whether the merger is apparently designed to establish market power or restrict competition. Based on the facts stated in the question, most of these factors are present.
Thus, the major antitrust law being violated is Section 7 of the Clayton Act. Section 7 pro?hibits any person or business organization from acquiring the stock or assets in an?other business where the result would be a significantly increased market share and the effect would most likely be to substan?tially lessen competition. The removal of a competitor who controls 35 per?cent of the market (GreatGro) combined with the 40 percent held by the acquiring company (Fruit-of-the-Plant) definitely could drive out the remaining small competitors and be a barrier to future entrants into this market. Either the U.S. Department of Justice or the Federal Trade Commission could file for di?vestiture of the resulting firm if these parties were to merge.

Question 3

Soft Drink Corporation is charged with violating the Sherman Act through conduct subject to the rule of reason. When applying the rule of reason in this situation, a court will not consider

Accepted Answer

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. 
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. C

Question 4

Big American 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 suit for violation of U.S. antitrust laws can be brought against

Accepted Answer

A)  Big American Oil and the foreign cartel. 
B)  the foreign cartel. 
C)  Big American Oil. 
D)  all of the choices. 
A)  Big American Oil and the foreign cartel. 
B)  the foreign cartel. 
C)  Big American Oil. 
D)  all of the choices.

Question 5

Golf & Tennis LLC makes and sells golf clubs, tennis racquets, and related sporting goods. By selling its products at prices substantially below the normal cost of production, Golf & Tennis hopes to drive its competitors from the market. This is

Accepted Answer

A)  market power. 
B)  predatory pricing. 
C)  price discrimination. 
D)  none of the choices. 
A)  market power. 
B)  predatory pricing. 
C)  price discrimination. 
D)  none of the choices.

Question 6

Predatory pricing is a legitimate marketing practice, not a form of anticompetitive conduct.

Accepted Answer

A) True 
 B)False

Question 7

A joint effort by businesspersons to obtain legislative action can be exempt from the antitrust laws.

Accepted Answer

A) True 
 B)False

Question 8

Smart Tablets, Inc., requires all distribu?tors of its products to sell them at a specified minimum price. This is a violation of antitrust law

Accepted Answer

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. 
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 9

A suit is filed against DrillBits Corporation, alleging that the firm commit?ted the offense of monopolization. To determine whether DrillBits has monopoly power requires looking at

Accepted Answer

A)  the price of a share of DrillBits' stock. 
B)  DrillBits' size alone. 
C)  DrillBits' production methods and marketing techniques. 
D)  the relevant market. 
A)  the price of a share of DrillBits' stock. 
B)  DrillBits' size alone. 
C)  DrillBits' production methods and marketing techniques. 
D)  the relevant market.

Question 10

Under what circumstances would Quality Market, a small store in Rustic, an isolated town, be considered a mo?nopoly? If Quality Market is a monopoly, is it in violation of antitrust law?

Accepted Answer

The elements of the offense of monopoliz

Question 11

An exclusive-dealing contract is an agreement in which a seller agrees not to sell to a buyer's competitors.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A)  an exclusive-dealing contract. 
B)  a tying arrangement. 
C)  none of the choices. 
D)  a price-fixing agreement. 
A)  an exclusive-dealing contract. 
B)  a tying arrangement. 
C)  none of the choices. 
D)  a price-fixing agreement.

Question 13

A seller is prohibited from charging different prices to competing buyers for identical goods or services.

Accepted Answer

A) True 
 B)False

Question 14

Bill's Barber Supplies, Inc., is the major distributor of barber supplies in the state of Colorado. Bill's closest competitor is Dona's Beauty Products Company, another Colorado firm. They agree that Bill's will distribute its products in western Colorado and Dona's will distribute its products in the eastern part of the state. This is

Accepted Answer

A)  a group boycott. 
B)  a market division. 
C)  none of the choices. 
D)  a tying arrangement. 
A)  a group boycott. 
B)  a market division. 
C)  none of the choices. 
D)  a tying arrangement.

Question 15

Fine Food Company, Gourmet Cheeses, Inc., and Healthy Eats, Inc. agree to exchange information and share advertising. This trade association is

Accepted Answer

A)  a deal that neither restrains trade nor harms competition. 
B)  a legal restraint of trade. 
C)  a per se violation of antitrust law. 
D)  subject to analysis under the rule of reason. 
A)  a deal that neither restrains trade nor harms competition. 
B)  a legal restraint of trade. 
C)  a per se violation of antitrust law. 
D)  subject to analysis under the rule of reason.

Question 16

The possession of monopoly power is the only element needed to establish the offense of monopolization.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A)  a refusal to deal. 
B)  none of the choices. 
C)  predatory bidding. 
D)  price discrimination. 
A)  a refusal to deal. 
B)  none of the choices. 
C)  predatory bidding. 
D)  price discrimination.

Question 18

A concentrated industry is one in which either a single firm or a small number of firms carry out the separate functions of the chain of production.

Accepted Answer

A) True 
 B)False

Question 19

Discount Retail Corporation may be engaging in conduct that vio?lates the Sherman Act. To bring an action against the firm requires that its conduct have a sig?nificant impact on

Accepted Answer

A)  international commerce. 
B)  Internet commerce. 
C)  interstate commerce. 
D)  intrastate commerce. 
A)  international commerce. 
B)  Internet commerce. 
C)  interstate commerce. 
D)  intrastate commerce.

Question 20

Frictionless Lubricant Corporation and Grease, Inc., are the principal sup?pliers of their product in their market. They agree that Frictionless will sell exclusively to retailers and Grease will sell exclusively to wholesalers. Under antitrust law, this is most likely

Accepted Answer

A)  a per se violation. 
B)  a violation only if their competitors make similar deals. 
C)  a violation only if their customers agree to honor the deal. 
D)  not a violation. 
A)  a per se violation. 
B)  a violation only if their competitors make similar deals. 
C)  a violation only if their customers agree to honor the deal. 
D)  not a violation.

Exam 46: Antitrust Law

U.S. antitrust laws may be applied to protect foreign consumers and competitors from violations committed by U.S. business firms.

Soft Drink Corporation is charged with violating the Sherman Act through conduct subject to the rule of reason. When applying the rule of reason in this situation, a court will not consider

Big American 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 suit for violation of U.S. antitrust laws can be brought against

Golf & Tennis LLC makes and sells golf clubs, tennis racquets, and related sporting goods. By selling its products at prices substantially below the normal cost of production, Golf & Tennis hopes to drive its competitors from the market. This is

Predatory pricing is a legitimate marketing practice, not a form of anticompetitive conduct.

A joint effort by businesspersons to obtain legislative action can be exempt from the antitrust laws.

Smart Tablets, Inc., requires all distribu?tors of its products to sell them at a specified minimum price. This is a violation of antitrust law

A suit is filed against DrillBits Corporation, alleging that the firm commit?ted the offense of monopolization. To determine whether DrillBits has monopoly power requires looking at

Under what circumstances would Quality Market, a small store in Rustic, an isolated town, be considered a mo?nopoly? If Quality Market is a monopoly, is it in violation of antitrust law?

An exclusive-dealing contract is an agreement in which a seller agrees not to sell to a buyer's competitors.

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 seller is prohibited from charging different prices to competing buyers for identical goods or services.

Fine Food Company, Gourmet Cheeses, Inc., and Healthy Eats, Inc. agree to exchange information and share advertising. This trade association is

The possession of monopoly power is the only element needed to establish the offense of monopolization.

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 concentrated industry is one in which either a single firm or a small number of firms carry out the separate functions of the chain of production.

Discount Retail Corporation may be engaging in conduct that vio?lates the Sherman Act. To bring an action against the firm requires that its conduct have a sig?nificant impact on

Frictionless Lubricant Corporation and Grease, Inc., are the principal sup?pliers of their product in their market. They agree that Frictionless will sell exclusively to retailers and Grease will sell exclusively to wholesalers. Under antitrust law, this is most likely

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