Managerial Economics: A Problem Solving Approach PDF
Preview Managerial Economics: A Problem Solving Approach
This is an electronic version of the print textbook. Due to electronic rights restrictions, some third party content may be suppressed. Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. The publisher reserves the right to remove content from this title at any time if subsequent rights restrictions require it. For valuable information on pricing, previous editions, changes to current editions, and alternate formats, please visit www.cengage.com/highered to search by ISBN#, author, title, or keyword for materials in your areas of interest. Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. A PROBLEM SOLVING APPROACH THIRD EDITION ? Luke M. Froeb Vanderbilt University Brian T. McCann Vanderbilt University Mikhael Shor University of Connecticut Michael R. Ward University of Texas, Arlington Australia(cid:129)Brazil(cid:129)Japan(cid:129)Korea(cid:129)Mexico(cid:129)Singapore(cid:129)Spain(cid:129)UnitedKingdom(cid:129)UnitedStates Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. ManagerialEconomics:AProblemSolving ©2014,2010,2008South-Western,CengageLearning Approach,ThirdEdition ALLRIGHTSRESERVED.Nopartofthisworkcoveredbythe LukeM.Froeb,BrianT.McCann,MikhaelShor, copyrighthereonmaybereproducedorusedinanyformorby MichaelR.Ward anymeans—graphic,electronic,ormechanical,including photocopying,recording,taping,Webdistribution,information SeniorVicePresident,LRS/Acquisitions&Solutions storageandretrievalsystems,orinanyothermanner—except Planning:JackW.Calhoun asmaybepermittedbythelicensetermsherein. 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Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. For our families: Lisa, Jake, Halley, Chris, Leslie, Jacob, Eliana, Cindy, Alex, and Chris Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. B R I E F C O N T E N T S Preface:TeachingStudentstoSolveProblems xiii SECTIONI ProblemSolving andDecisionMaking 1 1 Introduction:WhatThisBookIsAbout 3 2 TheOneLessonofBusiness 11 3 Benefits,Costs,andDecisions 21 4 Extent(HowMuch)Decisions 33 5 InvestmentDecisions:LookAheadandReasonBack 45 SECTIONII Pricing,Costs,andProfits 57 6 SimplePricing 59 7 EconomiesofScaleandScope 73 8 UnderstandingMarketsandIndustryChanges 85 9 RelationshipsBetweenIndustries:TheForcesMovingUsToward Long-RunEquilibrium 103 10 Strategy:TheQuesttoKeepProfitfromEroding 113 11 ForeignExchange,Trade,andBubbles 125 SECTIONIII Pricing forGreaterProfit 137 12 MoreRealisticandComplexPricing 139 13 DirectPriceDiscrimination 149 14 IndirectPriceDiscrimination 157 SECTIONIV Strategic DecisionMaking 167 15 StrategicGames 169 16 Bargaining 187 SECTIONV Uncertainty 197 17 MakingDecisionswithUncertainty 199 18 Auctions 213 19 TheProblemofAdverseSelection 223 20 TheProblemofMoralHazard 233 SECTIONVI Organizational Design 243 21 GettingEmployeestoWorkintheFirm’sBestInterests 245 22 GettingDivisionstoWorkintheFirm’sBestInterests 257 23 ManagingVerticalRelationships 269 v Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. vi BRIEFCONTENTS SECTIONVII WrappingUp 279 24 YouBetheConsultant 281 Epilogue:CanThoseWhoTeach,Do? 289 Glossary 291 Index 295 Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. C O N T E N T S Preface: Teaching Students to Solve Problems xiii SECTION I Problem Solving and Decision Making 1 CHAPTER 1 INTRODUCTION: WHAT THISBOOKISABOUT 3 UsingEconomics toSolve Problems 3 ProblemSolvingPrinciples 4 TestYourself 5 Ethicsand Economics 6 Economicsin JobInterviews 8 Summary& HomeworkProblems 10 EndNotes 10 CHAPTER 2 THE ONELESSON OFBUSINESS 11 Capitalism andWealth 12 DoestheGovernment CreateWealth? 13 WhyEconomicsisUseful toBusiness 14 Wealth Creationin Organizations 16 Summary& HomeworkProblems 17 EndNotes 19 CHAPTER 3 BENEFITS, COSTS, ANDDECISIONS 21 Background: Variable,Fixed, andTotal Costs 22 Background: Accounting VersusEconomicProfit 23 Costsare WhatYouGiveUp 25 Sunk-Cost Fallacy 26 Hidden-CostFallacy 28 AFinalWarning 28 Summary& HomeworkProblems 29 EndNotes 31 CHAPTER 4 EXTENT (HOWMUCH) DECISIONS 33 Background: Averageand Marginal Costs 34 MarginalAnalysis 35 IncentivePay 37 TiePayto PerformanceMeasures thatReflect Effort 38 IsIncentive PayUnfair? 39 vii Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. viii CONTENTS Summary& HomeworkProblems 40 EndNotes 42 CHAPTER 5 INVESTMENT DECISIONS:LOOKAHEAD ANDREASON BACK 45 Compoundingand Discounting 45 HowtoDetermine WhetherInvestments areProfitable 46 BreakevenAnalysis 47 Choosingthe RightManufacturing Technology 48 Shutdown Decisionsand BreakevenPrices 49 SunkCostsand Post-Investment Hold-Up 50 Anticipate Hold-Up 51 Summary& HomeworkProblems 52 EndNotes 55 SECTION II Pricing, Costs, and Profits 57 CHAPTER 6 SIMPLE PRICING 59 Background: Consumer Valuesand DemandCurves 60 MarginalAnalysis ofPricing 62 PriceElasticity andMarginal Revenue 64 WhatMakes DemandMoreElastic? 66 Forecasting DemandUsingElasticity 67 Stay-Even Analysis,Pricing, andElasticity 68 Cost-BasedPricing 69 Summary& HomeworkProblems 69 EndNotes 72 CHAPTER 7 ECONOMIES OFSCALE ANDSCOPE 73 Increasing Marginal Cost 74 EconomiesofScale 75 Learning Curves 76 EconomiesofScope 78 DiseconomiesofScope 79 Summary& HomeworkProblems 80 EndNotes 82 CHAPTER 8 UNDERSTANDING MARKETS ANDINDUSTRY CHANGES 85 WhichIndustry orMarket? 85 ShiftsinDemand 86 ShiftsinSupply 88 MarketEquilibrium 89 Predicting Industry ChangesUsingSupply and Demand 90 ExplainingIndustry ChangesUsing Supplyand Demand 92 PricesConveyValuable Information 95 MarketMaking 96 Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
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