Spokes Folks Is One of Four Bicycle Shops in a College

question 43

Multiple Choice

Spokes Folks is one of four bicycle shops in a college town.Spokes Folks is the only retailer in town that carries the line of bicycles made by Silver Streak.Spokes Folks carries several other bicycle lines,some of which are also sold by at least one of the other retailers.Spokes Folks has been having difficulties lately dealing with Silver Streak.Following a recent disagreement,Spoke Folks sent a letter to Silver Streak stating that Spoke Folks "refuses to purchase any further products from Silver Streak,and will terminate all business dealings as soon as its current unpaid invoices are paid." Is this an illegal boycott under the Sherman Act?

• A) yes, because any refusal to deal with Silver Streak is a violation
• B) yes, because Spoke Folks is Silver Streak's only access to the retail market in this town
• C) no, because Spoke Folks carries other lines of bicycles
• D) The action is legal if the dispute with Silver Streak is bona fide; otherwise, it is illegal.
• E) no, because there was no agreement by Spoke Folks with a competitor

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Definitions:

Pure Exchange Economy

An economic model where there is no production, and agents trade endowments of goods that they own initially.

Utility Function

A mathematical representation of how consumers rank different bundles of goods according to the levels of satisfaction those goods provide.

Numeraire

A standard unit of account in economics used to compare the value of goods and services.

Perfect Substitutes

Goods that a consumer is completely indifferent between, meaning they will substitute one for another at a constant rate regardless of any change in price or utility.