ISBN: 9780199811786 | 0199811784

Edition: 7thFormat: Hardcover

Publisher: Oxford University Press

Pub. Date: 7/22/2011

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Managerial economics refers to the application of economic theory and the tools of analysis of decision science to examine how a firm can make optimal managerial decisions in the face of constraints. The text exhibits four unique features: First, it uses the theory of the firm as the unifying theme to examine the managerial decision-making process. Second, it takes a uniquely global view into managerial economics to reflect the internationalization of tastes, production, distribution and competition in the world today. Third, it introduces many new and exciting topics into the study of managerial economics, such as firm architecture, firm governance and business ethics; Porter's strategic framework and the evolution of the creative firm; electronic commerce and risk management, as well as international economies of scale, the virtual corporation, reengineering, benchmarking, the learning organization, and the digital factory. Fourth, it shows how firms actually reach managerial decisions in the world today with more than 122 real-world case studies (more than any other competitor), as well as 11 more extensive integrating cases studies at the end of each of the five parts of the text. Improvements to the 7th Edition include: · Every chapter has been revised to incorporate the effects of and lessons from the recent global financial crisis. · A new Chapter 2: Demand, Supply and Equilibrium Analysis to help refresh students on the principles of economic analysis they'll need to succeed in managerial economics. The chapter is optional and may be assigned or skipped, as the instructor prefers. · The instructor ancillary package has been greatly expanded and improved, especially for instructors teaching on-line or a hybrid lecture/on-line course. Ancillaries include editable PowerPoints, computerized test bank, on-line study guide, and more. All electronic ancillaries are available to adopters of the text in a format suitable for uploading into their learning management system (e.g., Blackboard, Moodle, Desire2Learn, and others). · Coverage of spreadsheets such as Microsoft Excel has been greatly expanded, with new appendices and spreadsheet-based problems to help students become more adept at using this critical tool. · Nearly one-third of the 122 Case Applications are brand new, while half of the remaining have been updated. Among the new Case Applications are: 1-7, the World Financial Crisis; 3-1, Management Across Countries; 7-7, Open Innovation at Proctor & Gamble; 10-10, The Most Innovative Companies in the World; 13-8, The Microsoft Antitrust Case; 13-11, Corporate Taxes Around the World. · Five longer "Integrating Case Studies" have been added, one at the end of each part: The Decade of Steve, Ford's Bet: It's a Small World After All, e-Books Rewrite Bookselling, How Silicon Valley Conquered the Carriers, and Phone Fight!

About the Author

Preface

Definition of Managerial Economics

Relationship to Economic Theory

Relationship to the Decision Sciences

Relationship to the Functional Areas of Business Administration Studies

Reasons for the Existence of Firms and Their Functions

The Objective and Value of the Firm

Constraints on the Operation of the Firm

Limitations of the Theory of the Firm

Business versus Economic Profit

Theories of Profit

Function of Profit

Microsoft Excel

Example

Solution

Demand Schedule and Demand Curve

Changes in Demand

Supply Schedule and Supply Curve

Changes in Supply

Adjustment to Changes in Demand

Adjustment to Changes in Supply

Market Equilibrium Algebraically

Shifts in Demand and Supply, and Equilibrium

The Effect of an Excise Tax

Total, Average, and Marginal Cost

Geometric Derivation of the Average- and Marginal-Cost Curves,

Profit Maximization by the Total-Revenue and Total-Cost Approach

Optimization by Marginal Analysis

Benchmarking

Total Quality Management

Reengineering

The Learning Organization

The Concept of the Derivative

Rules of Differentiation

Determining a Maximum or a Minimum by Calculus

Distinguishing between a Maximum and a Minimum: The Second Derivative

Partial Derivatives

Maximizing a Multivariable Function

Constrained Optimization by Substitution

Constrained Optimization by the Lagrangian Multiplier Method

The Decade of Steve

Apple's Future

An Individual's Demand for a Commodity

From Individual to Market Demand

The Demand Faced by a Firm

Point Price Elasticity of Demand

Arc Price Elasticity of Demand

Price Elasticity, Total Revenue, and Marginal Revenue

Factors Affecting the Price Elasticity of Demand

The Consumer's Tastes: Indifference Curves

The Consumer's Constraints: The Budget Line

The Consumer's Equilibrium

Derivation of the Consumer's Demand Curve

Income and Substitution Effects of a Price Change

The Theory of Consumer Choice Mathematically

Consumer Surveys and Observational Research

Consumer Clinics,

Market Experiments

Virtual Shopping and Virtual Management,

The Ordinary Least-Squares Method

Tests of Significance of Parameter Estimates

Other Aspects of Significance Tests and Confidence Intervals

Test of Goodness of Fit and Correlation

The Multiple Regression Model

The Coefficient of Determination and Adjusted R2

Analysis of Variance

Point and Interval Estimates

Multicollinearity

Heteroscedasticity

Autocorrelation

Model Specification

Collecting Data on the Variables

Specifying the Form of the Demand Equation

Testing the Econometric Results

Simple Regression

Multiple Regression Analysis

Survey Techniques

Opinion Polls

Soliciting a Foreign Perspective

Reasons for Fluctuations in Time-Series Data

Trend Projection

Seasonal Variations

Moving Averages

Exponential Smoothing

Single-Equation Models

Multiple-Equation Models

Forecasting New-Housing Starts with Regression Analysis

Adjusting the Trend Forecasts of New-Housing Starts for Seasonal Variations by the Ratio-to-Trend Method

Adjusting the Trend Forecasts of New-Housing Starts for Seasonal Variations by Using Seasonal Dummies

The Organization of Production

The Production Function

Total, Average, and Marginal Product

The Law of Diminishing Returns and Stages of Production

Production Isoquants

Economic Region of Production

Marginal Rate of Technical Substitution

Perfect Substitutes and Complementary Inputs

Isocost Lines

Optimal Input Combination for Minimizing Costs or Maximizing Output

Profit Maximization

Effect of Change in Input Prices

Meaning and Importance of Innovations

The Open Innovation Model

The Next Step in Open Innovation

Innovations and the International Competitiveness of U.S. Firms

The New Computer-Aided Production Revolution and the International Competitiveness of U.S. Firms

Constrained Output Maximization

Constrained Cost Minimization

Profit Maximization

Short-Run Total and Per-Unit Cost Functions

Short-Run Total and Per-Unit Cost Curves

Long-Run Total Cost Curves

Long-Run Average and Marginal Cost Curves

International Trade in Inputs

The New International Economies of Scale

Immigration of Skilled Labor

Cost-Volume-Profit Analysis

Operating Leverage

Data and Measurement Problems in Estimating Short-Run Cost Functions

The Functional Form of Short-Run Cost Functions

Estimating Long-Run Cost Functions with Cross-Sectional Regression Analysis

Estimating Long-Run Cost Functions with Engineering and Survival Techniques

Meaning and Importance of Perfect Competition

Price Determination under Perfect Competition

Short-Run Analysis of a Perfectly Competitive Firm

Short-Run Supply Curve of the Competitive Firm and Market

Long-Run Analysis of a Perfectly Competitive Firm

Domestic Demand and Supply, Imports, and Prices

The Dollar Exchange Rate and the International Competitiveness of U.S. Firms

Sources of Monopoly

Short-Run Price and Output Determination under Monopoly

Long-Run Price and Output Determination under Monopoly

Comparison of Monopoly and Perfect Competition

Meaning and Importance of Monopolistic Competition

Short-Run Price and Output Determination under Monopolistic Competition

Long-Run Price and Output Determination under Monopolistic Competition

Product Variation and Selling Expenses under Monopolistic Competition

Oligopoly: Meaning and Sources

Concentration Ratios, the Herfindahl Index, and Contestable Markets

The Cournot Model

The Kinked Demand Curve Model

Cartel Arrangements

Porter's Strategic Framework

Efficiency Implications of Oligopoly

The Architecture of the Ideal Firm

The Evolution of the Creative Company

The Virtual Corporation

Relationship Enterprises

The Cournot Model

The Kinked Demand Curve Model

The Centralized Cartel Model

The Market-Sharing Cartel

The Sales Maximization Model

Dominant Strategy

Nash Equilibrium

Price Competition and the Prisoners' Dilemma

Nonprice Competition, Cartel Cheating, and the Prisoners' Dilemma

Threat, Commitments, and Credibility

Entry Deterrence

Pricing of Products with Interrelated Demands

Plant Capacity Utilization and Optimal Product Pricing

Optimal Pricing of Joint Products Produced in Fixed Proportions

Optimal Pricing and Output of Joint Products Produced in Variable Proportions

Meaning of and Conditions for Price Discrimination

First- and Second-Degree Price Discrimination

Third-Degree Price Discrimination Graphically

Third-Degree Price Discrimination Algebraically

Meaning and Nature of Transfer Pricing

Transfer Pricing with No External Market for the Intermediate Product

Transfer Pricing with a Perfectly Competitive Market for the Intermediate Product

Transfer Pricing with an Imperfectly Competitive Market for the Intermediate Product

Cost-Plus Pricing

Evaluation of Cost-Plus Pricing

Incremental Analysis in Pricing

Peak-Load Pricing, Two-Part Tariff, Tying, and Bundling

Other Pricing Practices

Government Regulations that Restrict Competition

Government Regulations to Protect Consumers, Workers, and the Environment

The Meaning and Importance of Externalities

Policies to Deal with Externalities

Public Utilities as Natural Monopolies

Difficulties in Public Utility Regulation

Sherman Act (1890)

Clayton Act (1914)

Federal Trade Commission Act (1914)

Robinson-Patman Act (1936)

Wheeler-Lea Act (1938)

Celler-Kefauver Antimerger Act (1950)

Enforcement of Antitrust Laws: Some General Observations

Enforcement of Antitrust Laws: Structure

Enforcement of Antitrust Laws: Conduct

The Deregulation Movement

Probability Distributions

An Absolute Measure of Risk: The Standard Deviation

Measuring Probabilities with the Normal Distribution

A Relative Measure of Risk: The Coefficient of Variation

Risk-Adjusted Discount Rates

Certainty-Equivalent Approach

Decision Trees

Simulation

The Maximin Criterion

The Minimax Regret Criterion

Other Methods of Dealing with Uncertainty

Asymmetric Information and the Market for Lemons

The Insurance Market and Adverse Selection

The Problem of Moral Hazard

The Principal-Agent Problem

Auctions

Meaning and Importance of Capital Budgeting

Overview of the Capital Budgeting Process

Projecting Cash Flows

Net Present Value (NPV)

Internal Rate of Return (IRR)

Comparison of NPV and IRR

The Cost of Debt

The Cost of Equity Capital: The Risk-Free Rate Plus Premium

The Cost of Equity Capital: The Dividend Valuation Model

The Cost of Equity Capital: The Capital Asset Pricing Model (CAPM)

The Weighted Cost of Capital

A-1. Future Value and Compounding

A-2. Present Value and Discounting

A-3. Future Value of an Annuity

A-4. Present Value of an Annuity

A-5. Compounding and Discounting Periods

A-6. Determining the Interest Rate

A-7. Perpetuities

Table B-1. Compound Value of $1

Table B-2. Present Value of $1

Table B-3. Future Value of an Annuity of $1 for n Periods

Table B-4. Present Value of an Annuity of $1 for n Periods

Table C-1. Areas under the Standard Normal Distribution

Table C-2. Areas in the Tails of the t Distribution

Table C-3. F Distribution for 5 Percent Significance

Table C-4. Durbin-Watson Statistic for 5 Percent Significance Points of dL and dU