National Evaluation Series (NES) Business Studies Practice Test

Which scenario would most likely constitute a violation of federal antitrust laws?

1. A firm plans to achieve a monopoly in its markets by merging with its closest competitor

2. A company offers discounts to loyal customers

3. Businesses collaborate on community projects

4. A firm engages in fair competition practices

The correct answer is: A firm plans to achieve a monopoly in its markets by merging with its closest competitor

The scenario where a firm plans to achieve a monopoly in its markets by merging with its closest competitor represents a clear violation of federal antitrust laws because it directly undermines competition within the marketplace. Antitrust laws are designed to promote fair competition and prevent monopolies, which can lead to higher prices, reduced innovation, and limited choices for consumers. When a company seeks to merge with a primary competitor, it consolidates market power, potentially eliminating competitive pressures and creating a situation where the merged entity controls a significant share of the market. This not only restricts competition but can also lead to harmful outcomes for consumers and the economy as a whole. The other scenarios do not undermine competitive practices. Offering discounts to loyal customers fosters customer loyalty without reducing competition. Collaborating on community projects can be seen as socially responsible behavior that doesn’t interfere with market competition. Engaging in fair competition practices simply supports a healthy marketplace where choices and prices remain favorable for consumers.