Exam 3 CHP 46, 47, 51

Question 1

Agreements between or among firms that have the effect of reducing competition in the market place.

Answer 1

Restraints of trade

Question 2

Sherman cases that are often concerned with whether an agreement (written or oral) leads to a restraint of trade between a group of individuals.

Answer 2

Section 1 cases

Question 3

Sherman cases that deal with the structure of a monopoly that exists in the market places.

Answer 3

Section 2 cases

Question 4

Illegal violations that are inherently under section 1 violation requirements. (Latin word)

Answer 4

Per se Violations

Question 5

When the courts analyze anticompetitive agreements that allegedly violate section 1 of the Sherman Act to determine whether they actually constitute reasonable restraints of trade.

Answer 5

Rule of Reason

Question 6

An agreement that in some way restrains competition between rival firms competing in the same market.

Answer 6

Horizontal restraint

Question 7

Competitive decline from an agreement between firms at different levels in the manufacturing and distribution process.

Answer 7

Vertical restraint

Question 8

When one firm attempts to drive its competitors from the market by selling its product at prices substantially below the normal costs of production.

Answer 8

Predatory pricing

Question 9

What are the 2 parts of a relevant market?

Answer 9

1. Relevant product market
2. Relevant geographic market

Question 10

Monopoly power, in and of itself, does not constitute the offense of monopolization under section 2 of the Sherman Act. The offense also requires an ________ to monopolize.

Answer 10

Intent

Question 11

An act that strengthens federal antitrust laws. What sections are provided.

Answer 11

The Clayton Act
Sections 2, 3, 7, and 8

Question 12

Section 2 also prohibits _______ monopolization of a market.

Answer 12

Attempted monopolization

Question 13

What are the 3 requirements for attempted monopolization under section 2?

Answer 13

1. Anticompetitive conduct
2. Specific intent to gain monopoly power
3. Dangerous probability of success of gaining monopoly

Question 14

What is the section 2 of the Clayton Act?

Answer 14

Price discrimination

Question 15

What are the 3 defenses for price discrimination?

Answer 15

1. Cost justification
2. Meeting a competitor’s price
3. Changing market conditions

Question 16

What is the section 3 of the Clayton Act?

Answer 16

Exclusionary practices

Question 17

What are the 2 examples of exclusionary actions?

Answer 17

1. Exclusive-dealing contracts
2. Tying arrangements

Question 18

What is section 7 of the Clayton Act?

Answer 18

Mergers (Both horizontal and vertical)

Question 19

What is section 8 of the Clayton Act?

Answer 19

Interlocking Directorates

Question 20

Who prosecutes violations of the Sherman Act?

Answer 20

DOJ

Question 21

True or false.
Clayton Act violations are crimes.

Answer 21

False. Clayton Act violations are not crimes, and they are enforced by the DOJ or the FTC through civil court.

Question 22

When a company is made to give up one or more of its operations.

Answer 22

Divestiture

Question 23

Due to these laws, any conspiracy that has a substantial effect on U.S. commerce is within the reach of the Sherman Act. (Even if its done outside the U.S.)

Answer 23

Extraterritorial Application of U.S. Antitrust Laws

Question 24

Name 4 industry exemptions to antitrust enforcement.

Answer 24

1. Labor
2. Fisheries
3. Oil marketing
4. State actions

Question 25

True or false.
Accountants are required to discover every impropriety, defalcation, or fraud in a clients book.

Answer 25

False.
Accountants are NOT responsible for finding every issue

Question 26

What are the 3 defenses accountants use for negligence?

Answer 26

1. Accountant wasn’t negligent
2. Accountant was negligent, but wasn’t cause for client loss
3. Client was also negligent

Question 27

Fraud, or misrepresentation, involves the following 3 elements….

Answer 27

1. Misrepresentation of material fact
2. Intent to deceive
3. Justifiable reliance by the innocent party

Question 28

When an professional is grossly negligent in performing his or her duties this is classified as ________ fraud.

Answer 28

Constructive fraud

Question 29

What rule requires the need of privity for a liability to be imposed?

Answer 29

The Ultramares Rule

Question 30

What rule requires a third parties reliance that is foreseen or known to impose liability?

Answer 30

The Restatement Rule

Question 31

What rule requires a third party’s use being reasonably foreseeable to impose liability?

Answer 31

The “Reasonably Foreseeable Users” Rule

Question 32

What are the 3 general professional liabilities who handle clients?

Answer 32

1. Breach of contract
2. Negligence
3. Fraud

Question 33

Which liability section from the Security Act of 1933 imposes civil liability on accountants for misstatements and omissions of material facts in registration statements?

Answer 33

Section 11

Question 34

Which liability section from the Security Act of 1933 imposes civil liability on accountants for fraud in relation to offerings or sales of securities?

Answer 34

Section 12(2)

Question 35

Which liability section from the Security Exchange Act of 1934 imposes civil liability on an accountant who makes a statement that was false or misleading with respect to any material fact?

Answer 35

Section 18

Question 36

Which liability sections from the Security Exchange Act of 1934 imposes civil liability on accountants that uses deceptive plans or devices to counter SEC rules and regulations as well as mess with interstate commerce?

Answer 36

Section 10(b) and SEC rule 10b-5