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1. The Sherman Act was designed to prevent extreme concentrations of economic power.
a.
True
b.
False
2. Both per se and rule of reason violations of the Sherman Act are automatically illegal.
a.
True
b.
False
3. The Clayton Act was passed in part because the courts were not enforcing the Sherman Act as strictly as it had
intended.
a.
True
b.
False
4. For the first 70 years after the Sherman Act was enacted, most scholars and judges took the view that large
concentrations of economic power were suspect even if they had no obvious impact on competition itself.
a.
True
b.
False
5. The FTC blocked the merger of Staples, Inc. and Office Depot because they controlled a large percentage of the
national market for office supplies.
a.
True
b.
False
6. A vertical merger involves companies at different stages of the production process.
a.
True
b.
False
7. The Clayton Act prohibits anti-competitive mergers.
a.
True
b.
False
8. Per se violations are subject to both civil and criminal penalties.
a.
True
b.
False
9. Both the Justice Department and the Federal Trade Commission have the authority to enforce antitrust laws.
a.
True
b.
False
10. Adherents of the Post Chicago School use an antitrust analysis based solely on whether competition has been harmed.
a.
True
b.
False
11. Gary, Louise, and Brian, who own competing gas stations in town, happen to see each other at a restaurant one
morning and have breakfast together. While talking, they decide to set their gas prices at the same amount. They have
committed an illegal act only if the agreed price is unfair to consumers.
a.
True
b.
False
12. Companies with substantial assets must notify the FTC before consummating a merger.
a.
True
b.
False
13. Reciprocal dealing is a type of vertical cooperative strategy.
a.
True
b.
False
14. Predatory pricing occurs when a company lowers its prices below cost to drive competitors out of business.
a.
True
b.
False
15. Under modern antitrust law analysis, a company with a market share between 70 and 90 percent has a monopoly.
a.
True
b.
False
16. An advocate of the Chicago School's position on antitrust legislation would ask which of the following questions?
a.
"Has a competitor been harmed?"
b.
"Has competition been harmed?"
c.
"Will competitors be allowed to freely enter the market?"
d.
"Will interstate commerce be affected?"
17. Horizontal cooperative strategies would include all EXCEPT
a.
market division.
b.
price fixing.
c.
reciprocal dealing.
d.
bid-rigging.
18. The Clayton Act was enacted
a.
because the courts were too strict in their enforcement of the Sherman Act.
b.
to clarify the provisions of the Sherman Act.
c.
to eliminate price discrimination that reduced competition.
d.
to allow the FTC to enforce antitrust laws.
19. If a company has violated antitrust laws,
a.
the Justice Department can initiate only noncriminal charges against the violator.
b.
the Federal Trade Commission may file criminal proceedings against the violator.
c.
any private person or company that has been harmed by the violator can file a lawsuit to recover damages.
d.
both the Justice Department and the Federal Trade Commission can bring criminal proceedings.
20. The most accurate statement about the Robinson-Patman Act is
a.
It has rarely been enforced in recent years.
b.
The U.S. government has stepped up its enforcement during the last decade.
c.
It has been declared unconstitutional.
d.
It was repealed by Congress in 1998.
21. A person injured by an antitrust violation
a.
does not have the right to bring suit.
b.
has the right to sue for criminal penalties.
c.
has the right to sue for triple damages.
d.
has the right to sue for administrative remedies.
22. Gorhan Construction, Brighton Bros., and Tirenn Construction agreed that on three upcoming projects, Gorhan would
bid lowest on one, Brighton would submit the lowest bid on the second project, and Tirenn would submit the lowest bid
on the third project. In this way, they would each be assured of work for the upcoming season. This behavior
a.
is legal and acceptable practice in the construction industry to spread work more evenly.
b.
is a per se violation of the Sherman Act.
c.
is a rule of reason violation of the Sherman Act.
d.
violates ethical, but not legal, standards.
23. If competitors act in concert but without an explicit agreement, they are engaged in
a.
a tying arrangement.
b.
monopolization.
c.
reciprocal dealing.
d.
conscious parallelism.
24. Ed was an independent owner of a chain of TV stores. He successfully got customers into his store by cutting his
prices on widely advertised name-brand products in order to sell other products for which he received a bigger profit.
When the manufacturers of three of the name-brand products discovered Ed's actions, they agreed secretly to stop selling
him their TVs. The three manufacturers
a.
are doing nothing illegal, as they did not get Ed to agree to anything.
b.
are free to agree not to deal with Ed since the public can go elsewhere and will not be hurt economically.
c.
can choose either as a group to deal or not to deal with any retailer they want.
d.
are engaged in a rule of reason violation of the antitrust laws if their action harms competition.
25. A vertical allocation of customers or territory
a.
is a per se violation of Section 1 of the Sherman Act.
b.
is a rule of reason violation of the Sherman Act.
c.
is not a violation of the Sherman Act.
d.
is illegal if it adversely affects one party over the other.
26. An agreement to sell a product on the condition that a buyer also purchases another, usually less desirable, product is
referred to as
a.
a tying arrangement.
b.
price fixing.
c.
resale price maintenance.
d.
market division.
27. A refusal to deal
a.
is a right to decide with whom to do or not to do business and cannot be legally limited.
b.
is a rule of reason violation of the Sherman Act and is illegal if it harms competition.
c.
is an agreement in which a buyer refuses to purchase goods from a supplier unless the supplier also purchases
items from the buyer.
d.
occurs when a manager refuses to recognize that price-fixing is a problem.
28. What law prohibits mergers that are anti-competitive?
a.
Sherman Act
b.
Clayton Act
c.
Robinson-Patman Act
d.
Radmon Act
29. Pat's Pen Co. manufacturers and sells an inexpensive ball-point pen. Salley's Stationery purchases the pens for $.25
each in quantities of 1,000. Salley's discovered that a national chain, a competitor of Salley's, buys the pen at $.20 for
1,000. If Salley's Stationery sues Pat's Pen Co. for price discrimination
a.
Pat's Pen Co. will win if it can prove that it has been selling to the national chain continuously at the cheaper
rate.
b.
Pat's Pen Co. will win if it can prove that it did not intend to economically harm Salley's Stationery.
c.
Salley's Stationery will win if it can prove price discrimination occured and that it lessened competition.
d.
Salley's Stationery will win since price discrimination is a per se violation with no real defenses.
30. Exclusive dealing contracts, if they have an anticompetitive effect, are illegal under the
a.
Sherman Act only.
b.
Clayton Act only,
c.
Sherman Act and Clayton Act.
d.
Sherman Act, Clayton Act, and Robinson-Patman Act.
31. The traditional formula for determining damages for a violation of the Robinson-Patman Act was to
a.
calculate the estimated amount of lost profits.
b.
determine the difference between the two prices and multiply the difference by the number of units purchased.
c.
allow a jury to determine the amount of punitive damages without using any particular formula.
d.
add both prices together and divide by the number of units purchased.
32. Assume that three automobile manufacturers all merged into one car company. Such a merger would be a
a.
vertical merger.
b.
vertical cooperative arrangement merger.
c.
horizontal merger.
d.
intracompetitive merger.
33. A major motion picture distributor offers to provide a television station with three very popular, desirable films.
However, as part of the agreement, the distributor requires that the television station also purchase four films that are not
very desirable. This type of arrangement is called a
a.
reciprocal dealing agreement.
b.
reverter arrangement.
c.
joint custody arrangement.
d.
tying arrangement.
34. What is the Justice Department's current position relative to reciprocal dealing agreements?
a.
The Justice Department actively enforces this illegal activity.
b.
The Justice Department is only concerned about these agreements if a large, national company is involved.
c.
The Justice Department only gets involved if such an agreement will foreclose a significant share of the
market and if the participants agreed not to buy from other competitors.
d.
The Justice Department only gets involved if such an agreement is "decidedly uneven" meaning that one
company benefits significantly more than the other.
35. Two universities located within 30 miles of each other agree to allocate their customers so as to help them both. The
two schools draw a line down a map and each university agrees to accept students only on their side of the line. What type
of horizontal cooperative strategy does this represent?
a.
Market division
b.
Refusal to deal
c.
Reciprocal dealing
d.
Joint venture
36. What type of collusion does the Supreme Court refer to as "the supreme evil of antitrust"?
a.
Price fixing
b.
Reciprocal dealing
c.
Price discrimination
d.
Vertical mergers
37. Cooperative strategies include all EXCEPT
a.
horizontal agreements.
b.
vertical agreements.
c.
mergers.
d.
spin-offs.
38. A monopoly is illegal
a.
under any circumstances, under Section 2 of the Sherman Act.
b.
only if it is gained or maintained by using wrongful tactics.
c.
if you have greater than 50 percent of market share.
d.
any time there are no interchangeable products.
39. John D. Rockefeller’s oil business was the main reason which legislation was enacted?
a.
Sherman Act
b.
Robinson-Patman Act
c.
Clayton Act
d.
Chicago School Act
40. Explain horizontal price-fixing and vertical minimum and maximum price-fixing. Discuss their status under antitrust
laws.
41. Smalltown has two family-owned hardware stores that have been in business for years. Major Hardware decides that
Smalltown would be a good place to build one of its superstores. Major opens, advertising unbelievably low prices; in
fact, at below cost. Because Major owns stores nationally, it is able to keep prices extremely low until both of the family-
owned stores have to go out of business because they cannot compete. After Major is the only hardware store in town, it
raises its prices enough to make up for its former losses and to make some additional profit. Discuss this behavior in
relation to antitrust law.
42. Explain the overall purposes of the Sherman Antitrust Act, the Clayton Act, and the Robinson-Patman Act. How do
each of these Acts relate to each other?
43. The chain of Mega Hardware stores agreed with Lock Tight Manufacturing not to carry any brand of locks and door
handles other than those manufactured by Lock Tight. Mighty Lock threatened to sue for antitrust violations. On what
basis and under what statute(s) would Mighty Lock sue?
44. Discuss when monopoly power is not a violation of Section 2 of the Sherman Act.
45. Violations of antitrust law are either per se violations or rule of reason violations. What are the differences between
these two types of violations? Give examples of each.
