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Fundamentals of Managerial Economics (with Economic Applications Access)

by: Hirschey, Mark

Fundamentals of Managerial Economics (with Economic Applications Access)

by: Hirschey, Mark

ISBN 13:
9780324288896
ISBN 10:
0324288891
Edition: 8th
Format: Paperback
Copyright: 05/16/2005
Publisher: South-Western College Pub
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Summary

Little or no background in economics or higher level mathematics? Not a problem. FUNDAMENTALS OF MANAGERIAL ECONOMICS focuses on the economics, not the mathematics, of the managerial decision process. You'll learn how managers use economics to make decisions and stay ahead of change. And in this version, you'll learn it fast through captivating examples and uncomplicated math. Plus it comes with Economics Applications Access! This powerful program walks you step-by-step through the decision-making process using economics.

Part 1 Overview of Managerial Economics

Introduction

(19)

How Is Managerial Economics Useful?

(1)

Evaluating Choice Alternatives

(1)

Making the Best Decision

(1)

Managerial Application 1.1: Managerial Ethics

(1)

Theory of the Firm

(3)

Expected Value Maximization

(2)

Constraints and the Theory of the Firm

(1)

Limitations of the Theory of the Firm

(1)

Managerial Application 1.2: The World Is Turning to Capitalism and Democracy

(1)

Profit Measurement

(3)

Business Versus Economic Profit

(1)

Variability of Business Profits

(2)

Why Do Profits Vary Among Firms?

(1)

Disequilibrium Profit Theories

(1)

Compensatory Profit Theories

(1)

Role of Profits in the Economy

(1)

Managerial Application 1.3: Google on Social Responsibility: Don't Be Evil

(1)

Role of Business in Society

(1)

Why Firms Exist

(1)

Social Responsibility of Business

(1)

Managerial Application 1.4: The Internet Revolution

(1)

Structure of This Text

(2)

Objectives

(1)

Development of Topics

(1)

Summary

(1)

Case Study: Is Coca-Cola the ``Perfect'' Business?

(3)

Basic Economic Relations

(26)

Economic Optimization Process

(2)

Optimal Decisions

(1)

Maximizing the Value of the Firm

(1)

Managerial Application 2.1: Greed Versus Self-Interest

(1)

Expressing Economic Relations

(5)

Tables and Equations

(1)

Total, Average, and Marginal Relations

(2)

Graphing Total, Marginal, and Average Relations

(2)

Managerial Application 2.2: Do Firms Really Optimize?

(1)

Marginal Analysis in Decision Making

(4)

Use of Marginals in Resource Allocation

(1)

Total and Marginal Relations

(2)

Practical Applications of Marginal Analysis

(1)

Managerial Application 2.3: How Entrepreneurs Shape the Economy

(3)

Profit Maximization

(1)

Revenue Maximization

(1)

Average Cost Minimization

(1)

Managerial Application 2.4: Information Brought Down the Berlin Wall

(1)

Incremental Concept in Economic Analysis

(3)

Marginal Versus Incremental Concept

(1)

Incremental Profits

(1)

Incremental Concept Example

(1)

Summary

(6)

Case Study: Spreadsheet Analysis of the EOQ at the Neighborhood Pharmacy, Inc.

(2)

Statistical Analysis of Economic Relations

(40)

Data Summary and Description

(1)

Population Parameters

(1)

Sample Statistics

(1)

Measures of Central Tendency

(6)

Mean

(2)

Median

(2)

Mode

(1)

Comparing Measures of Central Tendency

(2)

Managerial Application 3.1: Sampling Technology for TV Advertising

(1)

Measures of Dispersion

(3)

Range

(1)

Variance and Standard Deviation

(1)

Coefficient of Variation

(1)

Hypothesis Testing

(3)

Hypothesis Tests

(1)

Means Tests for Large Samples

(2)

Means Tests for Small Samples

(1)

Managerial Application 3.2: Market Experiments on the Web

(1)

Economic Relations

(1)

Deterministic and Statistical Relations

(1)

Scatter Diagrams

(1)

Regression Analysis

(4)

Linear and Multiplicative Models

(3)

Least Squares Method

(1)

Managerial Application 3.3: Lies, Damn Lies, and Government Statistics

(2)

Judging Regression Model Fit

(5)

Standard Error of the Estimate

(2)

Goodness of Fit, r, and R2

(1)

Corrected Coefficient of Determination, R2

(1)

F Statistic

(1)

Judging Variable Significance

(2)

Statistics

(1)

Interpreting t Statistics

(1)

Managerial Application 3.4: Spreadsheet and Statistical Software for the PC

(1)

Summary

(9)

Case Study: Demand Estimation for The San Francisco Bread Co.

(4)

Part 2 Demand Analysis and Estimation

(102)

Demand and Supply

(29)

Basis for Demand

(1)

Direct Demand

(1)

Derived Demand

(1)

Managerial Application 4.1: How the Internet Affects Demand and Supply

(1)

Market Demand Function

(2)

Determinants of Demand

(1)

Industry Demand Versus Firm Demand

(1)

Demand Curve

(3)

Demand Curve Determination

(1)

Relation Between the Demand Curve and Demand Function

(2)

Basis for Supply

(1)

Managerial Application 4.2: ISP Customers Learn About Demand and Supply

(1)

How Output Prices Affect Supply

(1)

Other Factors That Influence Supply

(1)

Market Supply Function

(2)

Determinants of Supply

(1)

Industry Supply Versus Firm Supply

(1)

Managerial Application 4.3: The Import Supply Battle in the U.S. Auto Industry

(1)

Supply Curve

100

(3)

Supply Curve Determination

100

(1)

Relation Between Supply Curve and Supply Function

100

(3)

Managerial Application 4.4: Demand and Supply Conditions for Economists

103

(1)

Market Equilibrium

104

(5)

Surplus and Shortage

104

(2)

Comparative Statics: Changing Demand

106

(3)

Comparative Statics: Changing Supply

109

(1)

Comparative Statics: Changing Demand and Supply

109

(1)

Summary

109

(6)

Case Study: Spreadsheet Analysis of Demand and Supply for Sunbest Orange Juice

115

(2)

Demand Analysis and Estimation

117

(32)

Measuring Market Demand

118

(2)

Graphing the Market Demand Curve

118

(2)

Evaluating Market Demand

120

(1)

Managerial Application 5.1: Demand for Oranges: A Classic Market Experiment

120

(1)

Demand Sensitivity Analysis: Elasticity

121

(3)

Elasticity Concept

121

(1)

Point Elasticity and Arc Elasticity

121

(1)

Advertising Elasticity Example

122

(2)

Managerial Application 5.2: Price Elasticity for Airline Passenger Service

124

(1)

Price Elasticity of Demand

125

(4)

Price Elasticity Formula

125

(1)

Price Elasticity and Total Revenue

126

(2)

Uses of Price Elasticity Information

128

(1)

Price Elasticity and Marginal Revenue

129

(3)

Varying Elasticity at Different Points on a Demand Curve

129

(1)

Price Elasticity and Price Changes

129

(3)

Managerial Application 5.3: Ag Price Supports

132

(1)

Price Elasticity and Optimal Pricing Policy

133

(2)

Optimal Price Formula

133

(1)

Optimal Pricing Policy Example

134

(1)

Determinants of Price Elasticity

134

(1)

Cross-Price Elasticity of Demand

135

(2)

Substitutes and Complements

136

(1)

Cross-Price Elasticity Example

136

(1)

Managerial Application 5.4: Haggling in the Car Business

137

(1)

Income Elasticity of Demand

138

(2)

Normal Versus Inferior Goods

138

(1)

Types of Normal Goods

139

(1)

Summary

140

(6)

Case Study: Demand Estimation for Mrs. Smyth's Pies

146

(3)

Forecasting

149

(40)

Forecasting Applications

150

(2)

Macroeconomic Applications

150

(1)

Microeconomic Applications

150

(1)

Forecast Techniques

151

(1)

Managerial Application 6.1: Economic Forecasting: The Art and the Science

152

(1)

Qualitative Analysis

152

(1)

Expert Opinion

153

(1)

Survey Techniques

153

(1)

Trend Analysis and Projection

153

(6)

Trends in Economic Data

154

(1)

Linear Trend Analysis

154

(2)

Growth Trend Analysis

156

(3)

Linear and Growth Trend Comparison

159

(1)

Managerial Application 6.2: The Dire Prediction Business

159

(1)

Business Cycle

160

(7)

What Is the Business Cycle?

160

(1)

Economic Indicators

161

(2)

Economic Recessions

163

(2)

Sources of Forecast Information

165

(2)

Managerial Application 6.3: The Stock Market and the Business Cycle

167

(1)

Exponential Smoothing

167

(4)

Exponential Smoothing Concept

167

(2)

One-Parameter (Simple) Exponential Smoothing

169

(1)

Two-Parameter (Holt) Exponential Smoothing

169

(1)

Three-Parameter (Winters) Exponential Smoothing

169

(1)

Practical Use of Exponential Smoothing

170

(1)

Managerial Application 6.4: How Good Is Your Forecasting Ability?

171

(1)

Econometric Forecasting

172

(2)

Advantages of Econometric Methods

172

(1)

Single-Equation Models

172

(1)

Multiple-Equation Systems

173

(1)

Judging Forecast Reliability

174

(2)

Tests of Predictive Capability

175

(1)

Correlation Analysis

175

(1)

Sample Mean Forecast Error Analysis

175

(1)

Choosing the Best Forecast Technique

176

(2)

Data Requirements

176

(1)

Time Horizon Considerations

176

(1)

Role of Judgment

177

(1)

Summary

178

(7)

Case Study: Forecasting Global Performance for a Mickey Mouse Organization

185

(4)

Part 3 Production and Competitive Markets

189

(186)

Production Analysis and Compensation Policy

190

(39)

Production Functions

191

(2)

Properties of Production Functions

191

(1)

Returns to Scale and Returns to a Factor

192

(1)

Total, Marginal, and Average Product

193

(3)

Total Product

193

(3)

Marginal Product

196

(1)

Average Product

196

(1)

Managerial Application 7.1: Total Quality Management

196

(1)

Law of Diminishing Returns to a Factor

197

(2)

Diminishing Returns to a Factor Concept

197

(1)

Illustration of Diminishing Returns to a Factor

198

(1)

Input Combination Choice

199

(5)

Production Isoquants

199

(1)

Input Factor Substitution

200

(2)

Marginal Rate of Technical Substitution

202

(1)

Rational Limits of Input Substitution

203

(1)

Managerial Application 7.2: What's Wrong with Manufacturing?

204

(1)

Marginal Revenue Product and Optimal Employment

204

(3)

Marginal Revenue Product

204

(1)

Optimal Level of a Single Input

205

(1)

Illustration of Optimal Employment

206

(1)

Optimal Combination of Multiple Inputs

207

(3)

Budget Lines

207

(2)

Expansion Path

209

(1)

Illustration of Optimal Input Proportions

210

(1)

Optimal Levels of Multiple Inputs

210

(1)

Optimal Employment and Profit Maximization

211

(1)

Managerial Application 7.3: A Jobless Recovery?

211

(1)

Illustration of Optimal Levels of Multiple Inputs

212

(1)

Returns to Scale

212

(3)

Evaluating Returns to Scale

213

(1)

Output Elasticity and Returns to Scale

213

(1)

Returns to Scale Estimation

214

(1)

Production Function Estimation

215

(1)

Cubic Production Functions

215

(1)

Power Production Functions

216

(1)

Managerial Application 7.4: BLS Statistics

216

(1)

Productivity Measurement

217

(3)

How Is Productivity Measured?

217

(1)

Uses and Limitations of Productivity Data

218

(2)

Summary

220

(6)

Case Study: Employee Productivity Among the Largest S&P 500 Firms

226

(3)

Cost Analysis and Estimation

229

(40)

What Makes Cost Analysis Difficult?

230

(1)

Link Between Accounting and Economic Valuations

230

(1)

Historical Versus Current Costs

230

(1)

Replacement Cost

231

(1)

Opportunity Costs

231

(2)

Opportunity Cost Concept

232

(1)

Explicit and Implicit Costs

232

(1)

Managerial Application 8.1: GE's ``20-70-10'' Plan

233

(1)

Incremental and Sunk Costs in Decision Analysis

233

(1)

Incremental Cost

233

(1)

Sunk Costs

234

(1)

Short-Run and Long-Run Costs

234

(2)

How Is the Operating Period Defined?

235

(1)

Fixed and Variable Costs

235

(1)

Short-Run Cost Curves

236

(1)

Short-Run Cost Categories

236

(1)

Short-Run Cost Relations

236

(1)

Managerial Application 8.2: Gaps in GAAP?

237

(2)

Long-Run Cost Curves

239

(4)

Long-Run Total Costs

239

(1)

Economies of Scale

239

(2)

Cost Elasticities and Economies of Scale

241

(1)

Long-Run Average Costs

241

(2)

Managerial Application 8.3: What in the Heck Is FASB?

243

(1)

Minimum Efficient Scale

244

(1)

Competitive Implications of Minimum Efficient Scale

244

(1)

Transportation Costs and MES

244

(1)

Firm Size and Plant Size

245

(6)

Multiplant Economies and Diseconomies of Scale

245

(1)

Economics of Multiplant Operation: An Example

246

(3)

Plant Size and Flexibility

249

(2)

Managerial Application 8.4: Bigger Isn't Always Better

251

(1)

Learning Curves

251

(3)

Learning Curve Concept

251

(2)

Learning Curve Example

253

(1)

Strategic Implications of the Learning Curve Concept

254

(1)

Economies of Scope

254

(1)

Economies of Scope Concept

254

(1)

Exploiting Scope Economies

255

(1)

Cost-Volume-Profit Analysis

255

(1)

Cost-Volume-Profit Charts

255

(5)

Degree of Operating Leverage

257

(3)

Summary

260

(5)

Case Study: Estimating the Costs of Nursing Care for Regional Hospitals

265

(4)

Linear Programming

269

(43)

Basic Characteristics

270

(1)

Inequality Constraints

270

(1)

Linear Assumptions

270

(1)

Managerial Application 9.1: Karmarkar's LP Breakthrough

271

(1)

Production Planning for a Single Product

271

(7)

Production Processes

271

(2)

Production Isoquants

273

(2)

Least-Cost Input Combinations

275

(1)

Optimal Input Combinations with Limited Resources

275

(3)

Managerial Application 9.2: LP: More Than a Visual Approach

278

(1)

Production Planning for Multiple Products

278

(2)

Objective Function Specification

278

(1)

Constraint Equation Specification

279

(1)

Nonnegativity Requirement

280

(1)

Graphic Specification and Solution

280

(5)

Analytic Expression

280

(1)

Graphing the Feasible Space

280

(1)

Graphing the Objective Function

281

(2)

Graphic Solution

283

(2)

Algebraic Specification and Solution

285

(4)

Slack Variables

285

(1)

Algebraic Solution

285

(3)

Slack Variables at the Solution Point

288

(1)

Computer-Based Solution Methods

289

(1)

Managerial Application 9.3: LP on the PC!

289

(1)

Dual in Linear Programming

289

(2)

Duality Concept

289

(1)

Shadow Prices

290

(1)

Dual Specification

291

(1)

Dual Objective Function

291

(1)

Dual Constraints

291

(1)

Dual Slack Variables

292

(1)

Solving the Dual Problem

292

(3)

Dual Solution

293

(1)

Using the Dual Solution to Solve the Primal

294

(1)

Managerial Application 9.4: It's a RIOT on the Internet!

295

(1)

Summary

296

(9)

Case Study: An LP Pension Funding Model

305

(2)

Appendix 9A: Rules for Forming the Dual LP Problem

307

(4)

Competitive Markets

311

(1)

Competitive Environment

312

(27)

What Is Market Structure?

312

(1)

Vital Role of Potential Entrants

312

(1)

Managerial Application 10.1: Benefits from Free Trade

313

(1)

Factors That Shape the Competitive Environment

313

(2)

Product Differentiation

313

(1)

Production Methods

314

(1)

Entry and Exit Conditions

314

(1)

Competitive Market Characteristics

315

(1)

Basic Features

315

(1)

Examples of Competitive Markets

315

(1)

Managerial Application 10.2: Is the Stock Market Perfectly Competitive?

316

(1)

Profit Maximization in Competitive Markets

317

(4)

Profit Maximization Imperative

317

(1)

Role of Marginal Analysis

317

(4)

Marginal Cost and Firm Supply

321

(2)

Short-Run Firm Supply Curve

321

(2)

Long-Run Firm Supply Curve

323

(1)

Managerial Application 10.3: Dot.com

323

(1)

Competitive Market Supply Curve

324

(2)

Market Supply with a Fixed Number of Competitors

324

(2)

Market Supply with Entry and Exit

326

(1)

Competitive Market Equilibrium

326

(3)

Balance of Supply and Demand

326

(3)

Normal Profit Equilibrium

329

(1)

Managerial Application 10.4: The Enron Debacle

329

(1)

Summary

330

(7)

Case Study: Profitability Effects of Firm Size for DJIA Companies

337

(2)

Performance and Strategy in Competitive Markets

339

(36)

Competitive Market Efficiency

340

(4)

Why Is It Called ``Perfect Competition''?

340

(1)

Deadweight Loss Problem

341

(1)

Deadweight Loss Illustration

342

(2)

Managerial Application 11.1: The Wal-Mart Phenomenon

344

(1)

Market Failure

344

(2)

Structural Problems

344

(1)

Incentive Problems

345

(1)

Role for Government

346

(1)

How Government Influences Competitive Markets

346

(1)

Broad Social Considerations

347

(1)

Managerial Application 11.2: Corn Growers Discover Oil!

347

(1)

Subsidy and Tax Policy

348

(2)

Subsidy Policy

348

(1)

Deadweight Loss from Taxes

348

(2)

Tax Incidence and Burden

350

(4)

Role of Elasticity

350

(2)

Tax Cost-Sharing Example

352

(2)

Managerial Application 11.3: Measuring Economic Profits

354

(1)

Price Controls

355

(2)

Price Floors

355

(2)

Price Ceilings

357

(1)

Business Profit Rates

357

(3)

Return on Stockholders' Equity

358

(1)

Typical Profit Rates

359

(1)

Managerial Application 11.4: Wonderful Businesses

360

(1)

Market Structure and Profit Rates

361

(2)

Profit Rates in Competitive Markets

361

(1)

Mean Reversion in Profit Rates

361

(2)

Competitive Market Strategy

363

(2)

Short-Run Firm Performance

363

(1)

Long-Run Firm Performance

364

(1)

Summary

365

(7)

Case Study: Profit Margins Among the Most Profitable S&P 500 Companies

372

(3)

Part 4 Imperfect Competition

375

(146)

Monopoly and Monopsony

376

(37)

Monopoly Market Characteristics

377

(2)

Basic Features

377

(1)

Examples of Monopoly

377

(2)

Managerial Application 12.1: The NCAA Cartel

379

(1)

Profit Maximization Under Monopoly

379

(4)

Price/Output Decisions

379

(2)

Role of Marginal Analysis

381

(2)

Social Costs of Monopoly

383

(3)

Monopoly Underproduction

383

(1)

Deadweight Loss from Monopoly

383

(3)

Social Benefits of Monopoly

386

(2)

Economies of Scale

386

(1)

Invention and Innovation

387

(1)

Managerial Application 12.2: Is Ticketmaster a Monopoly?

388

(1)

Monopoly Regulation

389

(5)

Dilemma of Natural Monopoly

389

(1)

Utility Price and Profit Regulation

390

(1)

Utility Price and Profit Regulation Example

391

(2)

Problems with Utility Price and Profit Regulation

393

(1)

Monopsony

394

(3)

Buyer Power

394

(1)

Bilateral Monopoly Illustration

394

(3)

Managerial Application 12.3: Is This Why They Call It ``Hardball''?

397

(1)

Antitrust Policy

398

(2)

Overview of Antitrust Law

398

(1)

Sherman and Clayton Acts

398

(1)

Antitrust Enforcement

399

(1)

Managerial Application 12.4: Price Fixing by the Insurance Cartel

400

(1)

Competitive Strategy in Monopoly Markets

401

(2)

Market Niches

401

(1)

Information Barriers to Competitive Strategy

401

(2)

Summary

403

(7)

Case Study: Effect of R&D on Tobin's q

410

(3)

Monopolistic Competition and Oligopoly

413

(42)

Contrast Between Monopolistic Competition and Oligopoly

414

(1)

Monopolistic Competition

414

(1)

Oligopoly

414

(1)

Dynamic Nature of Competition

415

(1)

Managerial Application 13.1: Dell's Price War with Itself

415

(1)

Monopolistic Competition

416

(3)

Monopolistic Competition Characteristics

416

(1)

Monopolistic Competition Price/Output

Decisions

417

(2)

Managerial Application 13.2: Government-Guaranteed Oligopoly

419

(1)

Monopolistic Competition Process

420

(3)

Short-Run Monopoly Equilibrium

420

(1)

Long-Run High-Price/Low-Output Equilibrium

421

(1)

Long-Run Low-Price/High-Output Equilibrium

422

(1)

Oligopoly

423

(1)

Oligopoly Market Characteristics

423

(1)

Examples of Oligopoly

423

(1)

Cartels and Collusion

424

(1)

Overt and Covert Agreements

424

(1)

Enforcement Problems

424

(1)

Oligopoly Output-Setting Models

425

(6)

Cournot Oligopoly

425

(3)

Stackelberg Oligopoly

428

(3)

Oligopoly Price-Setting Models

431

(5)

Bertrand Oligopoly: Identical Products

431

(1)

Bertrand Oligopoly: Differentiated Products

431

(3)

Sweezy Oligopoly

434

(1)

Oligopoly Model Comparison

435

(1)

Managerial Application 13.3: Contestable Airline Passenger Service Markets

436

(1)

Market Structure Measurement

436

(3)

Economic Markets

437

(1)

Economic Census

437

(2)

Census Measures of Market Concentration

439

(3)

Concentration Ratios

439

(2)

Herfindahl-Hirschmann Index

441

(1)

Limitations of Census Information

441

(1)

Managerial Application 13.4: Horizontal Merger Guidelines

442

(1)

Summary

443

(8)

Case Study: Market Structure Analysis at Columbia Drugstores, Inc.

451

(4)

Game Theory and Competitive Strategy

455

(32)

Game-Theory Basics

456

(2)

Types of Games

456

(1)

Role of Interdependence

456

(1)

Strategic Considerations

457

(1)

Managerial Application 14.1: Intel: Running Fast to Stay in Place

458

(1)

Prisoner's Dilemma

458

(3)

Classic Riddle

458

(2)

Business Application

460

(1)

Broad Implications

460

(1)

Nash Equilibrium

461

(2)

Nash Equilibrium Concept

461

(1)

Nash Bargaining

462

(1)

Infinitely Repeated Games

463

(1)

Role of Reputation

463

(1)

Product Quality Games

463

(1)

Managerial Application 14.2: Wrigley's Success Formula

464

(1)

Finitely Repeated Games

465

(2)

Uncertain Final Period

465

(1)

End-of-Game Problem

466

(1)

First-Mover Advantages

466

(1)

Competitive Strategy

467

(3)

Basic Concepts

467

(1)

Competitive Advantage

468

(1)

When Large Size Is a Disadvantage

469

(1)

Managerial Application 14.3: The ``Tobacco'' Issue

470

(1)

Pricing Strategies

470

(3)

Limit Pricing

470

(2)

Market Penetration Pricing

472

(1)

Managerial Application 14.4: Network Switching Costs

473

(1)

Nonprice Competition

473

(4)

Advantages of Nonprice Competition

473

(1)

Optimal Level of Advertising

474

(2)

Optimal Advertising Example

476

(1)

Summary

477

(7)

Case Study: Time Warner, Inc., Is Playing Games with Stockholders

484

(3)

Pricing Practices

487

(34)

Pricing Rules-of-Thumb

488

(1)

Competitive Markets

488

(1)

Imperfectly Competitive Markets

488

(1)

Managerial Application 15.1: Markup Pricing Technology

489

(1)

Markup Pricing and Profit Maximization

490

(2)

Optimal Markup on Cost

490

(1)

Optimal Markup on Price

491

(1)

Price Discrimination

492

(3)

Profit-Making Criteria

493

(1)

Degrees of Price Discrimination

494

(1)

Managerial Application 15.2: 10 for a Gallon of Gas in Dayton, Ohio

495

(1)

Price Discrimination Example

495

(4)

Price/Output Determination

495

(2)

One-Price Alternative

497

(1)

Graphic Illustration

498

(1)

Multiple-Product Pricing

499

(1)

Demand Interrelations

499

(1)

Production Interrelations

499

(1)

Joint Products

500

(3)

Joint Products in Variable Proportions

500

(1)

Joint Products in Fixed Proportions

501

(2)

Managerial Application 15.3: Do Colleges Price Discriminate?

503

(1)

Joint Product Pricing Example

503

(4)

Joint Products Without Excess By-Product

503

(2)

Joint Production with Excess By-Product (Dumping)

505

(2)

Transfer Pricing

507

(2)

Transfer Pricing Problem

507

(1)

Products Without External Markets

507

(1)

Products with Competitive External Markets

508

(1)

Products with Imperfectly Competitive External Markets

508

(1)

Managerial Application 15.4: Why Some Price Wars Never End

509

(1)

Global Transfer Pricing Example

509

(4)

Profit Maximization for an Integrated Firm

509

(1)

Transfer Pricing with No External Market

510

(1)

Competitive External Market with Excess Internal Demand

511

(1)

Competitive External Market with Excess Internal Supply

512

(1)

Summary

513

(6)

Case Study: Pricing Practices in the Denver, Colorado, Newspaper Market

519

(2)

Part 5 Long-Term Investment Decisions

521

(114)

Risk Analysis

522

(39)

Concepts of Risk and Uncertainty

523

(2)

Economic Risk and Uncertainty

523

(1)

General Risk Categories

524

(1)

Special Risks of Global Operations

524

(1)

Managerial Application 16.1: Internet Fraud

525

(1)

Probability Concepts

525

(6)

Probability Distribution

525

(2)

Expected Value

527

(2)

Absolute Risk Measurement

529

(1)

Relative Risk Measurement

530

(1)

Other Risk Measures

530

(1)

Standard Normal Concept

531

(2)

Normal Distribution

531

(1)

Standardized Variables

532

(1)

Use of the Standard Normal Concept: An Example

532

(1)

Managerial Application 16.2: Why Lotteries Are Popular

533

(1)

Utility Theory and Risk Analysis

533

(2)

Possible Risk Attitudes

534

(1)

Relation Between Money and Its Utility

534

(1)

Managerial Application 16.3: Employee Stock Options

535

(1)

Adjusting the Valuation Model for Risk

536

(4)

Basic Valuation Model

536

(1)

Certainty Equivalent Adjustments

536

(1)

Certainty Equivalent Adjustment Example

537

(2)

Risk-Adjusted Discount Rates

539

(1)

Risk-Adjusted Discount Rate Example

540

(1)

Decision Trees and Computer Simulation

540

(3)

Decision Trees

541

(1)

Computer Simulation

542

(1)

Computer Simulation Example

543

(1)

Managerial Application 16.4: Game Theory at the FCC

543

(2)

Uses of Game Theory in Risk Analysis

545

(4)

Game Theory and Auction Strategy

545

(1)

Maximin Decision Rule

546

(1)

Minimax Regret Decision Rule

547

(1)

Cost of Uncertainty

548

(1)

Summary

549

(8)

Case Study: Stock-Price Beta Estimation for the Royal Dutch Petroleum Company

557

(4)

Capital Budgeting

561

(38)

Capital Budgeting Process

562

(1)

What Is Capital Budgeting?

562

(1)

Project Classification Types

562

(1)

Steps in Capital Budgeting

563

(2)

Sequence of Project Valuation

563

(1)

Cash Flow Estimation

563

(1)

Incremental Cash Flow Evaluation

564

(1)

Managerial Application 17.1: Market-Based Capital Budgeting

565

(1)

Cash Flow Estimation Example

565

(3)

Project Description

565

(1)

Cash Flow Estimation and Analysis

566

(2)

Capital Budgeting Decision Rules

568

(5)

Net Present-Value Analysis

568

(2)

Profitability Index or Benefit/Cost Ratio Analysis

570

(1)

Internal Rate of Return Analysis

571

(1)

Payback Period Analysis

572

(1)

Managerial Application 17.2: Is the Sun Setting on Japan's Vaunted MOF?

573

(1)

Project Selection

574

(4)

Decision Rule Conflict Problem

574

(1)

Reasons for Decision Rule Conflict

574

(1)

Ranking Reversal Problem

575

(2)

Making the Correct Investment Decision

577

(1)

Managerial Application 17.3: Federal Government Support for R&D

578

(1)

Cost of Capital

578

(5)

Component Cost of Debt Financing

579

(1)

Component Cost of Equity Financing

579

(2)

Weighted-Average Cost of Capital

581

(2)

Managerial Application 17.4: Capital Allocation at Berkshire Hathaway, Inc.

583

(1)

Optimal Capital Budget

583

(3)

Investment Opportunity Schedule

584

(1)

Marginal Cost of Capital

585

(1)

Postaudit

585

(1)

Summary

586

(7)

Case Study: Sophisticated NPV Analysis at Level 3 Communications, Inc.

593

(6)

Government in the Market Economy

599

(36)

Externalities

600

(2)

Negative Externalities

600

(1)

Positive Externalities

600

(2)

Managerial Application 18.1: How Do You Regulate a Global Economy?

602

(1)

Solving Externalities

602

(2)

Government Solutions

603

(1)

Market Solutions

603

(1)

Public Goods

604

(3)

Rivalry and Exclusion

604

(1)

Free Riders and Hidden Preferences

605

(2)

Managerial Application 18.2: Political Corruption

607

(1)

Benefit/Cost Concepts

608

(4)

Pareto Improvement

608

(2)

Benefit/Cost Methodology

610

(1)

Social Rate of Discount

611

(1)

Benefit/Cost Criteria

612

(4)

Social Net Present-Value

612

(2)

Benefit/Cost Ratio

614

(1)

Internal Rate of Return

615

(1)

Limitations of Benefit/Cost Analysis

616

(1)

Managerial Application 18.3: Free Trade Helps Everyone

616

(1)

Additional Methods for Improving Public Management

617

(2)

Cost-Effectiveness Analysis

617

(1)

Privatization

618

(1)

Regulatory Reform in the New Millennium

619

(2)

Promoting Competition in Electric Power Generation

619

(1)

Fostering Competition in Telecommunications

619

(1)

Reforming Environmental Regulation

620

(1)

Improving Regulation of Health and Safety

621

(1)

Managerial Application 18.4: Price Controls for Pharmaceutical Drugs

621

(1)

Health Care Reform

622

(2)

Managed Competition

622

(2)

Outlook for Health Care Reform

624

(1)

Summary

624

(7)

Case Study: Oh, Lord, Won't You Buy Me a Mercedes-Benz (Factory)?

631

(4)

Appendices

635

(14)

Appendix A: Interest Factor Tables

635

(8)

Appendix B: Statistical Tables

643

(6)

Selected Check Figures for End-of-Chapter Problems

649

(6)

Index

655

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Fundamentals of Managerial Economics (with Economic Applications Access)

Fundamentals of Managerial Economics (with Economic Applications Access)

9780324288896

0324288891

Summary

Table of Contents

Supplemental Materials

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Amazon no longer offers textbook rentals. We do!

Fundamentals of Managerial Economics (with Economic Applications Access)

Fundamentals of Managerial Economics (with Economic Applications Access)

9780324288896

0324288891

Summary

Table of Contents

Supplemental Materials

Write a Review

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