Deck 31: Antitrust Law and Promoting Competition

Question 1

Predatory pricing involves selling a product at prices substantially above the fair market value.

Answer 1

False

Question 2

For products that are sold nationwide, the relevant geographic market is the entire globe.

Answer 2

False

Question 3

Territorial and customer restrictions are judged under the rule of reason.

Answer 3

True

Question 4

A group boycott that is intended to eliminate competition is legal.

Question 5

Market power is the ability of a firm to enter a given market.

Question 6

A firm is not a monopolist unless it is the sole seller in a market.

Question 7

Unilateral conduct cannot result in a violation of antitrust law.

Question 8

Joint refusals to deal are not subject to scrutiny under the Sherman Act.

Question 9

A market division by class of customer between rival firms does not violate antitrust law.

Question 10

A trade association practice or agreement that restrains trade is analyzed under the rule of reason.

Question 11

A restraint of trade is an agreement between firms that has the effect of reducing anticompetitive business practices.

Question 12

The Sherman Act is an example of legislation designed to curb anticompetitive business practices.

Question 13

Monopoly power is an extreme amount of market power.

Question 14

An agreement that is deemed a per se violation will be examined by a court to determine whether the agreement actually constitutes a reasonable restraint of trade.

Question 15

Any agreement among competitors to fix prices is subject to evaluation under the rule of reason.

Question 16

An act must substantially affect interstate commerce to violate antitrust law.

Question 17

Resale price maintenance agreements are per se violations of the Sherman Act.

Question 18

Monopoly power may be proved by evidence that a firm used its power to control prices.

Question 19

The purpose of antitrust legislation is to foster competition.

Question 20

Section 1 of the Sherman Act condemns monopolization.

Question 21

When a small number of companies share a large part of a market, the market is concentrated.

Question 22

In determining the legality of a merger, market concentration has no significance.

Question 23

A divestiture is an order to a company to cease, or divest itself of, its anticompetitive conduct.

Question 24

Congress enacts a statute to outlaw a specific type of anticompetitive business agreement. Like other laws that regulate economic competition, this law is referred to as

A)a federal trade commission act.
B)an antitrust law.
C)an interstate commerce act.
D)a suppressive restraint on trade.

Question 25

Insurance companies are exempt from antitrust laws whenever state regulation exists.

Question 26

The U.S. Department of Justice can prosecute violations of all of the antitrust laws.

Question 27

Any conspiracy-even if it occurs outside the United States-that has a substantial effect on U.S. commerce is within the reach of the Sherman Act.

Question 28

North Mining Company and South Excavation Company agree to abide by the decisions of East Coast Financial Corporation as to their respective levels of production, markets, and prices, effectively reducing competition and increasing profits. This is most likely

A)a common, legal, time-honored type of business arrangement.
B)an illegal restraint on trade.
C)an innovative, legally efficient approach to doing business.
D)an outdated, but legal business trust.

Question 29

Any action challenged as an attempt to monopolize must have been specifically intended to exclude competitors and garner monopoly power.

Question 30

Discount Retail Corporation may be engaging in conduct that violates the Sherman Act. To bring an action against the firm requires that its conduct have a significant impact on

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

Question 31

It is in society's interest to condemn every firm that acquires a position of power.

Question 32

Labor unions can organize and bargain without violating antitrust law.

Question 33

A contract under which a seller forbids a buyer to purchase products from the seller's competitors is a tying arrangement.

Question 34

Sunrich Company can process solar energy into an inexpensive fuel for internal combustion engines. As an innovator in its market, Sunrich currently has the power to affect the price of its product. This is

A)market power.
B)predatory pricing.
C)price discrimination.
D)monopsony power.

Question 35

Size alone determines whether a firm is a monopoly.

Question 36

Thermo Gas, Inc., and Uno Oil Corporation refine and sell gasoline and other petroleum products. To limit the supply of gas on the market and thereby raise prices, Thermo Gas and Uno Oil agree to buy "excess" supplies from dealers and "dispose" of it. This is​

A) ​a deal that neither restrains trade or harms competition.
B) ​a legal restraint of trade.
C) ​a per se violation of the Sherman Act.
D) ​subject to analysis under the rule of reason.

Question 37

Price discrimination occurs when a seller charges different prices to competing buyers for identical goods or services.

Question 38

Under an exclusive-dealing contract, a seller promises a buyer a certain territory in which the buyer will have no direct competition.

Question 39

Monopoly power in and of itself constitutes the offense of monopolization.

Question 40

The Clayton Act prohibits price discrimination.

Question 41

Rugged Bikes, Inc., makes and distributes Rugged-brand bicycles and accessories to authorized dealers, including Super Sports Stores, Inc. Super Sports operates dealerships in several locations. To insulate other dealers from direct competition, Rugged Bikes imposes limits on where Super Sports can sell Rugged products. This is​

A) ​a territorial restriction.
B) ​a resale price maintenance agreement.
C) a unilateral refusal to deal.
D) a price-fixing agreement.

Question 42

Spa Selectiva Company makes and sells beauty salon supplies. By selling its product at prices substantially below the normal cost of production, Spa Selectiva hopes to drive its competitors from the market. This is​

A) ​predatory bidding.
B) ​predatory pricing.
C) ​price discrimination.
D) ​price-fixing.

Question 43

A suit is filed against AgriSeeds Corporation, alleging that the firm committed the offense of monopolization. To determine whether AgriSeeds has monopoly power requires looking at​

A) ​the company's size alone.
B) ​the marketing practices of AgriSeeds's competitors.
C) ​AgriSeeds's marketing techniques.
D) ​the relevant market.

Question 44

Pads & Pods Corporation requires all distributors of its products to sell the products at specified minimum prices. This resale price maintenance agreement is​

A) ​a per se violation of antitrust law.
B) a legal restraint of trade.
C) ​subject to evaluation under the rule of reason.
D) ​not subject to antitrust law.

Question 45

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

A) ​a deal that inherently 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 46

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​

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.

Question 47

An antitrust action is brought against Carrier Transport Company, alleging the offense of attempted monopolization. To be guilty of this offense, Carrier's attempt must have​

A) ​a dangerous probability of success.
B) ​a deadly guaranty of success.
C) ​a distant possibility of success.
D) ​a distinct improbability of success.

Question 48

Agreements that are deemed per se violations of Section 1 of the Sherman Act include all of the following except​

A) a price-fixing agreement.
B) a group boycott.
C) a trade association.
D) a market division.

Question 49

Dredgers, Inc., is the major wholesale distributor of heavy equipment in the state of Georgia. Its closest competitor is Excavators Company, another Georgia firm. The two firms agree that Excavators will operate in southern Georgia and Dredgers will operate in northern Georgia. This is​

A) ​a group boycott.
B) a market division.
C) a price-fixing agreement.
D) a tying arrangement.

Question 50

Frictionless Lubricant Corporation and Grease Inc. are the principal suppliers 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 market division is most likely​

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.

Question 51

Gearbox, Inc., a manufacturer of vehicle parts, refuses to sell to Motor Repair & Replace, Inc., a national vehicle service firm. Gearbox convinces Cam & Cylinder Company, a competitor, to do the same. This is​

A) ​a group boycott.
B) an exclusive-dealing contract.
C) ​a tying arrangement.
D) ​a market division.

Question 52

Fact Pattern 31-1
​Bodycare Corporation makes and sells ChemMed, the most prescribed name-brand blood pressure-lowering medication. Deja Vu Drugs, Inc., has the potential to make a generic version of the same drug.
Refer to Fact Pattern 31-1.Bodycare pays Deja Vu notto sell its product. This is​

A) ​a market division.
B) a refusal to deal.
C) an exclusive-dealing contract.
D) a price-fixing agreement.

Question 53

Speedee Snoboards, Inc., refuses to sell its products to Timber Mountain WinterSports Stores, Inc., a retail snowboard dealership. This is

A) ​an exclusive-dealing contract.
B) ​a territorial restriction.
C) ​attempted monopolization.
D) ​a unilateral refusal to deal.

Question 54

Fresh Vegetables, Inc., a wholesaler, refuses to sell its produce to Good Foods Marketplace, Inc., a retailer. This is​

A) ​"an unfair or deceptive act or practice."
B) ​a per se violation.
C) ​not a violation.
D) ​subject to analysis under the rule of reason.

Question 55

Fact Pattern 31-1
​Bodycare Corporation makes and sells ChemMed, the most prescribed name-brand blood pressure-lowering medication. Deja Vu Drugs, Inc., has the potential to make a generic version of the same drug.
Refer to Fact Pattern 31-1. A court would most likely rule that the agreement between Bodycare and Deja Vu is​

A) ​a deal that neither restrains trade or harms competition.
B) a legal restraint of trade.
C) a per se violation of the Sherman Act.
D) subject to analysis under the rule of reason.

Question 56

To acquire monopoly power in its market, Global Condiments, Inc., sets its prices substantially below the normal costs of production. Under antitrust law, this is​

A) ​a per se violation.
B) ​a violation if the firm's competitors set similar prices.
C) ​a violation if the firm thereby acquires monopoly power.
D) ​not a violation.

Question 57

Frozen Confections Corporation makes and sells ice cream under a variety of brand names. Frozen wants to merge with Grocers Products Company, its main competitor. In considering a challenge to the deal, a court looks at the relevant product market. This most likely includes ice cream and​

A) ​no other products.
B) ​products that are not identical but are related, such as spin-offs.
C) ​products that are reasonably interchangeable.
D) ​products with identical attributes only.

Question 58

Glassworx Corporation has exclusive control over the market for its products. Under antitrust law, this is​

A) ​a per se violation.
B) ​a violation if it acquired this power through "business judgment."
C) ​a violation if it acquired this power through "anticompetitive means."
D) ​not a violation.

Question 59

Healthcare Device, Inc., has exclusive control over the market for its product. Healthcare Device's market power is most likely​

A) ​"an unfair or deceptive act or practice."
B) ​a per se violation.
C) ​not a violation.
D) ​subject to further evaluation.

Question 60

The Association of Organic Food Growers, which does not include all organic farmers and ranchers, refuses to deal with any parties who do not carry the products of its members. This group boycott is​

A) ​a situation 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 61

Earthgrown Flora, Inc., is one of many producers of cut flowers. Earthgrown refuses to sell its products to Florist Shops Corporation. Under antitrust law, this refusal is most likely​

A) ​a per se violation.
B) ​a violation if its competitors make similar deals.
C) ​a violation if it thereby acquires monopoly power.
D) ​not a violation.

Question 62

To prevent its competitors from obtaining sufficient supplies to make their products, Continental Steel, Inc., uses its market power to increase the prices of those supplies. This is​

A) ​price discrimination.
B) ​business judgment.
C) ​predatory bidding.
D) ​predatory pricing.

Question 63

HVAC Parts Company charges different buyers different prices for identical goods. HVAC's prices are subject to evaluation under​

A) ​the Clayton Act.
B) ​the Federal Trade Commission Act.
C) ​the Sherman Act.
D) ​no antitrust law.

Question 64

Pump Makers Inc. makes pumps for fire trucks and conditions shipments of its products to Quality Motors Corporation-a maker of fire trucks-on Quality's agreement to buy additional pumps only from Pump Makers. This is​

A) ​an exclusive-dealing contract.
B) ​a tying arrangement.
C) ​price discrimination.
D) ​a group boycott.

Question 65

Domestic Oil Company joins with a foreign cartel to control the price of oil. The cartel has a substantial effect on U.S. commerce. A suit for violation of U.S. antitrust laws can be brought against​

A) ​Domestic Oil and the foreign cartel.
B) ​the foreign cartel.
C) ​Domestic Oil.
D) ​all of the choices.

Question 66

Under what circumstances would Small's Market, a little store in Rustic, an isolated town, be considered a monopoly? If Small's Market is a monopoly, is it in violation of antitrust law?​

Question 67

Clear View Corporation offers to sell its flat-panel display monitors to Best Computer & Video, Inc., only if Best agrees to buy Clear View's servicing of its products along with the monitors. This is

A) an exclusive-dealing contract.
B) ​a tying arrangement.
C) ​price discrimination.
D) ​business acumen.

Question 68

Grip-All Tires, Inc., conditions the sale of one of its products on Harvey's Service Stores agreeing to buy another of Grip-All's products. This deal is legal​

A) ​depending on its purpose and the effect on competition.
B) ​depending on production and transportation costs.
C) ​under any circumstances.
D) ​under no circumstances.

Question 69

By contract, Oil Shale Corporation forbids Petro Refining, Inc., a wholesale buyer of Oil Shale's products, from purchasing the products of its competitors. This exclusive-dealing contract is not permitted​

A) ​under any circumstances.
B) ​if its effect is to cause a competitor a loss of any business.
C) ​if its effect is to substantially lessen competition.
D) ​unless there is no effect on a competitor.

Question 70

To drive its competitors out of a certain geographic segment of its market, Drone Drives, Inc., sets the prices of its products below cost for the buyers in that area. This is​

A) ​price-fixing.
B) ​business acumen.
C) ​predatory pricing.
D) ​price discrimination.

Question 71

Precision Parts Corporation and Aligned Gears, Inc., are competitors selling certain machine parts that are otherwise generally unattainable in their geographic market. This market includes the states of Minnesota, North Dakota, and South Dakota. Precision Parts and Aligned Gears agree that Precision Parts will no longer sell in Minnesota and that Aligned Gears will no longer sell in North and South Dakota. Have Precision Parts and Aligned Gears violated any antitrust law? If so, which one? Explain. If they had divided their market by type of customer rather than geographic are, would the result be the same? Why or why not?​

Question 72

Gaucho Ranchland Supplies Corporation believes that Vaquero Stock & Equipment Corporation engages in anticompetitive behavior in an attempt to drive Gaucho, its chief competitor, out of the market. Antitrust laws can be enforced against Vaquero by​

A) ​only a disinterested third party.
B) Congress.
C) Gaucho.
D) none of the choices.