Chapter 16

Question 1

1) Trusts are a legal arrangement in which a fiduciary __________.

A) forfeits his or her title to property
B) benefits from the profits of a company
C) acts as a bailor to another
D) provides financial support to another
E) holds legal title to property for benefit of another

Answer 1

E) holds legal title to property for benefit of another

Question 2

2) Which of the following statements accurately describes antitrust laws?

A) They allow a trustee to control operations and policy for a group of companies.
B) They are intended to promote and regulate trusts.
C) They make our economic system less competitive and more stable.
D) They are intended to create workable competition.
E) They allow the same types of businesses to unite and eliminate competition among themselves

Answer 2

D) They are intended to create workable competition.

Question 3

3) Regarding state governments’ enforcement of antitrust laws, which of the following statements is true?

A) States have not enacted antitrust laws that cover both products and services.
B) A state attorney general may bring criminal suits for damages under the Sherman Act.
C) A state attorney general may bring civil suits for damages under the Sherman Act.
D) A state high court may allow a company to fix its price as long as the price is low.
E) State governments prohibit private parties from bringing civil suits to enforce antitrust laws.

Answer 3

C) A state attorney general may bring civil suits for damages under the Sherman Act.

Question 4

4) In 1914, Congress, recognizing that the Sherman Act needed to be more specific, enacted the __________ as an amendment to the Sherman Act.

A) Clayton Act
B) Fair Credit Billing Act
C) Securities Act
D) Truth in Lending Act
E) Robinson-Patman Act

Answer 4

A) Clayton Act

Question 5

5) The federal government enforces antitrust laws through two agencies, the __________ and the __________ .

A) Treasury Department; U.S. Supreme Court
B) Department of Justice; Federal Trade Commission
C) Federal Trade Commission; Department of Labor
D) U.S. Supreme Court; Department of Revenue and Taxation
E) Department of Labor; U.S. Supreme Court

Answer 5

B) Department of Justice; Federal Trade Commission

Question 6

6) The __________ holds that contracts or conspiracies in restraint of trade are illegal only if they constituted undue or unreasonable restraints of trade and that only unreasonable attempts to monopolize are covered by the Sherman Act.

A) rule of per se illegality
B) Parker v. Brown doctrine
C) rule of reason
D) duty-to-deal doctrine
E) Ker-Frisbie doctrine

Answer 6

C) rule of reason

Question 7

7) The Bike Shop and Road Warriors are fierce competitors in the national bike market. They compete in everything from parts to clothing to bicycles. Due to decreasing sales, the companies make an agreement to share product information and pricing to ensure that their market contains similar items at similar prices lower than their competitors. This action is most likely to be considered a __________.

A) licensing agreement violating the Clayton Act
B) reciprocal dealing agreement violating the Clayton Act
C) vertical agreement in violation of the Sherman Act
D) horizontal agreement in violation of the Sherman Act
E) tying agreement in violation of the Clayton Act

Answer 7

D) horizontal agreement in violation of the Sherman Act

Question 8

8) Louise Bouton, a designer and manufacturer, sells luxury shoes to stores across the nation including Lordstorms. Louise entered into a contract with Lordstorms to price her shoes higher than any other shoes in the store and forced Lordstorms to lower the prices of similar luxury shoes. If a competitor files suit, they would most likely allege that Louise and Lordstorms engaged in a __________.

A) licensing agreement violating the Clayton Act
B) reciprocal dealing agreement violating the Clayton Act
C) vertical agreement in violation of the Sherman Act
D) horizontal agreement in violation of the Sherman Act
E) tying agreement in violation of the Clayton Act

Answer 8

C) vertical agreement in violation of the Sherman Act

Question 9

9) The president of a bottling company agreed with a competitor to stop giving discounts to retailers, which earned him a jail sentence. Which of the following is indicated in this scenario?

A) Variable pricing
B) Product bundling
C) Mixed-leader bundling
D) Predatory conduct
E) Horizontal price fixing

Answer 9

E) Horizontal price fixing

Question 10

10) Resale price maintenance is also known as __________.

A) linear price fixing
B) vertical price fixing
C) horizontal price fixing
D) resale price maintenance
E) express price fixing

Answer 10

B) vertical price fixing

Question 11

11) The use of ethical standards to avoid restrictions on price fixing is __________.

A) a violation of the Sherman Act
B) illegal per se under the Clayton Act
C) legal as long as relative-value scales are used
D) legal for services
E) only allowed for healthcare products

Answer 11

A) a violation of the Sherman Act

Question 12

12) Under the Sherman Act, which of the following is true?

A) An action is not considered to be price fixing if the prices fixed are fair or reasonable.
B) The Sherman Act covers only goods, including those created by trade professionals.
C) The Sherman Act applies to both the sale of goods and the sale of services.
D) Price fixing in the service sector is permitted under the Sherman Act.
E) Maximum-price agreements are illegal, while minimum-price agreements are not illegal.

Answer 12

C) The Sherman Act applies to both the sale of goods and the sale of services.

Question 13

13) Attempts by manufacturers to control the ultimate retail price for their products are known as __________.

A) transfer price fixing
B) vertical price fixing
C) lateral price fixing
D) congestion price fixing
E) rational price fixing

Answer 13

B) vertical price fixing

Question 14

14) Under the Colgate doctrine, the Supreme Court recognizes that __________.

A) individuals are allowed to engage in horizontal price fixing
B) a franchisor can require that franchisees purchase all of its equipment and inventory
C) resale price maintenance is illegal
D) individuals are allowed to engage in horizontal price fixing for provision of services
E) manufacturers can announce their prices and refuse to deal with those who fail to comply

Answer 14

E) manufacturers can announce their prices and refuse to deal with those who fail to comply

Question 15

15) For the purpose of giving each an exclusive territory, competing businesses may enter into a __________ territorial agreement.

A) bilateral
B) vertical
C) horizontal
D) competitive
E) congeneric

Answer 15

C) horizontal

Question 16

16) A __________ territorial agreement assigns the dealer an exclusive territory and the manufacturer agrees not to sell to other dealers in that territory in exchange for an agreement by the dealer that it will not operate outside the area assigned.

A) vertical
B) conglomerate
C) congeneric
D) tying
E) per se

Answer 16

A) vertical

Question 17

17) Which of the following is a violation of the Sherman Act?

A) Market extension mergers between companies from different fields
B) Conglomerate mergers between small companies
C) Price fixing agreements between large companies
D) Gaining a monopoly through the use of franchising agreements
E) Gaining a monopoly through the use of patent technology

Answer 17

C) Price fixing agreements between large companies

Question 18

18) When competitors attempt to share some activities or join together in the performance of a function, they are performing __________ activities.

A) derivative
B) appellate
C) preemptive
D) arbitrated
E) concerted

Answer 18

E) concerted

Question 19

19) Which of the following statements is true of concerted activities?

A) They are illegal as they are never beneficial to the society.
B) They are only legal if a firm has monopoly power.
C) They are often beneficial to society even though they reduce competition.
D) They are only legal when firms have a vertical territorial agreement.
E) They are performed by state governments to restrict monopolization.

Answer 19

C) They are often beneficial to society even though they reduce competition.

Question 20

20) In __________ pricing, the price of goods and services is limited to levels that tend to discourage new entry to markets.

A) congestion
B) exemption
C) limit
D) per se
E) variable

Answer 20

A) congestion

Question 21

21) To prove deliberate conduct to create predatory pricing, there must be proof that __________.

A) the prices were intended to drive competitors out of business followed by the wrongdoer recouping the initial losses
B) a buyer had other options in the same product line which were available in different price ranges
C) the buyers were willing to buy a product at the seller’s prices despite having a wide range of options
D) the seller was selling the product at a price above the cost price
E) the prices were higher than those of all competitors within the same product group

Answer 21

A) the prices were intended to drive competitors out of business followed by the wrongdoer recouping the initial losses

Question 22

22) Backpack designers Lily and Rose have designed a new travel backpack. This backpack is manufactured and sold by their company, Mountain Gear. The backpack they devised uses new technology that they created, and their backpack far exceeds the capabilities of any current backpack. This gives them a monopoly in the backpack market. Which of the following statements is true in this scenario?

A) Mountain Gear has monopoly power that violates the Clayton Act but not the Sherman Act.
B) Mountain Gear has monopoly power that does not violate the Sherman Act.
C) Mountain Gear is guilty of monopoly that violates both the Clayton and Sherman Act.
D) Mountain Gear is guilty of engaging in predatory conduct.
E) Mountain Gear has monopoly power that violates the Sherman Act.

Answer 22

B) Mountain Gear has monopoly power that does not violate the Sherman Act.

Question 23

23) Sara’s Steel merged with other steel companies to create the firm Solo Steel, which has 85% of the virgin steel market. This merger gives the consumer few or no substitutes when choosing to purchase steel and gives Solo Steel a monopoly in the virgin steel market. Which of the following statements is true in this scenario?

A) Solo Steel has monopoly power that violates the Clayton Act but not the Sherman Act.
B) Solo Steel has monopoly power that does not violate the Sherman Act.
C) Solo Steel is guilty of monopoly that violates both the Clayton and Sherman Act.
D) Solo Steel is guilty of engaging in predatory conduct.
E) Solo Steel has monopoly power that violates the Sherman Act.

Answer 23

E) Solo Steel has monopoly power that violates the Sherman Act.

Question 24

24) Which of the following statements is true of monopoly power?

A) Mere possession of monopoly power violates Section 1 of the Sherman Act.
B) If monopoly power is thrust upon a firm, there is a violation Section 2 of the Sherman Act.
C) Monopoly power, which exists because of a patent or franchise, violates the Clayton Act.
D) If a firm engages in conduct that has the effect of extending its monopoly power, it does not violate the Sherman Act.
E) Proof of monopoly power alone is insufficient to qualify as a violation of the Sherman Act.

Answer 24

E) Proof of monopoly power alone is insufficient to qualify as a violation of the Sherman Act.

Question 25

25) __________ pricing takes place when a seller sells at below cost to drive out a competitor.

A) Transfer
B) Translational
C) Congestion
D) Predatory
E) Psychological

Answer 25

D) Predatory

Question 26

26) Which of the following statements is true about the sanctions of the Sherman Act?

A) Its sanctions are only civil punishments and not criminal punishments.
B) Crimes under the Sherman Act are misdemeanors.
C) Injured parties may collect a maximum of double damages.
D) The Sherman Act prevents courts from granting injunctions to prevent violations.
E) Violations may be subject to both criminal fines and imprisonment.

Answer 26

E) Violations may be subject to both criminal fines and imprisonment.

Question 27

27) An individual found guilty under the Sherman Act may be imprisoned up to __________.

A) 5 years
B) 10 years
C) 15 years
D) 25 years
E) 0 years, as only fines are permitted for individuals

Answer 27

B) 10 years

Question 28

28) A corporation found guilty under the Sherman Act may be fined up to __________ for each offense.

A) $10 million
B) $1 million
C) $100 million
D) $500 million
E) $300 million

Answer 28

C) $100 million

Question 29

29) Which of the following statements is true of the triple damages awarded to the injured parties under the Sherman Act?

A) Triple damages apply only to individuals, and not corporations or larger institutions.
B) The government cannot directly or indirectly receive triple damages.
C) Triple damages are only meant to compensate a plaintiff for actual injury.
D) Only injured members of the general public can enforce the law.
E) Legislation allows both federal and state governments to file a suit for triple damages.

Answer 29

E) Legislation allows both federal and state governments to file a suit for triple damages.

Question 30

30) When a state acts in its sovereign capacity, __________.

A) it is immune from federal antitrust scrutiny
B) it can legalize bribery
C) it can force defendants to civil suits to enter a plea of nolo contendere
D) it is liable for triple damages
E) it has the right to forgive corporations for violations of the Clayton Act

Answer 30

A) it is immune from federal antitrust scrutiny

Question 31

31) Parker v. Brown doctrine is based on the reasoning that __________.

A) individuals cannot be fined for violations of the Sherman Act
B) concerted efforts to lobby government officials are not anticompetitive
C) the Sherman Act does not apply to state governments
D) not all independent actions by a manufacturer are per se violation of the Sherman Act
E) only unreasonable attempts to monopolize a market were covered by the Sherman Act

Answer 31

C) the Sherman Act does not apply to state governments

Question 32

32) In a 1943 case known as Parker v. Brown, the Supreme Court created a __________ exception to the Sherman Act.

A) limited liability
B) double tax
C) general action
D) merger monopoly
E) state action

Answer 32

E) state action

Question 33

33) Which of the following is an exemption from the Sherman Act that extends to concerted efforts to lobby government officials?

A) Noerr-Pennington doctrine
B) Quick look doctrine
C) State action doctrine
D) Per se illegality doctrine
E) Doctrine of inherency

Answer 33

A) Noerr-Pennington doctrine

Question 34

34) In the context of antitrust sanctions, liability for triple-damages suits is based on __________law and is said to be joint and several.

A) corporate
B) tax
C) criminal
D) tort
E) antitrust

Answer 34

D) tort

Question 35

35) To avoid the impact of a guilty plea or a conviction on a pending civil antitrust suit, a criminally accused defendant is most likely to plead __________.

A) nolo contendere
B) stare decisis
C) voir dire
D) res judicata
E) obiter dicta

Answer 35

A) nolo contendere

Question 36

36) Which of the following is true of the Clayton Act?

A) The Clayton Act permits price fixing.
B) The Clayton Act allows companies to extend their monopoly power.
C) The Clayton Act allows a plaintiff to collect three times the damages suffered.
D) The original Clayton Act contained sanctions for forfeiture of property.
E) The original Clayton Act did not allow individuals to obtain injunctive relief.

Answer 36

C) The Clayton Act allows a plaintiff to collect three times the damages suffered.

Question 37

37) In 1976, the Hart-Scott-Rodino Antitrust Improvements Act was passed to provide for __________.

A) premerger notification
B) reciprocal dealing
C) merger extension rights
D) post-merger bailout
E) full-line forcing

Answer 37

A) premerger notification

Question 38

38) The __________ attempted to eliminate the advantage that a large buyer could secure over a small buyer solely because of the larger buyer’s quantity-purchasing ability.

A) monopoly leveraging
B) buy and sell amendment
C) Wheeler-Lea amendment
D) Parker v. Brown doctrine
E) Robinson-Patman amendment

Answer 38

E) Robinson-Patman amendment

Question 39

39) The __________ makes it a crime for a seller to sell at lower prices in one geographic area than elsewhere in the United States to eliminate competition or a competitor.

A) Robinson-Patman amendment
B) Federal Trade Commission Act
C) Free Exercise Act
D) Wheeler-Lea amendment
E) Gramm-Rudman-Hollings Act

Answer 39

A) Robinson-Patman amendment

Question 40

40) Sifco Incorporated, a tire manufacturing company, stipulates that Rambox Corporation should buy its entire line of Roadgrip tires. Sifco has significant market power in a particular variety of Roadgrip tires for which no substitute is available in the market. It uses this power to its advantage and does not agree to let Rambox buy less than the entire line of Roadgrip tires. The sales contract between Sifco and Rambox is an example of a __________.

A) tying arrangement
B) reciprocal dealing arrangement
C) rescission contract
D) premerger arrangement
E) justification contract

Answer 40

A) tying arrangement

Question 41

41) Which of the following statements is true of the good-faith meeting-of-competition defense as permitted by the Robinson-Patman amendment?

A) It applies when sellers select their own customers in good faith and not in restraint of trade.
B) It applies when there are price differentials based on differences in the cost of manufacture, sale, or delivery of commodities.
C) It applies to a situation that involves the setting up of barriers to market entry around a product, brand, product line, market, or market segment.
D) It applies when a seller in good faith meets the equally low price of a competitor.
E) It applies when price changes are made in response to changing conditions, such as sales in good faith in discontinuance of business in the goods concerned.

Answer 41

D) It applies when a seller in good faith meets the equally low price of a competitor.

Question 42

42) The __________ permits price differentials based on differences in the cost of manufacture, sale, or delivery of commodities and is recognized by the Robinson-Patman amendment.

A) good-faith meeting-of-competition defense
B) mobile defense
C) cost justification defense
D) changing conditions defense
E) position defense

Answer 42

C) cost justification defense

Question 43

43) The Robinson-Patman amendment gives the Federal Trade Commission (FTC) jurisdiction and authority to __________.

A) control production amounts
B) regulate the retail price of products
C) regulate quantity discounts
D) control market share
E) enforce trade bans

Answer 43

C) regulate quantity discounts

Question 44

44) A __________ is one in which a product is sold or leased only on the condition that a buyer or lessee purchase a different product or service from a seller or lessor.

A) executory contract
B) exclusive dealing contract
C) reciprocal dealing arrangement
D) tying contract
E) licensing agreement

Answer 44

D) tying contract

Question 45

45) In __________, a seller compels a buyer or lessee to take a complete product range from the seller.

A) a reciprocal agreement
B) med-arb forcing
C) a rescission contract
D) a restitution agreement
E) full-line forcing

Answer 45

E) full-line forcing

Question 46

46) Joshua owns orange groves. He enters into a contract with the local food processing plant, Gram Corporation, which stipulates that he will sell oranges only to them. In this scenario, the contract between Joshua and Gram Corporation is known as a(n) __________ contract.

A) installment
B) exclusive dealing
C) reciprocal dealing
D) tying
E) franchise

Answer 46

B) exclusive dealing

Question 47

47) In a(n) __________ contract, a buyer agrees to purchase all of its needs of a given contract from a seller during a certain period of time.

A) franchise
B) installment
C) reciprocal dealing
D) tying
E) requirements

Answer 47

E) requirements

Question 48

48) One party offers to buy the other’s goods, but only if the second party buys other goods from the first party. This is known as a(n) __________ arrangement.

A) franchise
B) exclusive dealing
C) reciprocal dealing
D) tying
E) requirements

Answer 48

C) reciprocal dealing

Question 49

49) Risle Incorporated is a paper supply company. One of its largest customers is Allende Publishers, a publishing house that makes books. If Risle Incorporated decides to acquire and merge with Allende, the merger is most likely to be called a __________ merger.

A) freeze-out
B) geographic extension
C) horizontal
D) product extension
E) vertical

Answer 49

E) vertical

Question 50

50) Lutite, a lighting corporation, acquires and merges with Castelle, a kitchen company. Lutite, prior to the merger, sold only lighting products. After the merger, Lutite sells lighting and kitchen products. The merger between Lutite and Castelle is an example of a __________ merger.

A) geographic extension
B) freeze-out
C) product extension
D) horizontal
E) vertical

Answer 50

C) product extension

Question 51

51) A(n) __________ is one in which the businesses involved neither compete nor are related as customer and supplier in any given line of commerce.

A) arbitration merger
B) horizontal pricing arrangement
C) vertical pricing arrangement
D) conglomerate merger
E) vertical merger

Answer 51

D) conglomerate merger

Question 52

52) Fields Tech School decides to expand and open a new campus in another state. Rather than acquiring land and building new buildings, the school board decides to merge with an existing school, Fennelstate, which has similar programs in the other state. Fennelstate is a small commuter school with the majority of the students from the same state. The merger between Fields Tech School and Fennelstate is best described as a __________ merger.

A) vertical
B) geographic extension
C) product extension
D) horizontal
E) freeze-out

Answer 52

B) geographic extension

Question 53

53) Investigating agencies use the __________ to measure market concentration and determine the impact of a proposed merger.

A) Herfindahl-Hirschman Index
B) Dow Jones Industrial Average
C) Hart-Scott-Rodino Improvements
D) Robinson-Patman Amendment
E) Federal Trade Commission

Answer 53

A) Herfindahl-Hirschman Index

Question 54

54) The __________, a measure of market concentration, squares the market share of each firm in a market and adds them together for a final number.

A) Noerr-Pennington Index
B) Producer Price Index
C) Consumer Price Index
D) Herfindahl-Hirschman Index
E) Big Mac Index

Answer 54

D) Herfindahl-Hirschman Index

Question 55

55) If there is no deception or antitrust violation involved, which of the following is a question the Federal Trade Commission (FTC) asks to determine if business conduct is “unfair”?

A) Does the conduct allow for an agreement among competitors to fix their prices?
B) Is the conduct oppressive, unscrupulous, immoral, or unethical?
C) Does the conduct significantly injure the defendant’s business?
D) Does the conduct prohibit the formation of conglomerate mergers?
E) Is the conduct permitted under the Sherman Act?

Answer 55

B) Is the conduct oppressive, unscrupulous, immoral, or unethical?

Question 56

57) The primary function of the Federal Trade Commission (FTC) is to __________.

A) prevent illegal business practices
B) award punitive damages for violations of the Sherman Act
C) award punitive damages for violations of the Clayton Act
D) prevent the formation of conglomerate mergers
E) facilitate the use of exclusive dealing contracts for trade agreements

Answer 56

A) prevent illegal business practices

Question 57

57) The primary function of the Federal Trade Commission (FTC) is to __________.

A) prevent illegal business practices
B) award punitive damages for violations of the Sherman Act
C) award punitive damages for violations of the Clayton Act
D) prevent the formation of conglomerate mergers
E) facilitate the use of exclusive dealing contracts for trade agreements

Answer 57

A) prevent illegal business practices

Question 58

58) The __________ made unfair or deceptive acts or practices in commerce illegal under Section 5 of the Federal Trade Commission Act.

A) Celler-Kefauver amendment
B) Noerr-Pennington amendment
C) Herfindahl-Hirschman amendment
D) Robinson-Patman amendment
E) Wheeler-Lea amendment

Answer 58

E) Wheeler-Lea amendment