581
Chapter 47
Antitrust Law
N.B.: TYPE indicates that a question is new, modified, or unchanged, as follows.
N A question new to this edition of the Test Bank.
+ A question modified from the previous edition of the Test Bank.
= A question included in the previous edition of the Test Bank.
TRUE/FALSE QUESTIONS
B1. Antitrust law prohibits anticompetitive practices.
B2. Restraints that have a significant impact on interstate commerce do not violate
antitrust law.
B3. Market power is the economic power to buy what you want in a given market.
B4. A vertical restraint is any agreement that in some way restrains competition between
rival firms competing in the same market.
582 TEST BANK B—UNIT NINE: GOVERNMENT REGULATION
B5. The reasonableness of a price-fixing agreement is never a defense.
B6. A concentrated industry is one in which either a single firm or a small number of
firms control a large percentage of market sales.
B7. Resale price maintenance agreements are currently considered per se violations of
antitrust law.
B8. A firm may have a legitimate reason for imposing a territorial or customer restriction.
B9. The possession of monopoly power is only one element of the offense of
monopolization.
B10. A firm can not be a monopolist unless it is the sole seller in a market.
B11. One component of the relevant market is the geographic boundaries of the market in
which the firm and its competitors sell the product or service.
CHAPTER 47: ANTITRUST LAW 583
B12. Attempted monopolization is not a violation of antitrust law.
B13. Only serious threats of monopolization are condemned as violations of antitrust law.
B14. A seller is not prohibited from charging a lower price to one buyer than is charged to
that buyer’s competitors.
B15. A seller is prohibited from making an exclusive-dealing contract if the effect is to
substantially lessen competition.
B16. In an exclusive-dealing contract, a seller conditions the sale of a product on the
buyer’s agreement to buy another product produced by the same seller.
B17. A horizontal merger occurs when a company at one stage of production acquires a
company at a higher or lower stage of production.
B18. Only the Federal Trade Commission can prosecute violations of all of the antitrust
laws.
584 TEST BANK B—UNIT NINE: GOVERNMENT REGULATION
B19. A joint effort by businesspersons to obtain legislative action is not exempt from the
antitrust laws.
B20. Most other nations’ antitrust laws do not apply extraterritorially.
MULTIPLE CHOICE QUESTIONS
B1. 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.
B2. Enterprising Business Corporation may be engaging in conduct that violates 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.
CHAPTER 47: ANTITRUST LAW 585
Fact Pattern 47-1B (Questions B3–B4 apply)
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.
B3. Refer to Fact Pattern 47-1B. The agreement between Thermo Gas and Uno Oil to buy
“excess” supplies from dealers and “dispose” of it is
a. a horizontal restraint.
b. a refusal to deal.
c. a resale price maintenance agreement.
d. a vertical restraint.
B4. Refer to Fact Pattern 47-1B. The deal between Thermo Gas and Uno Oil is
a. a deal that neither restrains trade or 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.
B5. Cardio, Inc., makes and sells Drawdown, the most prescribed name-brand heart
medication. Emitate Corporation has the potential to make a generic version of the
same drug. Cardio pays Emitate not to sell its product. This price-fixing agreement is
most likely
a. a deal that neither restrains trade or 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.
586 TEST BANK B—UNIT NINE: GOVERNMENT REGULATION
B6. Pacific Bicycle, Inc., is the major distributor of bikes in the state of California. Pacific’s
closest competitor is Golden State Bike Company, another California firm. They agree
that Golden State will distribute bikes in northern California and Pacific will distribute
bikes in southern California. This is
a. a group boycott.
b. a market division.
c. a price-fixing agreement.
d. a tying arrangement.
B7. Red’s Sport Equipment Inc. and Sienna Athletic Company are the chief competitors in
their market. They agree that Red’s will operate only north of the Mason-Dixon line
and Sienna will operate only south of the same line. 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.
B8. Quotient Corporation and Precision Products, Inc., are the principal suppliers of their
product in their market. They agree that Quotient will sell exclusively to retailers and
Precision 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.
CHAPTER 47: ANTITRUST LAW 587
B9. The United Association of Video Game Designers, which does not include all video
game makers, 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 or 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.
B10. Gourmet Foods, Inc., requires all distributors 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.
B11. Spa Serena LLC makes and sells beauty salon supplies. By selling its product at prices
substantially below the normal cost of production, Spa Serena hopes to drive its
competitors from the market. This is
a. market power.
b. predatory pricing.
c. price discrimination.
d. price-fixing.
588 TEST BANK B—UNIT NINE: GOVERNMENT REGULATION
B12. Granite Golfballs, Inc., has the power to control the market for its product. Antitrust
law regulates
a. how Granite acquired its power and what it does with it.
b. how Granite makes its product and who buys it.
c. the degree of trust Granite has with its customers and suppliers.
d. the size of Granite’s market.
B13. Listen Up! Corporation books and promotes concerts and other entertainment events,
for which Listen Up! also sells tickets. In weighing a challenge to Listen Up!’s
“monopolistic” ticket prices, a court looks at the relevant geographic market. This
encompasses
a. only areas in which Listen Up! does not have monopoly power.
b. only areas in which Listen Up! has monopoly power.
c. the area in which Listen Up! and its competitors sell the tickets.
d. the entire United States in all cases.
B14. Master Fabrication Corporation has exclusive control over the market for its product.
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.
CHAPTER 47: ANTITRUST LAW 589
B15. Fresh Veggies, Inc., a wholesaler, refuses to sell its produce to Grocery Mart Stores,
Inc., a retailer. Under antitrust law, 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.
B16. Repair Prepare Parts Company charges different buyers different prices for identical
goods. This is
a. market power.
b. predatory pricing.
c. price discrimination.
d. price-fixing.
B17. Press Now Corporation, a disk manufacturer, sells its product in certain quantities to
Quik 2U, a retailer, for $275 but charges Rite Here, a competitive retailer, $350. 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.
590 TEST BANK B—UNIT NINE: GOVERNMENT REGULATION
B18. Excel Corporation conditions shipments of its products to Federated Stores, Inc., on
Federated’s agreement not to buy products from Gnarly Goods Company, Excel’s
competitor. This is
a. an exclusive-dealing contract.
b. a tying arrangement.
c. price discrimination.
d. price fixing.
B19. Gorgeous Eatin’ Corporation merges with Hasty Burgers, Inc. This merger between
firms that compete with each other in the same market is
a. a horizontal merger.
b. an interlocking directorate.
c. a tying arrangement.
d. a vertical merger.
B20. Energy Services Corporation engages in trade practices that may violate antitrust law.
The Federal Trade Commission has the power to act against anticompetitive behavior
under
a. Section 1 of the Sherman Act.
b. the Federal Trade Commission Act.
c. no federal law.
d. Section 2 of the Sherman Act.
ESSAY QUESTIONS
B1. Under what circumstances would Mom’s Tools & Hardware, a small store in the
middle of Nowhere, a small, isolated town, be considered a monopoly? If Mom’s is a
monopoly, is it in violation of antitrust law?
CHAPTER 47: ANTITRUST LAW 591
B2. Bubbly Bottling Company is engaged in the soft-drink bottling and distribution
industry in the states of New York and New Jersey. The firm currently has about 40
percent of the market for these products and related services. Carbonate Distribution
Corporation competes with Bubbly in the same states. Carbonate has about 35
percent of the market. If Bubbly were to acquire the stock and assets of Carbonate,
would Bubbly be in violation of any of the antitrust laws? If so, which one? Discuss
fully.