Deck 16: Legal and Regulatory Environment of the Firm

Question 1

Price fixing is the practice of one firm setting the price of a final product at a specific level.

Answer 1

False

Question 2

Exclusive dealing occurs when a firm agrees that goods sold or leased will be used only with other goods of the seller or lessor.

Answer 2

False

Question 3

Tort law pertains to:

A) acts where injuries are sustained by private parties as a result of non-performance of a duty created by law.
B) acts that are viewed as offenses against a federal, state or local government.
C) wrongful acts in breach of contracts.
D) binding agreements between two or more parties wherein one of the parties is obliged to do or refrain from doing a specific act and the obligation incurred is recognized or enforced by law.
E) laws regulating any business practices or agreements that intensify monopoly power or otherwise restrict trade.

Answer 3

A

Question 4

A tying agreement occurs when a firm agrees that goods sold or leased will be used only with other goods of the seller or lessor.

Question 5

A natural monopoly is present where economies of scale are sufficiently large that, if two or more firms were to be involved in the production of the industry output, unit costs would be higher than for a monopoly.

Question 6

Tort law deals with injuries sustained by private parties as a result of non-performance of a duty created by law.

Question 7

Torts are laws that deal with wrongful acts that are viewed as offenses against the state or government.

Question 8

A tying agreement occurs when a group of firms agrees to set the price of a final or intermediate product at a specific level.

Question 9

A consent decree is a statement of certain provisions agreed to by both an administrative agency of the United States federal government and the alleged wrongdoer named in a complaint filed with that agency.

Question 10

Criminal law deals with injuries sustained by private parties as a result of non-performance of a duty created by law.

Question 11

Criminal law pertains to acts that are viewed as offenses against a federal, state or local government.

Question 12

A contract is a binding agreement between two parties wherein one of the parties is obliged to perform a specific act and the obligation to perform that act is recognized or enforced by law.

Question 13

Price fixing is the practice of a group of firms agreeing to set the price of a final or intermediate product at a specific level.

Question 14

Contract law pertains to the establishment of contractual obligations and to wrongful acts in breach of contracts.

Question 15

In the case of public utility rate setting, one of the jobs of the regulators is to insure that privately owned utility firms earn a fair of return on its investment.

Question 16

Antitrust laws are laws regulating any business practices or agreements that intensify monopoly power or otherwise restrict trade.

Question 17

A contract is a binding agreement between two or more parties wherein one of the parties is obliged to do or refrain from doing a specific act and the obligation incurred is recognized or enforced by law.

Question 18

Criminal law pertains to:

A) acts where injuries are sustained by private parties as a result of non-performance of a duty created by law.
B) acts that are viewed as offenses against a federal, state or local government.
C) wrongful acts in breach of contracts.
D) binding agreements between two or more parties wherein one of the parties is obliged to do or refrain from doing a specific act and the obligation incurred is recognized or enforced by law.
E) laws regulating any business practices or agreements that intensify monopoly power or otherwise restrict trade.

Question 19

Exclusive dealing refers to a situation where a firm buying or leasing the goods of one firm agrees not to deal with competing suppliers.

Question 20

Contract law deals with injuries sustained by private parties as a result of non-performance of a duty created by law.

Question 21

When a firm agrees that goods sold or leased will be used only with other goods of the seller or lessor, that practice is called:

A) price fixing.
B) a tying agreement.
C) exclusive dealing.
D) a consent decree.
E) a multilateral contract.

Question 22

Firms in an industry where economies of scale are sufficiently large that if two or more firms were to be involved in the production of the industry output, unit cost would be higher than for a monopoly are called:

A) natural monopolies.
B) oligopolies.
C) purely competitive firms.
D) monopolistically competitive firms.
E) duopolies.

Question 23

In today's business environment, the largest volume of tort cases occurs in the area of:

A) contracts.
B) negligence.
C) antitrust.
D) criminal.
E) civil litigation.

Question 24

Punitive damages:

A) are always awarded in breach of contract cases.
B) are excess damages sought in order to punish the wrongdoer and are generally not awarded in breach of contract cases.
C) are excess damages sought in order to punish the wrongdoer and generally are awarded in breach of contract cases.
D) are excess damages sought in order to punish the wrongdoer and are never awarded in breach of contract cases.
E) are excess damages sought by the state or federal government in order to punish the wrongdoer.

Question 25

Anti-trust law pertains to:

A) acts where injuries are sustained by private parties as a result of non-performance of a duty created by law.
B) acts that are viewed as offenses against a federal, state or local government.
C) wrongful acts in breach of contracts.
D) laws regulating any business practices or agreements that intensify monopoly power or otherwise restrict trade.
E) binding agreements between two or more parties wherein one of the parties is obliged to do or refrain from doing a specific act and the obligation incurred is recognized or enforced by law.

Question 26

The practice of a group of firms agreeing to set the price if a final or intermediate product at a specific level is called:

A) price fixing.
B) a tying agreement.
C) exclusive dealing.
D) a consent decree.
E) a multilateral contract.

Question 27

A binding agreement between two or more parties wherein one of the parties is obliged to do or refrain from doing a specific act and the obligation incurred is recognized or enforced by law is called an):

A) tying agreement.
B) contract.
C) business practice.
D) antitrust violation.
E) consent decree.

Question 28

Laws enacted to preserve competition and prevent the concentration of economic power in one or a firms are commonly called:

A) business practice laws
B) criminal laws
C) contract laws
D) antitrust laws
E) tort laws.

Question 29

Remedies for "breach of contract" ordinarily include all of the following EXCEPT:

A) Suing for punitive damages, where excess damages are sought in order to punish the wrongdoer.
B) Rescinding the contract, where the contract is treated as discharged.
C) Suing for specific performance in cases involving the purchase of real estate.
D) Bringing an action for damages so that the injured party can be compensated for actual loss sustained.
E) Suing for specific performance in cases involving the purchase of personal property having a unique value.

Question 30

Public utility regulator's instructions to use price discrimination or block pricing is designed to:

A) allow utilities increases in the quantity of output and the firm's profit.
B) limit the profits of a utility.
C) reduce all of the prices charged by a natural monopoly like a public utility.
D) allow for more service while reducing profit of a natural monopoly.
E) assure that profit will be only normal and increase the quantity of output.

Question 31

The major determinations to be made in negligence cases include all of the following EXCEPT:

A) Was the defendant negligent?
B) If there is more than one plaintiff involved, was there contributory negligence on the part of the plaintiffs)?
C) Was there justification for the defendant's acts?
D) If there is only one plaintiff involved, was there contributory negligence on the part of the plaintiff?
E) What is the extent of the injury to the plaintiff or plaintiffs?

Question 32

When a firm buying or leasing the goods of one firm agrees not to deal with competing suppliers, that practice is called:

A) price fixing.
B) a tying agreement.
C) exclusive dealing.
D) a consent decree.
E) a multilateral contract.

Question 33

Natural monopolies are often found in the all of the following industries EXCEPT:

A) Distribution of electricity.
B) Petroleum refining and marketing.
C) Distribution of natural gas.
D) Transportation.
E) Communications.

Question 34

The major determinations to be made in negligence cases include all of the following EXCEPT:

A) Was the defendant negligent?
B) If there is more than one plaintiff involved, was there contributory negligence on the part of the plaintiffs)?
C) Was there justification for the defendant's acts?
D) If there is only one plaintiff involved, was there contributory negligence on the part of the plaintiff?
E) What is the extent of the injury to the plaintiff or plaintiffs?

Question 35

"Per se" violations of U.S. federal antitrust laws include all of the following business practices EXCEPT:

A) Price fixing.
B) Division of markets.
C) Price discrimination.
D) Tying agreements.
E) Group boycotts.

Question 36

Which of the following statements is TRUE regarding the penalties for violations of the antitrust laws?

A) For firms, fines have ranged up to $500,000 per violation.
B) Penalties for violation of the antitrust laws can be quite severe with fines ranging up to $1,000,000.
C) Prison sentences have never been used for as a remedy for individual officers and employees of firms involved in antitrust activities.
D) The cost of defending a firm in an antitrust suit is small because the government provides each firm with representation if requested.
E) The cost of antitrust lawsuits has been kept somewhat in check because the antitrust laws prohibit the imposition of treble or punitive damages.