Chapter 5 GOVERNMENT REGULATION OF COMPETITION AND RICES

TRUE/FALSE

1)The government can regulate not just businesses, but also business competition and prices

2. State governments may regulate business in all of its aspects, even if such regulation imposes a burden on interstate commerce. 
3. The federal government may regulate any area of business to advance the nation’s economic need 
4. Governments may regulate prices but not credit terms.          

        5 Each of the states and the federal government have statutes and regulations that prohibit unfair methods of competition.                        

6. The Federal Trade Commission administers the law prohibiting unfair methods of competition.       
7. An agreement between real estate brokers to never charge a commission less than 6% is not an example of price fixing.
8. The Sherman Act applies only to buying and selling activities, not manufacturing and production activities.
9. Having a large percentage of the market is not necessarily a monopoly.
10. Boycotts are always illegal, even when done with good intentions.    
11. Under the Sherman Act competitors are permitted to agree not to deal with certain buyers.

12. A divestiture order is a decree ordering a defendant to dispose of excessive ownership or control of interests in competing enterprise         
13. When large-size enterprises plan to merge, they must give written notice to the Interstate Commerce Commission.
14. The Clayton Act prohibits price discrimination between different buyers of like commodities when the effect may be to substantially lessen competition.    
15. A manufacturer with distributors in New York City may give its newer distributors free advertising and other services to help them compete with the distributors who have been doing business for a number of years and have become firmly established.        
16. A state may prohibit a seller from selling below cost if the purpose is to harm competitors.  
17. A price reduction to one customer is lawful when it is made because of the deteriorated condition of the goods sold to that customer.   
18. Price discrimination is not permitted even when it can be justified on the basis of a difference in grade, quality, or quantity.
19. The Robinson-Patman Act guarantees a seller the right to refuse to deal with anyone for any reason or purpose.
20. A manufacturer having a restriction on territories in the form of a sole outlet is a per se violation.
21. A “suggested retail price” is not a violation of the antitrust laws.
22. Requiring buyers to purchase one product in order to get another is acceptable practice and not a violation of the Sherman Act.

23. The United States Supreme Court generally has held that vertical merger agreements should not automatically be condemned as an unlawful restraint of interstate commerce merely because they create the potential to monopolize it.
24. Criminal penalties are possible under the Sherman Act.         
25. A person who is harmed by a conspiracy that violates the Sherman Antitrust Act may sue the wrongdoers for four times the actual damages.          
26. The attorney general of a state may bring a class action suit to recover damages for those injured by an antitrust violation which raised prices.

MULTIPLE CHOICE

1 The federal government may impose regulations on business:

1. by virtue of its police power.
2. to advance the interests of homeland security.
3. to advance the nation’s economic needs.
4. if those regulations do not impose an unreasonable burden on interstate commerc 

2. Unfair competition is controlled by:
   1. statutes.
   2. administrative agencies.
   3. administrative regulations.
   4. all of the above.
3. Price regulations:
   1. may be imposed by the national government.
   2. may be imposed by state governments.
   3. include rules regarding credit terms and other charges.
   4. all of the above.   
4. A person who attempts to monopolize any part of the trade or commerce among the states:
   1. is guilty of a misdemeanor.
   2. is guilty of a felony.
   3. can be fined up to $500,000.
   4. none of the above.                    

5.                    power relates to a firm’s ability to control price and exclude competitors.
   1. Market
   2. Competitive
   3. Product
   4. Production
6. The Sherman Act focuses on:
   1. unfair methods of competition.
   2. combinations or contracts in restraint of trade.
   3. permitted price discriminations.
   4. intrastate commerce.
7. Section                    of the Sherman Act applies to agreements, conduct, or conspiracies to restrain trade, which can consist of price-fixing, typing, and monopolization.
   1. A
   2. B
   3. 1
   4. 2
8. The Sherman Act applies to:
   1. buying activities.
   2. selling activities.
   3. production activities.
   4. all of the above.   
9. The Sherman Act does not prohibit:
   1. a company from engaging in purposeful conduct to exclude competitors.
   2. a seller from dominating a market because of superior product or business.
   3. competitors from agreeing not to deal with certain buyers.
   4. all of the above.   
10. Under the Clayton Act, a divestiture order is:
    1. notification from the Department of Justice that a merger is about to occur.
    2. notification from the Department of Justice that a merger did not occur.
    3. a decision by a court requiring a defendant to sell an enterprise.
    4. an order by a court requiring an enterprise to dispose of its inventory.
11. Under the Clayton Act, when large-scale enterprises plan to merge, they must in advance:
    1. notify the New York Stock Exchange.
    2. notify the President of the United States.
    3. complete the necessary financing arrangements.
    4. notify the Antitrust Division of the Department of Justice.           

11. The Clayton Act prohibits:
    1. all unfair methods of competition.
    2. conspiracies in restraint of trade.
    3. attempts to monopolize.
    4. price discrimination between buyers of like commodities.
12. The Robinson-Patman Act:
    1. prohibits charging different prices to different buyers when the margin costs are the same.
    2. allows sellers to offer incentives and bonuses to certain customers.
    3. allows sellers to refuse to deal with anyone for any reason.
    4. all of the above.   
13. Tying:
    1. is a violation of the Sherman Act.
    2. occurs when sellers require buyers to purchase an unwanted product to get a wanted one.
    3. both of the above.
    4. none of the above.           
14. Vertical mergers:
    1. occur between firms that have a competitor relationship.
    2. occur between firms that have buyer and seller relationships.
    3. are not covered by the Clayton Act.
    4. are always protected by the federal government.
15. A violator of the Sherman Act may be subject to:
    1. fine only.
    2. imprisonment only.
    3. both fine and imprisonment.
    4. neither fine nor imprisonment.
16. For violation of the Sherman Act, the maximum fine that may be imposed on a natural person is:
    1. $1 million.

b. $500,000.

c.   $0.

d. $100 million.         

18. A person or enterprise harmed by a Sherman Act violation may bring an action for:
    1. punitive damages only.
    2. treble damages.
    3. quadruple damages.
    4. actual damages only.