Deck 9: A Managers Guide to Antitrust Policy

Question 1

For individuals, the maximum fine for a Sherman Act violation is million and the maximum prison sentence is _ years.

A)$1; 10
B)$1; 5
C)$2; 10
D)$2; 5

Answer 1

A

Question 2

If a sailboat manufacturer has an agreement with the firm that produces the sails for the sailboats, this is an example of a agreement.

A)leftward
B)rightward
C)horizontal
D)vertical

Answer 2

D

Question 3

The Antitrust Division of the Department of Justice file criminal suits and the Federal Trade Commission _ file criminal suits.

A)can; can
B)cannot; cannot
C)cannot; can
D)can; cannot

Answer 3

D

Question 4

In recent years, almost percent of managers convicted of violating the Sherman Act have gone to prison.

A)100
B)75
C)90
D)50

Question 5

Antitrust laws are laws that .

A)promote competition
B)support monopolies
C)assist firms in earning greater profit
D)create barriers to entry

Question 6

If an automobile manufacturer has an agreement with its tire supplier, this is an example of a agreement.

A)rightward
B)horizontal
C)leftward
D)vertical

Question 7

If three cell phone providers are in an agreement, this is an example of a agreement.

A)vertical
B)rightward
C)leftward
D)horizontal

Question 8

In recent years, the average prison sentence for managers convicted of violating the Sherman Act is years.

A)three
B)five
C)ten
D)two

Question 9

If two fast food pizza companies are in an agreement, this is an example of a agreement.

A)horizontal
B)vertical
C)leftward
D)rightward

Question 10

Four firms agree to operate as a monopoly and charge the monopoly price of $15 for their product and (jointly)produce the monopoly quantity of 25,000 units. If the competitive price for the product is $8, under the Clayton Act these four firms face treble damages of .

A)$525,000
B)$175,000
C)$3,000,000
D)$1,000,000

Question 11

If three paper product companies are in an agreement, this is an example of a agreement.

A)rightward
B)leftward
C)vertical
D)horizontal

Question 12

If a sailboat manufacturer has an agreement with the firm that produces the engines for the sailboats, this is an example of a agreement.

A)horizontal
B)leftward
C)rightward
D)vertical

Question 13

Four firms agree to operate as a monopoly and charge the monopoly price of $10 for their product and (jointly)produce the monopoly quantity of 50,000 units. If the competitive price for the product is $6, under the Clayton Act these four firms face treble damages of .

A)$600,000
B)$1,000,000
C)$3,000,000
D)$200,000

Question 14

To date, the longest prison sentence for violating the Sherman Act has been _ years.

A)ten
B)eight
C)two
D)five

Question 15

The Federal Trade Commission Act declares that all of the following are illegal except which one?

A)unfair methods of competition in or affecting commerce
B)unfair acts or practices in or affecting commerce
C)deceptive acts or practices in or affecting commerce
D)mergers

Question 16

All of the following are true regarding the Sherman Act except which one?

A)It addresses both monopolies are cartels.
B)It was the second major piece of antitrust legislation.
C)It condemns the act of becoming a monopoly.
D)It condemns the act of trying to become a monopoly.

Question 17

If laundry detergent companies are in an agreement, this is an example of a agreement.

A)horizontal
B)vertical
C)triple- threat
D)treble

Question 18

If three health bar companies are in an agreement, this is an example of a agreement.

A)horizontal
B)leftward
C)vertical
D)triple- threat

Question 19

Monopolies society's total surplus by producing than the efficient quantity.

A)decrease; more
B)increase; more
C)increase; less
D)decrease; less

Question 20

If an automobile manufacturer has an agreement with its air bag supplier, this is an example of a agreement.

A)leftward
B)horizontal
C)vertical
D)rightward

Question 21

Three firms agree to operate as a monopoly and charge the monopoly price of $40 for their product and (jointly)produce the monopoly quantity of 50,000 units. If the competitive price for the product is $35, under the Clayton Act these three firms face treble damages of .

A)$3,000,000
B)$750,000
C)$1,000,000
D)$250,000

Question 22

If four large commercial contractors meet and collude on the bids they are going to submit for a large government road contract, this is an example of .

A)output restrictions
B)market division
C)bid suppression
D)bid rigging

Question 23

The Sherman Act was passed in 1914.

Question 24

The Antitrust Division of the Department of Justice enforces antitrust laws through both civil and criminal suits.

Question 25

The Clayton Act was the second major piece of antitrust legislation.

Question 26

If four electronics companies agree to decrease their production of cell phones and raise the price of their cell phones to $400, this is an example of _ .

A)market division
B)bid rigging
C)price fixing
D)monopolization

Question 27

All of the following are examples of restraints of trade except which one?

A)output restrictions
B)predatory pricing
C)price fixing
D)bid rigging

Question 28

If three pizza delivery companies agree to decrease their output and raise the price of their pizzas to $15, this is an example of .

A)resale price maintenance
B)price fixing
C)market division
D)bid rigging

Question 29

All of the following are examples of restraints of trade except which one?

A)market division
B)price fixing
C)bid rigging
D)recoupment

Question 30

All of the following are examples of illegal per se activities except which one?

A)output restrictions
B)bid rigging
C)resale price maintenance
D)market division

Question 31

Actions that violate the Sherman Act can result in penalties that total substantially more than $100 million.

Question 32

The Federal Trade Commission Act and the Sherman Act were passed in the same year.

Question 33

Three firms agree to operate as a monopoly and charge the monopoly price of $40 for their product and (jointly)produce the monopoly quantity of 25,000 units. If the competitive price for the product is $10, under the Clayton Act these three firms face treble damages of .

A)$1,000,000
B)$750,000
C)$2,250,000
D)$3,000,000

Question 34

If four hair products companies agree to decrease the output of their styling products and raise the price of their styling products to $18, this is an example of .

A)price fixing
B)market division
C)resale price maintenance
D)bid rigging

Question 35

Three firms agree to operate as a monopoly and charge the monopoly price of $80 for their product and (jointly)produce the monopoly quantity of 5,000 units. If the competitive price for the product is $40, under the Clayton Act these three firms face treble damages of .

A)$200,000
B)$3,000,000
C)$1,000,000
D)$600,000

Question 36

Three firms agree to operate as a monopoly and charge the monopoly price of $100 for their product and (jointly)produce the monopoly quantity of 20,000 units. If the competitive price for the product is $35, under the Clayton Act these three firms face treble damages of .

A)$1,000,000
B)$3,000,000
C)$3,900,000
D)$1,300,000

Question 37

All of the following are examples of illegal per se activities except which one?

A)output restrictions
B)price- fixing
C)bid rigging
D)resale price maintenance

Question 38

Price fixing is an agreement among competing managers to the prices of the products they are selling or to the prices of the inputs they are buying.

A)lower; lower
B)lower; raise
C)raise; raise
D)raise; lower

Question 39

Three firms agree to operate as a monopoly and charge the monopoly price of $50 for their product and (jointly)produce the monopoly quantity of 10,000 units. If the competitive price for the product is $35, under the Clayton Act these three firms face treble damages of .

A)$450,000
B)$1,000,000
C)$150,000
D)$3,000,000

Question 40

Which of the following is determined using the rule- of- reason analysis?

A)market division
B)bid rigging
C)resale price maintenance
D)output restrictions

Question 41

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 .

A)market division
B)bid rigging
C)output restriction
D)bid suppression

Question 42

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 .

A)bid rigging
B)price fixing
C)monopolization
D)market division

Question 43

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.

A)resale price maintenance; is
B)resale price maintenance; is not
C)price fixing; is not
D)price fixing; is

Question 44

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 _.

A)market division
B)bid suppression
C)output restrictions
D)resale price maintenance

Question 45

Resale price maintenance can prevent showrooming.

Question 46

Section 2 of the Sherman Act prohibits _.

A)monopolies
B)an attempt of one firm to become a monopoly through the use of unreasonably exclusionary conduct
C)price fixing
D)market division

Question 47

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.

Question 48

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.

A)66
B)50
C)95
D)75

Question 49

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 .

A)market division
B)output restrictions
C)its reputation
D)price fixing

Question 50

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

Question 51

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 .

A)market division
B)predatory pricing
C)resale price maintenance
D)output restrictions

Question 52

Bid rigging is analogous to price fixing.

Question 53

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 _ .

A)market division
B)price fixing
C)monopolization
D)resale price maintenance

Question 54

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 .

A)market division
B)bid rigging
C)predatory pricing
D)resale price maintenance

Question 55

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.

A)75; 50
B)99; 50
C)90; 75
D)80; 60

Question 56

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 .

A)output restrictions
B)resale price maintenance
C)monopolization
D)market division

Question 57

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

Question 58

Resale price maintenance is a kind of restraint and it legal.

A)vertical; is never
B)horizontal; is never
C)vertical; can be
D)horizontal; can be

Question 59

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 .

A)bid rigging
B)price fixing
C)output restrictions
D)market division

Question 60

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

A)The plaintiff must appropriately define the defendant's product and geographic market.
B)The plaintiff must demonstrate that the defendant's success is due to unreasonable exclusionary, predatory, or other unreasonable anticompetitive conduct.
C)The plaintiff must establish that the defendant has competed on the basis of product desirability.
D)The plaintiff must establish that the defendant has a large market share.

Question 61

If Happy Cows contractually requires distributors who purchase Happy Cows' milk to also purchase Happy Cows' cream, this is an example of .

A)territorial confinement
B)a requirements contract
C)a tying arrangement
D)exclusive dealing

Question 62

All of the following are required to make a tying arrangement vulnerable to antitrust prosecution except which one?

A)There must be proof of an actual tie between two products.
B)There must be at least three products involved.
C)There must be some nontrivial amount of commerce affected by the tying contract.
D)The seller must have substantial market power in the market for the tying product.

Question 63

If a grocery store offers a five percent discount to senior citizens, this is an example of and is .

A)price discrimination; always illegal per se
B)conditional sales; always illegal per se
C)conditional sales; only illegal if the practice substantially lessens competition or tends to create a monopoly
D)price discrimination; only illegal if the practice substantially lessens competition or tends to create a monopoly

Question 64

All of the following are examples of conditional sales except which one?

A)price discrimination
B)tying arrangements
C)exclusive dealing
D)territorial confinement

Question 65

Healthy Crunch contractually requires distributors who purchase Healthy Crunch's snack bars to also purchase Healthy Crunch's breakfast cereal. The legality of the practice will be evaluated under Section of the Clayton Act.

A)2
B)3
C)7
D)8

Question 66

If Healthy Crunch contractually requires distributors who purchase Healthy Crunch's snack bars to also purchase Healthy Crunch's breakfast cereal, this is an example of .

A)a requirements contract
B)exclusive dealing
C)a tying arrangement
D)territorial confinement

Question 67

All of the following are required to make a tying arrangement vulnerable to antitrust prosecution except which one?

A)The seller must have substantial market power in the market for the tying product.
B)There must be at least two products involved.
C)There cannot be proof of an actual tie between two products.
D)There must be proof of an actual tie between two products.

Question 68

If a local dairy farm sells its ice cream to a distributor and contractually restricts the distributor from reselling the ice cream outside of the south east, this is an example of _ .

A)territorial confinement
B)exclusive dealing
C)a requirements contract
D)a tying arrangement

Question 69

If a cigarette manufacturer sells its cigarettes to a distributor and contractually restricts the distributor from reselling the cigarettes outside the state of New York, this is an example of .

A)a tying arrangement
B)a requirements contract
C)territorial confinement
D)exclusive dealing

Question 70

Conditional sales all involve the relationship between .

A)horizontal; two buyers
B)horizontal; a seller and a buyer
C)vertical; two sellers
D)vertical; a seller and a buyer

Question 71

All of the following are required to make a tying arrangement vulnerable to antitrust prosecution except which one?

A)There must be some nontrivial amount of commerce affected by the tying contract.
B)There must be at least two products involved.
C)The seller cannot have substantial market power in the market for the tying product.
D)There must be proof of an actual tie between two products.

Question 72

A company promotes a 'buy one, get one free' offer such that customers who purchase one unit of the product can get a second unit for free. The legality of the practice will be evaluated under Section of the Clayton Act.

A)3
B)8
C)7
D)2

Question 73

Happy Cows contractually requires distributors who purchase Happy Cows' milk to also purchase Happy Cows' cream. The legality of the practice will be evaluated under Section of the Clayton Act.

A)3
B)7
C)8
D)2

Question 74

Business practices affected by the Clayton Act fall into each of these categories except which one?

A)price fixing
B)conditional sales
C)mergers
D)price discrimination

Question 75

A popular shoe company has a 'buy one, get one half price' offer in which customers who purchase one pair of shoes can purchase a second pair at half price. This is an example of and is .

A)price discrimination; only illegal if the practice substantially lessens competition or tends to create a monopoly
B)conditional sales; only illegal if the practice substantially lessens competition or tends to create a monopoly
C)conditional sales; always illegal per se
D)price discrimination; always illegal per se

Question 76

Healthy Nuts contractually requires distributors who purchase Healthy Nuts' snack packs to also purchase Healthy Nuts' large- sized mixed nuts tins. The legality of the practice will be evaluated under Section of the Clayton Act.

A)8
B)7
C)2
D)3

Question 77

If Healthy Nuts contractually requires distributors who purchase Healthy Nuts' snack packs to also purchase Healthy Nuts' large- sized mixed nuts tins, this is an example of .

A)a requirements contract
B)exclusive dealing
C)a tying arrangement
D)territorial confinement

Question 78

If a company offers a discounted price to college students, the legality of the practice will be evaluated under Section of the Clayton Act.

A)2
B)3
C)8
D)7

Question 79

Mr. Shades Sunglasses promotes its 'buy one, get one half price' offer in which customers who purchase one pair of sunglasses can purchase a second pair at half price. This is an example of and is .

A)conditional sales; only illegal if the practice substantially lessens competition or tends to create a monopoly
B)conditional sales; always illegal per se
C)price discrimination; always illegal per se
D)price discrimination; only illegal if the practice substantially lessens competition or tends to create a monopoly

Question 80

If a large hardware chain offers a ten percent discount to those currently serving in the military and veterans, this is an example of _ and is .

A)price discrimination; only illegal if the practice substantially lessens competition or tends to create a monopoly
B)price discrimination; always illegal per se
C)conditional sales; only illegal if the practice substantially lessens competition or tends to create a monopoly
D)conditional sales; always illegal per se