To Acquire Monopoly Power in Its Market, Perfect Plastics, Inc

question 49

Multiple Choice

To acquire monopoly power in its market, Perfect Plastics, Inc., sets its prices lower than its competitors. Under the Sherman Act, this is

• A) a per se violation.
• B) a violation if its competitors make similar deals.
• C) a violation if it thereby acquires monopoly power.
• D) not a violation.

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Definitions:

Strike Price

In options trading, this is the price at which the holder of the option can buy or sell the underlying asset.

Shares

Units of ownership interest in a corporation or financial asset that provide an equal distribution in any profits, if any are declared, in the form of dividends.

European Options

Financial derivatives that give the holder the right to buy or sell the underlying asset at a specified price only at the expiration date.

Black-Scholes Model

A mathematical model of the market for an equity, in which the price of the equity is modeled as a stochastic process, used primarily to price European style options.