25 Questions
What is one of the objectives of rules that protect competition?
To prohibit agreements that limit competition
What is an example of an agreement between competitors that may be prohibited?
An agreement to fix prices
Why are rules that protect competition important?
To ensure fair competition among businesses
What may happen if competitors agree to increase prices?
Prices may increase
What is not a goal of rules that protect competition?
To encourage monopolies
What happens to individual debts when an account is closed?
They are settled at the time of closing
When are individual debts paid according to the given information?
At the time of account closing
What is the opposite approach to settling debts at account closing?
Settling debts immediately
What is the key difference between settling debts at account closing and settling them immediately?
One is done immediately, the other at account closing
Why might someone choose to settle debts at account closing rather than immediately?
To avoid immediate financial burden
What is the primary purpose of using a Documentary Credit?
To guarantee payment only when specific conditions are met
What would trigger the payment process in a Documentary Credit arrangement?
Delivery of the goods
What is the benefit of using a Documentary Credit from the buyer's perspective?
It provides protection against sellers who do not meet conditions
In a Documentary Credit arrangement, what is the role of the payment trigger?
To authorize payment only when conditions are met
Why would a buyer opt for a Documentary Credit over other payment methods?
To reduce the risk of paying for goods that do not meet specifications
What is the primary purpose of a Letter of Guarantee?
To ensure payment to a beneficiary in case of default
What is a key characteristic of a Letter of Guarantee?
It is an unconditional promise of payment
In what scenario would a bank issue a Letter of Guarantee?
When a beneficiary requires a payment guarantee
What is the role of the bank in a Letter of Guarantee?
To promise payment to the beneficiary
What is the primary benefit of a Letter of Guarantee to the beneficiary?
Guaranteed payment in case of need
What is the primary purpose of a security in a bank transaction?
To protect the bank's interests in case of default
What happens if the bank client defaults on their payment?
The bank takes possession of the security asset
What is the role of the security in a bank transaction?
To protect the bank's interests in case of default
Why does the bank require a security from the client?
To reduce the risk of non-payment by the client
What is the relationship between the security and the bank's risk?
The security reduces the bank's risk
Study Notes
Rules Protecting Competition
- Agreements between competitors are prohibited when they attempt to increase, decrease, or fix prices.
Payment Methods
- Documentary Credit: a payment method where a buyer pays only when specific conditions are met (e.g., receiving purchased goods).
- Letter of Guarantee: a document issued by a bank promising to pay a beneficiary an amount without conditions, usually requiring a client to provide a security (an asset that the bank can take if it pays the beneficiary).
This quiz covers rules that protect competition, specifically focusing on agreements between competitors that try to manipulate prices. Test your knowledge on antitrust laws and regulations.
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