[Adult Floaters] Adam and Zach Are Both Involved in Businesses

question 80

Multiple Choice

[Adult Floaters] Adam and Zach are both involved in businesses that manufacture bathing suits with small personal flotation devices implanted to assist with swimming. They both ship the suits to different states around the country. Adam and Zach get together and decide to raise their prices. They decide that since they are the only two manufacturers of this type of suit, if they both stick together and raise prices to an agreed upon amount, then consumers will be forced to pay that amount. They want to make a lot of money before anyone else jumps into the market. Adam's disgruntled secretary finds out about the agreement and sends out letters to consumers revealing the agreement.
-Have Adam and Zach violated the Sherman Act?

• A) Yes, they violated Section 1.
• B) Yes, they violated Section 2.
• C) No, there is no violation because they are not engaged in intrastate commerce.
• D) No, there is no violation because they have not established a monopoly.
• E) No, there is no violation because at least three businesses must be involved in order to establish a violation of the Sherman Act.

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Definitions:

Investment Costing

The process of determining the total costs associated with making an investment.

Direct Materials

Raw materials that can be directly traced to the manufacturing of a specific product.

Variable Manufacturing Overhead

Costs of manufacturing that vary directly with the level of production, such as raw materials or labor costs.

Fixed Manufacturing Overhead

Costs associated with production that do not vary with the level of output, such as rent and salaries of managers.