PART 1 OVERVIEW OF MANAGERIAL ECONOMICS
1 Introduction
How Is Managerial Economics Useful?
Managerial Application 1.1: Managerial Ethics
Theory of the Firm
Profit Measurement
Why Do Profits Vary Among Firms?
Role of Business in Society
Managerial Application 1.2: The Internet Revolution
Structure of This Text
Summary
2 Basic Economic Relations
Economic Optimization Process
Basic Economic Relations
Managerial Application 2.1: Does Good Theory Always Work in Practice?
Marginal Analysis in Decision Making
Practical Applications of Marginal Analysis
Managerial Application 2.2: How Entrepreneurs Shape the Economy
Incremental Concept in Economic Analysis
Summary
3 Statistical Analysis of Economic Relations
Data Summary and Description
Measures of Central Tendency
Managerial Application 3.1: Sampling Technology for TV Advertising
Measures of Dispersion
Hypothesis Testing
Regression Analysis
Regression Statistics
Managerial Application 3.2: Spreadsheet and Statistical Software for the PC
Demand Estimation Example
Summary
PART 2 DEMAND ANALYSIS
4 Demand and Supply
Basis for Demand
Managerial Application 4.1: How the Internet Affects Demand and Supply
Market Demand Function
Demand Curve
Basis for Supply
Market Supply Function
Supply Curve
Managerial Application 4.2: Demand and Supply Conditions for Economists
Market Equilibrium
Summary
5 Demand Analysis and Estimation
Demand Sensitivity Analysis: Elasticity
Price Elasticity of Demand
Managerial Application 5.1: Due Diligence in E-Commerce
Price Elasticity and Marginal Revenue
Price Elasticity and Optimal Pricing Policy
Managerial Application 5.2: Relationship Marketing
Cross-Price Elasticity of Demand
Income Elasticity of Demand
Summary
6 Forecasting
What Is Economic Forecasting?
Common Types of Forecasting Problems
Managerial Application 6.1: Economic Forecasting: The Art and the Science
Qualitative Analysis
Trend Analysis and Projection
Business Cycle
Exponential Smoothing Techniques
Managerial Application 6.2: The Stock Market and the Business Cycle
Summary
PART 3 PRODUCTION AND COST ANALYSIS
7 Production Analysis and Compensation Policy
Production Functions
Total, Marginal, and Average Product
Managerial Application 7.1: Total Quality Management
Law of Diminishing Returns to a Factor
Input Combination Choice
Managerial Application 7.2: Are CEOs Overpaid?
Marginal Revenue Product and Optimal Employment
Input Demand Function
Optimal Combination of Multiple Inputs
Optimal Levels of Multiple Inputs
Returns to Scale
Production Function Estimation
Productivity Measurement
Summary
Cost Analysis and Estimation
What Makes Cost Analysis Difficult?
Opportunity Costs
Incremental and Sunk Costs in Decision Analysis
Short-Run and Long-Run Costs
Short-Run Cost Curves
Managerial Application 8.1: Gaps in GAAP?
Long-Run Cost Curves
Minimum Efficient Scale
Firm Size and Plant Size
Managerial Application 8.2: Bigger Isn't Always Better
Learning Curves
Economies of Scope
Cost-Volume-Profit Analysis
Summary
PART 4 MARKET STRUCTURE ANALYSIS AND ESTIMATION
9 Perfect Competition and Monopoly
Contrast Between Perfect Competition and Monopoly
Managerial Application 9.1: Is the Stock Market Perfectly Competitive?
Factors That Determine the Level of Competition
Perfect Competition
Monopoly
Countervailing Power: The Monopoly/Monophony Confrontation
Measurement of Business Profit Rates
Managerial Application 9.2: Wrigley's Success Formula
Link Between Market Structure and Business Profit Rates
Competitive Strategy in Perfectly Competitive and Monopoly Markets
Summary
10 Monopolistic Competition and Oligopoly
Contrast Between Monopolistic Competition and Oligopoly
Monopolistic Competition
Managerial Application 10.1: Intel: Running Fast to Stay in Place
Illustration of Monopolistically Competitive Equilibrium
Oligopoly
Nonprice Competition
Game Theory
Managerial Application 10.2: Dot.com
Market Structure Measurement
Census Measures of Market Concentration
Competitive Strategy in Monopolistic Competition and Oligopoly Markets
Summary
11 Pricing Practices
Markup Pricing
Managerial Application 11.1: 10~ for a Gallon of Gas in Dayton, Ohio
Markup Pricing and Profit Maximization
Price Discrimination
Price Discrimination Example
Multiple-Unit Pricing Strategies
Managerial Application 11.2: Do Colleges Price Discriminate?
Multiple-Product Pricing
Example of Joint Product Pricing
Transfer Pricing
Global Transfer Pricing Example
Summary
PART 5 LONG-TERM INVESTMENT DECISIONS
12 Regulation of the Market Economy
Competition and the Role of Government
Regulatory Response to Incentive Failures
WhoPays the Costs of Regulation?
Regulatory Response to Structural Failures
Managerial Application 12.1: Microsoft's Antitrust Woes
Antitrust Policy
Managerial Application 12.2: The Enron Debacle
Problems with Regulation
Deregulation Movement
Summary
13 Risk Analysis
Concepts of Risk and Uncertainty
Probability Concepts
Standard Normal Concept
Managerial Application 13.1: Why Lotteries Are Popular
Utility Theory and Risk Analysis
Managerial Application 13.2: Employee Stock Options
Adjusting the Valuation Model for Risk
Decision Trees and Computer Simulation
Uses of Game Theory in Risk Analysis
Summary
14 Capital Budgeting
Capital Budgeting Process
Steps in Capital Budgeting
Managerial Application 14.1: Market-Based Capital Budgeting
Cash Flow Estimation Example
Capital Budgeting Decision Rules
Choosing Among Alternative Projects
Cost of Capital
Managerial Application 14.2: Capital Allocation at Berkshire Hathaway, Inc.
Optimal Capital Budget
Summary
Appendix: Interest Factor Tables
Selected Check Figures for End-of-Chapter Problems
Glossary