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The Fundamentals
of
Managerial
Economics
Copyright 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Chapter One
Chapter
Overview
Introduction
The manager
Economics
Managerial economics defined
Introduction
Chapter
Overview
The Manager
Introduction
1-4
Introduction
Economics
The science of making decisions in
the presence of scarce resources.
Resources are anything used to produce
a good or service, or achieve a goal.
Decisions are important because
scarcity implies trade-offs.
1-5
Introduction
Economics of Effective
Management
Economics of Effective
Management
1-7
Economics of Effective
Management
Economic profit
The difference between total revenue and the
total opportunity cost of producing goods or
services.
Opportunity cost
The explicit cost of a resource plus the implicit cost
of giving up its best alternative.
1-8
Economics of Effective
Management
1-9
Economics of Effective
Management
Entry Costs
Speed of Adjustment
Sunk Costs
Economies of Scale
Network Effects
Reputation
Switching Costs
Government Restraints
Power of
Input Suppliers
Power of
Buyers
Supplier Concentration
Price/Productivity of
Alternative Inputs
Relationship-Specific
Investments
Supplier Switching Costs
Government Restraints
Level, Growth,
and Sustainability
of Industry Profits
Industry Rivalry
Concentration
Price, Quantity, Quality,
or Service Competition
Degree of Differentiation
Switching Costs
Timing of Decisions
Information
Government Restraints
Buyer Concentration
Price/Value of Substitute
Products or Services
Relationship-Specific
Investments
Customer Switching Costs
Government Restraints
1-10
Economics of Effective
Management
Understand Incentives
1-11
Economics of Effective
Management
Understand Markets
Economics of Effective
Management
Economics of Effective
Management
1-14
Economics of Effective
Management
1-15
Economics of Effective
Management
1-16
Economics of Effective
Management
1-17
Economics of Effective
Management
1-18
Economics of Effective
Management
1-19
Economics of Effective
Management
1-20
Economics of Effective
Management
1-21
Economics of Effective
Management
1-22
Economics of Effective
Management
Marginal Analysis
1-23
Economics of Effective
Management
Marginal cost:
The change in the total costs arising from a
change in the managerial control variable, .
Economics of Effective
Management
1-25
Economics of Effective
Management
Marginal Principle II
Marginal principle (calculus
alternative)
1-26
Economics of Effective
Management
Economics of Effective
Management
pe
o
l
S
Maximum net
benefits
pe
o
l
S
Quantity
(Control Variable)
1-28
Economics of Effective
Management
Slope =
Quantity
(Control Variable)
1-29
Economics of Effective
Management
Quantity
(Control Variable)
1-30
Economics of Effective
Management
Incremental Decisions
Incremental revenues
Incremental costs
The additional costs that stem from a
yes-or-no decision.
Thumbs up decision
.
Learning Managerial
Economics
1-32
Conclusion
Conclusion