Fact Pattern 46-1B (Questions B4-B5 Apply)

question 21

Multiple Choice

Fact Pattern 46-1B (Questions B4-B5 apply)
Natural Gas, Inc., and Olio Energy Company refine and sell natural gas. To limit the supply of natural gas on the market and thereby raise prices, Natural Gas and Olio Energy agree to buy "excess" supplies from dealers and "dispose" of it.
-Refer to Fact Pattern 46-1B. The Natural Gas and Olio Energy deal is

• A) a deal that neither restrains trade nor harms competition.
• B) a legal restraint of trade.
• C) a per se violation of antitrust law.
• D) subject to analysis under the rule of reason.

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Definitions:

Marginal Cost

The addition to total cost that results from producing one more unit of output.

Diseconomies of Scale

The condition in which a company's costs per unit increase as it produces more units, typically due to inefficiencies that arise with increased size or output.

Diminishing Marginal Returns

A principle stating that as additional units of a variable input are added to a fixed input, the additions to output will eventually decrease.

Law of Diminishing Returns

An economic principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, cannot continue to increase if other variables remain constant.