Managerial Economics : Economic Tools for Today's Decision Makers

by Keat, Paul; Young, Philip K

• ISBN13: 9780131860155
• ISBN10: 0131860151
• Edition: 5th
• Format: Hardcover
• Copyright: 2009-01-01
• Publisher: Prentice Hall

Summary

For managerial economics courses taught in business schools and economics departments.This text provides a vivid learning environment by integrating a running case study and providing a dynamic capstone case.

Table of Contents

Preface	xv
Introduction	1	(25)
Introduction: Economics and Managerial Decision Making	3	(3)
The Economics of a Business	6	(3)
A Brief Review of Important Economic Terms and Concepts	9	(6)
The Case of Global Foods, Inc.: Situations and Solutions	15	(1)
Summary of the Situations and Solutions	16	(4)
International Application: Reinventing the Corporation	20	(6)
Summary	24	(1)
Important Concepts	24	(1)
Questions	24	(2)
The Firm and Its Goals	26	(22)
Introduction	27	(1)
The Firm	27	(5)
The Economic Goal of the Firm and Optimal Decision Making	32	(1)
Goals Other Than Profit	33	(2)
Once Again---Do Companies Maximize Profits?	35	(3)
Maximizing the Wealth of Stockholders	38	(4)
Economic Profits	42	(1)
International Application	43	(5)
Summary	45	(1)
Important Concepts	45	(1)
Questions	46	(2)
Supply and Demand	48	(28)
Introduction	49	(1)
Market Demand	49	(4)
Market Supply	53	(2)
Market Equilibrium	55	(2)
Comparative Statics Analysis	57	(8)
Supply, Demand, and Price: The Managerial Challenge	65	(2)
International Application: Competition Among Countries for the Global Demand for Coffee	67	(9)
Summary	70	(1)
Important Concepts	71	(1)
Questions	72	(1)
Problems	73	(3)
Appendix 3A The Mathematics of Supply and Demand	76	(35)
Demand Elasticity	79	(32)
The Economic Concept of Elasticity	80	(1)
The Price Elasticity of Demand	81	(16)
The Cross-Elasticity of Demand	97	(2)
Income Elasticity	99	(3)
Other Elasticity Measures	102	(1)
Elasticity of Supply	103	(1)
International Application: Price Elasticities in Asia	103	(8)
Summary	106	(1)
Important Concepts	106	(1)
Questions	107	(1)
Problems	108	(3)
Appendix 4A Applications of Supply and Demand	111	(108)
Interference with the Price Mechanism	111	(3)
The Incidence of Taxes	114	(2)
Actual Situations	116	(9)
Summary	124	(1)
Demand Estimation and Forecasting	125	(54)
Demand Estimation	127	(1)
Introduction	127	(2)
Regression Analysis: A Management Briefing	129	(8)
Problems in the Use of Regression Analysis	137	(4)
International Application: Food in Spain, Cigarettes in Taiwan	141	(2)
Forecasting	143	(1)
Introduction	143	(1)
Subjects of Forecasts	143	(1)
Prerequisites of a Good Forecast	144	(1)
Forecasting Techniques	144	(23)
International Application: Forecasting Exchange Rates	167	(12)
Summary	170	(1)
Important Concepts	171	(1)
Questions	172	(1)
Problems	173	(6)
The Theory and Estimation of Production	179	(40)
The Production Function	181	(2)
A Short-Run Analysis of Total, Average, and Marginal Product	183	(10)
The Long-Run Production Function	193	(3)
The Estimation of Production Functions	196	(9)
The Importance of Production Functions in Managerial Decision Making	205	(2)
Call Centers: Applying the Production Function to a Service	207	(1)
International Application: Is China Running Out of Workers?	208	(11)
Summary	210	(1)
Important Concepts	211	(1)
Questions	212	(1)
Problems	213	(6)
Appendix 6A The Multiple-Input Case	219	(10)
Substituting Input Factors	219	(5)
The Optimal Combination of Multiple Inputs	224	(2)
The Optimal Levels of Multiple Inputs	226	(3)
Appendix 6B Expressing the Production Function with the Use of Calculus	229	(47)
A Brief Review of the Production Function	229	(1)
Marginal Product: The First Derivative of the Total Product Function	229	(1)
Converting the Cobb-Douglas Function into a Linear Form	230	(1)
The Optimal Combination of Two Inputs	231	(2)
The Theory and Estimation of Cost	233	(43)
The Importance of Cost in Managerial Decisions	235	(1)
The Definition and Use of Cost in Economic Analysis	236	(2)
The Relationship between Production and Cost	238	(2)
The Short-Run Cost Function	240	(6)
The Long-Run Cost Function	246	(9)
The Learning Curve	255	(3)
Economies of Scope	258	(1)
Economies of Scale: The Short Run versus the Long Run	259	(1)
Supply Chain Management	259	(3)
Examples of Ways Companies Have Cut Costs to Remain Competitive	262	(4)
International Application: Will All Our Clothes Be Made in China?	266	(10)
Summary	268	(1)
Important Concepts	269	(1)
Questions	270	(1)
Problems	271	(5)
Appendix 7A A Mathematical Restatement of the Short-Run Cost Function	276	(1)
Appendix 7B The Estimation of Cost	277	(45)
The Estimation of Short-Run Cost Functions	277	(4)
The Estimation of Long-Run Cost Functions	281	(7)
Summary	286	(2)
Pricing and Output Decisions: Perfect Competition and Monopoly	288	(34)
Introduction	290	(1)
Competition and Market Types in Economic Analysis	291	(3)
Pricing and Output Decisions in Perfect Competition	294	(13)
Pricing and Output Decisions in Monopoly Markets	307	(4)
The Implications of Perfect Competition and Monopoly for Managerial Decision Making	311	(2)
International Application: Perfect Competition Means More Than Just the Shifting of Supply and Demand Diagrams	313	(9)
Summary	317	(1)
Important Concepts	317	(1)
Questions	318	(1)
Problems	319	(3)
Appendix 8A The Use of Calculus in Pricing and Output Decisions	322	(2)
Perfect Competition	322	(1)
Monopoly	322	(2)
Appendix 8B Break-Even Analysis (Volume-Cost-Profit)	324	(159)
Introduction	325	(1)
The Break-Even Point	326	(2)
Break-Even Revenue	328	(1)
Required Profit	329	(1)
Combining Break-Even Analysis with Demand	329	(1)
Degree of Operating Leverage	329	(3)
The Uses and Limitations of Volume-Cost-Profit Analysis	332	(1)
An Application: The Restaurant Industry	333	(5)
Summary	335	(1)
Important Concepts	335	(1)
Questions	335	(1)
Problems	336	(2)
Pricing and Output Decisions: Monopolistic Competition and Oligopoly	338	(29)
Introduction	339	(1)
Monopolistic Competition	340	(3)
Oligopoly	343	(3)
Pricing in an Oligopolistic Market: Rivalry and Mutual Interdependence	346	(3)
Competing in Imperfectly Competitive Markets	349	(5)
Strategy: The Fundamental Challenge for Firms in Imperfect Competition	354	(6)
International Application: The Market for Beer	360	(7)
Summary	362	(1)
Important Concepts	362	(1)
Questions	363	(1)
Problems	364	(3)
Special Pricing Practices	367	(42)
Introduction	368	(1)
Cartel Arrangements	368	(5)
Price Leadership	373	(2)
Revenue Maximization	375	(2)
Price Discrimination	377	(11)
Nonmarginal Pricing	388	(4)
Multiproduct Pricing	392	(5)
Transfer Pricing	397	(2)
Other Pricing Practices	399	(1)
International Application	400	(9)
Summary	403	(1)
Important Concepts	404	(1)
Questions	404	(1)
Problems	405	(4)
Game Theory and Asymmetric Information	409	(28)
Introduction	410	(1)
Game Theory	410	(1)
A Selected Sample of Games of Particular Relevance in Economics	411	(7)
Game Theory and Auctions	418	(2)
Strategy and Game Theory	420	(5)
Asymmetric Information	425	(1)
Markets with Asymmetric Information	426	(2)
Market Responses to Asymmetric Information	428	(1)
Reputation	428	(1)
Standardization	429	(1)
Market Signaling	429	(2)
A Final Example: Two Banking Systems as Responses to Information Asymmetries	431	(6)
Summary	434	(1)
Important Concepts	435	(1)
Questions	435	(1)
Problems	436	(1)
Capital Budgeting and Risk	437	(46)
Introduction	439	(1)
The Capital Budgeting Decision	439	(1)
Time Value of Money	440	(1)
Methods of Capital Project Evaluation	441	(6)
Cash Flows	447	(2)
Cost of Capital	449	(3)
The Capital Budgeting Model	452	(1)
Capital Rationing	453	(1)
Risk versus Uncertainty	454	(1)
Sources of Business Risk	455	(1)
The Measures of Risk	455	(5)
Capital Budgeting under Conditions of Risk	460	(1)
Two Other Methods for Incorporating Risk	461	(2)
Sensitivity and Scenario Analysis	463	(1)
Simulation	464	(1)
Decision Trees	465	(1)
Real Options in Capital Budgeting	466	(2)
International Application: Political Risk	468	(15)
Summary	474	(1)
Important Concepts	475	(1)
Questions	476	(1)
Problems	477	(6)
Appendix 12A The Value of a Corporation	483	(64)
The Multinational Corporation and Globalization	485	(24)
Introduction	487	(1)
Globalization	488	(1)
Is Globalization Good or Bad?	488	(1)
Proglobalization Arguments	489	(1)
AntiGlobalization Arguments	490	(1)
Globalization and the Future	490	(2)
Risks Faced by a Multinational Corporation	492	(1)
Exchange Rates	493	(1)
Exchange Rate Hedging	494	(2)
Foreign Direct Investment	496	(1)
Multinational Capital Budgeting	496	(2)
The Repositioning of Funds	498	(1)
Multinational Transfer Pricing	499	(3)
International Application: ``From Here to the Moon in Six Months''	502	(7)
Summary	506	(1)
Important Concepts	507	(1)
Questions	507	(1)
Problems	508	(1)
Government and Industry: Challenges and Opportunities for Today's Manager	509	(23)
Introduction	510	(1)
The Rationale for Government Involvement in a Market Economy	510	(6)
Stabilization of the Aggregate Economy: Monetary and Fiscal Policy	516	(2)
Doing Business with the U.S. Government	518	(5)
Government Deregulation, Mergers, and Acquisitions	523	(5)
International Application: The Failed Attempt to Merge by General Electric and Honeywell	528	(4)
Summary	530	(1)
Important Concepts	531	(1)
Questions	531	(1)
Managerial Economics in Action: The Case of the Semiconductor Industry	532	(15)
Introduction	532	(2)
Industry Background	534	(3)
Industry Analysis	537	(6)
Managerial Decision Making in Action	543	(3)
Question for Further Study	546	(1)
Appendix A Statistical and Financial Tables	547	(15)
Index	562