Fact Pattern 20-1 MicroManage Is the Fastest Growing Home-Software Producer in the Country

question 371

Multiple Choice

Fact Pattern 20-1
MicroManage is the fastest growing home-software producer in the country. In 2000, it sold 6% of all home software in the U.S., but in 2011, it sold 55% of all home software. A recent issue of Computer Universe said that MicroManage was "the most dominant and aggressive of all home-software developers." Home software is a small part of the entire software industry.
In 2011, MicroManage proposed a merger with Game Master, its main rival. Game Master was responsible for 10% of all home-software sales in 2010. MicroManage's president says that the combination of the firms will allow MicroManage to lower costs and pass the savings on to its customers.
The Department of Justice filed suit to stop this merger, claiming the combination would give monopoly power to the merged firm. Justice insists that consumers would lose in the end.
-Refer to Fact Pattern 20-1. MicroManage executives decide that if they are not allowed to merge with Game Master, MicroManage will propose to GameMaster and other home-software producers that they allocate customers on a geographic basis. Such an agreement:

• A) would be legal under the Parker doctrine
• B) would be an illegal horizontal market sharing device
• C) would be a legal horizontal marketing device because it does not control prices
• D) would probably be unenforceable under the rule in Leegin Leather
• E) none of the other choices

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Definitions:

Variable Costing

A costing method that includes only variable costs - costs that vary with production levels - in the cost of goods sold and excludes fixed costs.

Net Operating Income

The profit generated from a company's everyday business operations, indicating the efficiency of management.

Net Operating Income

Income generated from a company's everyday business operations, excluding taxes and interest expenses.

Common Fixed Cost

A fixed cost that supports more than one business segment, but is not traceable in whole or in part to any one of the business segments.