The Legal Environment of Business, 8e (Kubasek)
Chapter 24 Antitrust Laws
1) A trust is defined as a ________.
A) policy that is based solely on the goal of economic efficiency or the maximization of
consumer welfare
B) business arrangement in which owners of stocks in several companies place their securities
with trustees, who jointly manage the companies and pay the owners a specific share of their
earnings
C) policy that is based on the desirability of preserving competition to prevent the accumulation
of economic and political power, the dislocation of labor, and market inefficiency
D) business arrangement in which owners of stocks in several companies place their securities in
an account that stores earnings
2) Trusts were originally business arrangements in which owners of stocks in several companies
placed their securities in the hands of ________, who controlled and managed the companies.
A) stockholders
B) trustees
C) third party beneficiaries
D) assignees
3) ________ Oil Company used the trust arrangement to monopolize the oil industry in the late
1800s.
A) Shell
B) Standard
C) Sun
D) Texas
4) Because the ________ Act (enacted in 1890) was aimed at monopolies that called themselves
trusts, it was called a(n) ________ statute.
A) Clayton; antitrust
B) Clayton; fiduciary
C) Sherman; antitrust
D) Sherman; fiduciary
5) The formulation and enforcement of antitrust policy have been substantially affected by the
disciplines of ________ and ________.
A) economics; ethics
B) sociology; economics
C) sociology; law
D) law; economics
6) The ________ School approach to antitrust policy argues that antitrust decisions should be
based solely on the criterion of economic ________.
A) New York; fairness
B) Chicago; fairness
C) New York; efficiency
D) Chicago; efficiency
7) The Chicago School approach to antitrust policy is a ________ or ________ approach to
antitrust policy.
A) fairness; equity
B) fairness; efficiency
C) market; equity
D) market; efficiency
8) The Chicago School approach to antitrust policy argues that antitrust decisions should be
based solely on the criterion of ________ of ________ welfare.
A) maximization; stakeholder
B) maximization; consumer
C) equalization; stakeholder
D) equalization; consumer
9) The ________ School approach to antitrust policy favors the preservation of an economy
characterized by ________ buyers and sellers with little domination by anyone.
A) Harvard; many
B) Cornell; few
C) Yale; many
D) Dartmouth; few
10) The Harvard School is a(n) ________ approach to antitrust policy.
A) structural
B) centralized
C) subjective
D) efficiency-based
11) Arnold believes that U.S. firms should be allowed to enter into joint ventures with foreign
multinationals without government interference. Betty thinks that the Federal Trade Commission
should monitor such joint ventures closely. Based on this scenario, which of the following
statements is true?
A) Both subscribe to the Chicago School approach to antitrust policy.
B) Both subscribe to the Harvard School approach to antitrust policy.
C) Arnold’s views are closer to the Chicago School approach to antitrust policy.
D) Betty’s views are closer to the Chicago School approach to antitrust policy.
12) Cal believes criminal penalties for antitrust violations should be increased. Donna believes
antitrust offenses should be decriminalized. Based on the scenario, which of the following
statements can be inferred?
A) Both subscribe to the Chicago School approach to antitrust policy.
B) Both subscribe to the Harvard School approach to antitrust policy.
C) Cal’s views are closer to the Harvard School approach to antitrust policy.
D) Donna’s views are closer to the Harvard School approach to antitrust policy.
13) George believes that antitrust policy should lead to more efficient markets. Based on
George’s view, which of the following statements is true?
A) George subscribes to both the Chicago and the Harvard Schools of antitrust policy.
B) George subscribes to neither the Chicago School nor the Harvard School of antitrust policy.
C) George subscribes to the Chicago School, but not the Harvard School of antitrust policy.
D) George subscribes to the Harvard School, but not the Chicago School of antitrust policy.
14) Advocates of the antitrust goal that preserves small businesses and an economy characterized
by many sellers competing with one another would ________.
A) define consumer welfare as an improvement in the allocation of resources without an
impairment to productive efficiency
B) argue that when large companies are allowed to merge, fix prices, and participate in joint
ventures, jobs are lost and plants are shut down in some areas
C) argue that there is a direct correlation between large corporations, economic power, and
control of the political process
D) break up large corporations such as General Motors (GM), International Business Machines
(IBM), and Microsoft
15) Advocates of the ________ argue that when large companies are allowed to merge, fix
prices, and participate in joint ventures, jobs are lost and plants are shut down in some areas.
A) preservation of small businesses and an economy characterized by many sellers competing
with one another
B) prevention of concentration of political and economic power in the hands of a few sellers in
each industry
C) preservation of local control of business and protection against the effects of labor dislocation
D) promotion of the maximization of consumer welfare using market principles and efficiency
criteria
16) Which of the following antitrust provisions focuses on the unlawful selling of corporate
assets to create a monopoly?
A) Clayton Act, Section 7
B) Clayton Act, Section 2
C) Sherman Act, Section 2
D) Sherman Act, Section 1
17) Which of the following antitrust provisions focuses on monopolization and conspiracies to
monopolize?
A) Clayton Act, Section 1
B) Sherman Act, Section 2
C) Sherman Act, Section 1
D) Clayton Act, Section 2
18) The Chicago School is a market or efficiency approach to antitrust policy.
19) The Harvard School of antitrust policy favors the consolidation of wealth and power into a
few firms capable of competing with the largest foreign corporations.
20) Advocates of the promotion of the maximization of consumer welfare using market
principles and efficiency criteria define consumer welfare as an improvement in the allocation of
resources without an impairment to productive efficiency.
21) Section 1 of the Sherman Act of 1890 forbids monopolizing, attempts to monopolize, or
conspiracies to monopolize.
22) Compare and contrast the Chicago and Harvard Schools’ approaches to antitrust policy.
23) The Harvard School proponents of preserving small businesses are criticized by adherents of
the Chicago School, who favor only consumer welfare maximization. Discuss with examples.
24) Discuss the various goals of the antitrust statutes.
25) The Antitrust Division of the Justice Department has concurrent jurisdiction with the Federal
Trade Commission (FTC) to enforce the ________ Act.
A) Clayton
B) Sherman
C) FTC
D) Securities
26) Which of the following is true of the enforcement of antitrust laws?
A) Enforcement of antitrust laws is carried out only in the public sectors.
B) Enforcement of antitrust laws is carried out only in the private sectors.
C) The Antitrust Division of the Justice Department exclusively enforces the Sherman Act.
D) The Antitrust Division of the Justice Department has exclusive jurisdiction to enforce the
Federal Trade Commission Act.
27) To enforce federal antitrust law in civil cases, the U.S. Justice Department files ________.
A) an administrative action with the Federal Trade Commission (FTC)
B) suit in federal district court
C) an administrative action with the Interstate Commerce Commission (ICC)
D) suit to enforce the law through a private internal administrative action at the Justice
Department
28) A corporation convicted of criminal conduct under the Sherman Act faces a fine of up to
________.
A) $100,000 for each offense
B) $100,000 for all offenses in the aggregate
C) $10,000,000 per offense to a maximum of $100,000,000 for all offenses in aggregate
D) $100,000,000 for each offense
29) Which of the following is true of a nolo contendere plea?
A) A nolo contendere plea is an admission of guilt.
B) A nolo contendere plea subjects the defendant to a lesser punishment than would result from
conviction at a trial.
C) Like a consent decree, a nolo contendere plea need not be approved by the court.
D) A nolo contendere plea cannot be negotiated between the Justice Department and corporate or
individual criminal defendants.
30) The defending parties of civil suits, because of the cost of litigation and the attendant bad
publicity,often choose not to fight a case and instead enter into a ________.
A) consent decree
B) guilty plea
C) price-fixing clause
D) replacement order
31) Which of the following serves as an incentive to bring private actions for the enforcement of
antitrust laws?
A) fines and imprisonment
B) precedents rendered by administrative law judges
C) presidential commendations
D) triple the amount for damages and reasonable attorney fees
32) Price-fixing among competitors is a serious violation of the Sherman Act.
33) A nolo contendere plea is an admission of guilt and is treated as such by a judge.
34) A class action suit is brought by a member of a group of persons on behalf of all members of
the group.
35) Parens patriae suits are usually brought by a state attorney general on behalf of purchasers
and taxpayers in a state.
36) In the context of implied agreements established by circumstantial evidence, which of the
following are the two major problems that courts have to deal with that violate the Sherman Act?
A) intra-enterprise conspiracy and restraint of trade
B) intra-enterprise conspiracy and conscious parallelism
C) class action suits and restraint of trade
D) class action suits and conscious parallelism
37) Which of the following refers to a concerted action by two or more individuals or business
entities in violation of the Sherman Act?
A) conscious parallelism
B) collusion
C) restraint of trade
D) conspiracy
38) Which of the following refers to identical actions that are taken independently but nearly
simultaneously by two or more leading companies in an industry?
A) conscious parallelism
B) collusion
C) restraint of trade
D) conspiracy
39) Which of the following terms refers to an action that interferes with the economic law of
supply and demand?
A) conscious parallelism
B) collusion
C) restraint of trade
D) conspiracy
40) Which of the following activities is judged by the per se standard?
A) exchange of information
B) joint research and development ventures
C) group boycotts
D) vertical price and non-price restraints
41) Which of the following activities is judged by the rule-of-reason standard?
A) horizontal price-fixing
B) group boycotts
C) some divisions of markets
D) exchange of information
42) Which of the following constitutes a vertical restraint?
A) an anticompetitive agreement between two competitors
B) an exclusive-dealing contract between a manufacturer and a retailer
C) a group boycott by criminal defense attorneys seeking higher fees
D) the formation of a market division by two manufacturers
43) The courts’ major concern in cases involving vertical price-fixing has been whether the
________.
A) fixed price was reasonable to consumers
B) fixed price was in line with prices charged by competitors retailing the same product
C) retailer made the pricing decision independently or by agreement with the manufacturer
D) manufacturer could remain financially viable at the agreed price
44) A tying arrangement involves ________.
A) a seller agreeing to sell a product on condition that the purchaser buys a second product
B) two companies with similar products merging to increase their market share
C) one company purchasing another company with similar products using a hostile takeover
approach
D) a purchaser agreeing to buy a product at a “suggested retail price”
45) Landmark Oil Company has a contract with Atlas Oil Stations that requires Atlas to buy all
its oil and petroleum products from Landmark only. This is an example of a(n) ________.
A) market division contract
B) vertical price-fixing arrangement
C) tying arrangement
D) exclusive dealing contract
46) Notions Corporation holds a dominant position in the market because of its superior line of
products. In fact, it now controls 90 percent of the product market within the relevant geographic
market. Consumers are willing to pay more for Notions’ products despite the fact that a few
competitors offer similar products at substantially lower prices. If a competitor were to charge
Notions with being a monopolist under Section 2 of the Sherman Act, which of the following
statements is true?
A) The competitor’s case would fail because a monopoly is defined as a firm having no
competition.
B) The competitor’s case would fail unless it could show intent on the part of Notions to
monopolize the market.
C) The competitor’s case would succeed because Notions controls 90 percent of the product
market within the relevant geographic market.
D) The competitor’s case would succeed because Notions has attained both market power and
overwhelming market share.
47) Which of the following concepts is important in the determination of a company’s relevant
product market?
A) advertising budget
B) retail sales tax rate
C) cross-elasticity of demand
D) government spending projections
48) Courts generally have defined the geographic market as the area in which the defendant’s
firm ________.
A) competes head-on with others in the relevant product market
B) focuses the bulk of its budget on advertising
C) engages in horizontal price-fixing
D) contracts with retailers in cases involving vertical restraints
49) Restraint of trade is the action that interferes with the political laws governing an economy.
50) Non-price vertical restraints are restraints used by a manufacturer to limit the territory in
which a retailer may sell the manufacturer’s products and the number of stores the retailer can
operate, as well as the customers the retailer can serve, in a location.
51) An economic market situation in which a single business has the power to fix the price of
goods or services is called a monopoly.
52) If cross-elasticity of demand is positive, an increase in price of the alleged monopolistic
product will result in consumers’ sticking to the same product.
53) Predatory pricing is pricing below the average variable cost in order to drive out competition.