1. Market power is the extent to which a firm can exclude competition.
1. A firm that can ignore its competitors in setting a price for its product
has no market power.
1. An agreement that fosters competition is an unreasonable restraint of
trade.
1. Any agreement between firms that has the effect of reducing
competition in the marketplace is a restraint of trade.
1. The basic purpose of antitrust law is to restrict competition.
1. Unilateral conduct cannot result in a violation of antitrust law.
1. An exclusive dealing contract is illegal per se.
1. Price discrimination occurs when a seller charges the same price
to competing buyers for identical goods or services.
1. A contract under which a seller forbids a buyer to purchase products
from the seller’s competitors is a tying arrangement.
1. The Sherman Act applies only to acts that have a significant impact on
interstate commerce.
1. Only the U.S. Department of Justice can prosecute violations of all of
the antitrust laws.
1. In a situation involving a price-fixing agreement, normally each com-
petitor is liable for the total amount of any damages.
1. 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.
antitrust laws.
1. Size alone determines whether a firm is a monopoly.
1. A firm may be a monopolist even though it is not the sole seller in a
market.
1. A firm can have monopoly power without violating antitrust law.
1. For products that are sold nationwide, there are no geographic bounda–
ries for the relevant market.
1. Any action challenged as an attempt to monopolize must have been
specifically intended to exclude competitors and garner monopoly
power.
1. There may be pro-competitive reasons for selling products below cost.
1. Monopsony power is market power on the buy side of a market.
1. 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.
1. 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.
1. 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
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.
1. 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.
1. Futuro Products, Inc., has exclusive control over the market for its
product. 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.
1. 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.
1. 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.
1. 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.
1. Health World Corporation may be engaging in conduct that violates the
Sherman Act. To bring an action against the firm requires that its con-
duct have a significant impact on
a. international commerce.
b. Internet commerce.
c. interstate commerce.
d. intrastate commerce.
1. Mango Corporation believes that Melon Corporation engages in anticom–
petitive 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.
1. 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 convince 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.
1. Industrial Coatings Corporation has exclusive control over the market 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.
1. 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.
1. 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.
1. 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.
1. A suit is filed against Urbana Corporation, alleging that the firm commit-
ted the offense of monopolization. To determine whether Urbana has
monopoly 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.
1. 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.
1. 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.
1. 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.
1. 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.
1. 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?
1. ProSports, Inc., makes and sells professional sports equipment. The
U.S. Department of Justice files a suit against ProSports, alleging 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 unreasonable restraint of
trade, and it has no intention of monopolizing the professional sports
equipment industry. What are the elements of the offense of
monopolization? Which, if any of ProSports’s defenses would be
successful against the charges filed by the U.S. Department of Justice?
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