Deck 27: Antitrust and Monopoly

Question 1

A firm that can ignore its competitors in setting a price for its product has no market power.

Answer 1

False

Question 2

In a situation involving a price-fixing agreement,normally each com?petitor is liable for the total amount of any damages.

Answer 2

True

Question 3

There may be pro-competitive reasons for selling products below cost.

Answer 3

True

Question 4

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 U.S.anti?trust laws.

Question 5

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

Question 6

Market power is the extent to which a firm can exclude competition.

Question 7

A firm can have monopoly power without violat?ing antitrust law.

Question 8

Any agreement between firms that has the effect of reducing competition in the marketplace is a restraint of trade.

Question 9

For products that are sold nationwide,there are no geographic bounda?ries for the relevant market.

Question 10

An exclusive dealing contract is illegal per se.

Question 11

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

Question 12

Unilateral conduct cannot result in a violation of antitrust law.

Question 13

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

Question 14

Price discrimination occurs when a seller charges the same price to competing buyers for identical goods or services.

Question 15

Size alone determines whether a firm is a monopoly.

Question 16

The basic purpose of antitrust law is to restrict competition.

Question 17

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

Question 18

An agreement that fosters competition is an unreasonable restraint of trade.

Question 19

The Sherman Act applies only to acts that have a significant impact on interstate commerce.

Question 20

Monopsony power is market power on the buy side of a market.

Question 21

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

A)a refusal to deal.
B)business judgment.
C)predatory bidding.
D)predatory pricing.

Question 22

Wind Turbines,Inc. ,has the power to control the market for its prod?uct.Antitrust law regulates

A)how Alpha acquired its power and what it does with it.
B)neither how Alpha acquired its power nor what it does with it.
C)only how Alpha acquired its power.
D)only what Alpha does with its power.

Question 23

Midwest Agri-Products Corporation offers to sell its sugar substitute to Nice Candies,Inc. ,only if Nice Candies agrees to buy all the corn it needs from Midwest Agri-Products,even though there are other corn sellers from whom Nice Candies could buy.This is

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

Question 24

Industrial Coatings Corporation has exclusive control over the mar?ket for its product.Under the Sherman Act,this is

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

Question 25

Rally Speedboat Corporation refuses to sell its products to Super Weekends,Inc. ,a recreational water products dealership.This is

A)a group boycott.
B)a horizontal market division.
C)attempted monopolization.
D)a unilateral refusal to deal.

Question 26

An antitrust action is brought against Tri-State Transport Company,al?leging the offense of attempted monopolization.To be guilty of this of?fense,Tri-State'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 27

A suit is filed against Urbana Corporation,alleging that the firm com?mit?ted the offense of monopolization.To determine whether Urbana has mo?nopoly power requires looking at

A)the company's size alone.
B)business ethics and corporate gamesmanship.
C)production methods and marketing techniques.
D)the relevant geographic market and the relevant product market.

Question 28

Diners Cafe and Eatery,Inc. ,are competing restaurants in Freetown.Good Food,Inc. ,plans to open a restaurant in Freetown.Diners and Eatery pool their efforts and con?vince the Freetown City Council to adopt zoning restrictions that make it difficult for others to open restau?rants.Good Food can

A)not sue Diners and Eatery for antitrust violations.
B)obtain just compensation from Diners and Eatery.
C)sue Diners and Eatery for antitrust violations.
D)sue the Freetown City Council for antitrust violations.

Question 29

To drive its competitors out of a certain geographic segment of its mar?ket,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)business acumen.
C)predatory bidding.
D)price discrimination.

Question 30

Jett Fuel Corporation conditions future shipments of its products to Kondor Airlines,Inc. ,on Kondor's agreement not to buy products from Lite Kerosene Company,Jett's competitor.This is

A)a tying arrangement.
B)exclusive dealing.
C)price discrimination.
D)price fixing.

Question 31

To acquire monopoly power in its market,Pure Plastics,Inc. ,sets its prices substantially below the normal costs of production.Under anti?trust law,this is

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 32

Futuro Products,Inc. ,has exclusive control over the market for its prod?uct.Futuro's market power is subject to evaluation under

A)the Clayton Act.
B)the Federal Trade Commission Act.
C)the Interstate Commerce Act.
D)the Sherman Act.

Question 33

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

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

Question 34

North Mining Company and South Excavation Company agree to abide by the decisions of East Coast Financial Corporation as to their respec?tive levels of production,markets,and prices,effectively reducing compe?tition 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 35

The impetus for federal antitrust legislation was concern that in par?ticular markets a single,dominant firm such as Microsoft Corporation could use its market power to

A)attain or set political or cultural goals.
B)dictate or influence prices or output.
C)improve its products or invent and market new products.
D)sell more than its competitors.

Question 36

International Products,Inc.(ICI),has exclusive control over the market for its product.ICI's market power is most likely

A)a situation that neither restrains trade or harms competition.
B)a legal restraint of trade.
C)a per se violation of antitrust law.
D)subject to further evaluation.

Question 37

Helio Company can process hydrogen into an inexpensive fuel for inter?nal combustion engines.As an innovator in its market,Helio currently has the power to affect the price of its product.This is

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

Question 38

Seaside Cannery,Inc. ,is one of many producers of canned seafood.Seaside refuses to sell its products to Port Harbor Restaurant 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 39

Rainey sells his Solar Bike Shop to Thelma and promises not to open a competing business within a five-mile radius for five years.The promise is

A)enforceable,because it was given to facilitate the sale of the business.
B)enforceable,because the parties freely agreed to it.
C)unenforceable,because it is a restraint of trade.
D)unenforceable,because it is too broad.

Question 40

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

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

Question 41

ProSports,Inc. ,makes and sells professional sports equipment.The U.S.Department of Justice files a suit against ProSports,al?leging that it has committed the offense of monopolization under the Sherman Act.ProSports responds that its share of the relevant market is less than 50 percent,its activities do not constitute an unrea?sonable restraint of trade,and it has no intention of monopolizing the pro?fessional sports equipment industry.What are the elements of the offense of monopoliza?tion? Which,if any of ProSports's defenses would be successful against the charges filed by the U.S.Department of Justice?

Question 42

Rapido Pizza,Inc. ,is a close corporation with only two shareholders,Sunny and Tomas.Rapido is in the pizza-delivery business.Two other such firms serve the same market,but Rapido controls a 75 percent share.Sunny and Tomas agree that Tomas will buy all of Sunny's Rapido shares.As a condition of the transaction,Sunny agrees not to open a competing pizza-delivery business within a seventy-mile radius or become employed by any rival firm within the same designated area.The covenant is to last five years.Is this an unreasonable restraint of trade? Would a court likely declare unenforceable Sunny's promise not to compete?