Deck 46: Antitrust Law

Question 1

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

Answer 1

False

Question 2

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

Answer 2

True

Question 3

A horizontal merger occurs when a company at one stage of production acquires a company at a higher or lower stage of production.

Answer 3

False

Question 4

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 5

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

Question 6

A seller is prohibited from making an exclusive-dealing contract if the effect is to tend to create a monopoly.

Question 7

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

Question 8

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

Question 9

The purpose of antitrust law is to reduce competition.

Question 10

A territorial or customer restriction is currently considered a per se violation of antitrust law.

Question 11

Any agreement that restricts output among competitors is a per se violation of Section 1 of the Sherman Act.

Question 12

The relevant product market includes only products that, although produced by different firms, have identical attributes.

Question 13

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

Question 14

A horizontal restraint is any agreement that in some way restrains competition between rival firms competing in the same market.

Question 15

Any activity that substantially affects interstate commerce falls outside the scope of antitrust laws.

Question 16

A price-fixing agreement that is reasonable does not violate antitrust law.

Question 17

Attempted monopolization is a violation of antitrust law.

Question 18

A firm may be a monopolist even though it is not the sole seller in a market.

Question 19

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.

Question 20

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

Question 21

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

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 22

The Association of Organic Food Producers, 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 23

Office Warehouse Inc. and Paperclips Inc. are the chief competitors in their market. They agree that Office Warehouse will operate only east of the Mississippi River and Paperclips will operate only west of the waterway. Under antitrust law, this 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 24

Fact Pattern 46-1B (Questions B4-B5 apply)
Natural Gas, Inc., and Olio Energy Company refine and sell natural gas. To limit the supply of natural gas on the market and thereby raise prices, Natural Gas and Olio Energy agree to buy "excess" supplies from dealers and "dispose" of it.
Refer to Fact Pattern 46-1B. The agreement between Natural Gas and Olio Energy is

A) a horizontal restraint.
B) none of the choices.
C) a resale price maintenance agreement.
D) a vertical restraint.

Question 25

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

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

Question 26

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

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

Question 27

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) 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 28

Mango Corporation believes that Melon Corporation engages in anticom?peti?tive behavior in an attempt to drive Mango and its other competitors out of the market. Antitrust laws can be enforced against Melon by

A) Mango and Melon's other competitors.
B) Mango and Melon's customers.
C) any federal government agency.
D) any business with a significant impact on interstate commerce.

Question 29

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

Question 30

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

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

Question 31

Speedboat Corporation refuses to sell its products to Water World, Inc., a recreational water products dealership. This is a violation of antitrust laws if it

A) has an anticompetitive effect on a particular market.
B) results in lower prices for consumers.
C) provides no economic benefits for consumers.
D) is likely to increase competition.

Question 32

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

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

Question 33

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

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 34

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

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 35

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 36

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

Question 37

Fact Pattern 46-1B (Questions B4-B5 apply)
Natural Gas, Inc., and Olio Energy Company refine and sell natural gas. To limit the supply of natural gas on the market and thereby raise prices, Natural Gas and Olio Energy agree to buy "excess" supplies from dealers and "dispose" of it.
Refer to Fact Pattern 46-1B. The Natural Gas and Olio Energy deal is

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 38

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?

Question 39

Disc & Shoe Brakes Corporation, a brake manufacturer, sells its products to Eastside Motors, a retailer, at lower prices than it charges Fast Brake, a com?peti?tive re?tailer. This price discrimination is legal

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

Question 40

Glassworx Corporation has exclusive control over the mar?ket 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 41

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.