...Economics for Managers, 11th Edition by McGuigan, Moyer, & Harris PowerPoint Lecture Slides prepared by Richard D. Marcus University of Wisconsin - Milwaukee 2008 Thomson * South-Western Slide 1 Chapter 1 Introduction & Goals of the Firm » Introduction » » » » » Structure of Decision Models Profit’s Role Agency Problems & Solutions Not-for-Profit Organizations Why Corporations Have Succeeded Over Other Organizational Forms Slide 2 What is Managerial Economics? Integrates and applies microeconomic theory and methods to decision making problems faced by private, public, and not-for-profit organizations. Managerial economics deals with microeconomic reasoning on real world problems such as pricing decisions, selecting the best strategy in different competitive environments, and making efficient choices. Slide 3 To Expand Capacity or Not? • Should Toyota expand its capacity? In part, it must consider current and future demand and what other firms are likely to do. • Capacity for making cars is a long term project, so Toyota should think in terms of the present value (PV) of future profits. • Objective Function: » Max PV of profits {S1, S2} » S1 could be expand capacity and S2 not to expand yet capacity at this time. • Decision Rule: » Choose S1 if PV {Profits of S1 } > PV { Profits of S2 } » Choose S2 if PV { Profits of S1 } < PV { Profits of S2 } » If equal profits, then flip a coin Slide 4 The Decision-Making Process (Figure 1.2)...
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...Exercise 1 Question 1 a. Microeconomics b. Macroeconomics c. Macroeconomics d. Microeconomics e. Macroeconomics Question 2 Given the graph of the production possibilities frontier, the main source of milk and ingredient of cookies are from cows. If the milk production is to be increased, the production of cookies will decreased, illustrated by the movement of quantity of milk and cookies produced, from point A to B. This is based on the opportunity cost applied in this situation. If the population of the cows grows, the economy in this industry grows along as well, and the producers are able to produce more cookies and milk, illustrated from the shift from point B to C. If the disease kills half of the population of the cows, the productivity level decreases, as the source now are limited. This results in a lower production for both products, illustrated with the shift from point B to D. Question 3 a. | | The demand of the orange juice increases, illustrated by the shift of the demand curve from D1 to D2. This causes the price of the orange juice rises from P1 to P2. | | | | b. | | As New England turns warm, people prefer to go there rather than the Caribbean. This causes the quantity demand for the resort in the Caribbean to fall, from Q1 to Q2, which resulted in the price of the hotel rooms in the Caribbean to fall as well. | | | | c. | | The supply of gasoline decreases as the war breaks, from...
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...Oligopoly • More than two • Oligopsony sellers – (oligopsonist) University Education, Car manufacturers, Banks, Fast Food • Several large buyers control the market – i.e. Fast Food industry controls the meat market • Monopolistic Competition ‐ sell side • Small to Medium sized businesses 11 Types of Markets: Perfect and Imperfect Perfect Competition has the following distinguishing characteristics: • • • • Many Buyers & Many Sellers Products are Homogeneous Perfect knowledge of competitors activities ‐ i.e. symmetrical knowledge Firms are Price Takers not Price Maker • • • • Freedom of Entry and Freedom to Exit All PC firms face the same costs Price = Demand = AR= MR. Firms make an economic profit Or an economic loss • No barriers to entry Examples: The spot market for crude oil & spot market for Henry Hub natural gas. Both markets tend to approximate perfect competitive behaviour. 12 13 14 Market Structure Perfect Competition Sell Side • • Perfect Competition • Duopoly • Monopoly • Example One large seller controls market...
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...Economics for the Global Manager BUS610 AIU Abstract This paper will discuss Boeing’s global operations as it pertains to its activities outside the U.S. It will identify the economic concepts that apply to this firm and how the concepts can be used to address the firm’s problems and opportunities. It will identify the economic and political policies that affect this firm and how the policies impact business decisions. It will discuss how the firm uses technology for strategic advantages and the impact of globalization for the firm. Economics for the Global Manager Introduction The world’s largest; Boeing is an aerospace company that leads the manufacturing of commercial jetliners. Boeing also has manufacturer defense, space, and security systems (About Us, 2013). Boeing’s global operations have supply and manufacturer activities outside the U.S. (Backgrounder, 2013). The economic concepts that apply to this firm are manufacturing of commercial jetliners as well as defense, space, and security systems and these concepts can be used to address the firm’s problems and opportunities (About Us, 2013). The economic and political policies that affect this firm are economic growth and political turmoil and these policies impact business decisions (Long-Term Market, 2013). The firm uses technology for strategic advantages by ¬making plans in its research and development investments to maximize potential returns and the impact of globalization for the firm (Arkell, 2005)...
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...Economics for the Global Manager BUS610 AIU Abstract An economic company has contracted out to establish the financial structure and potential actions of the Organization of Petroleum Exporting Countries, or OPEC. The purpose of this paper is to discuss the difference between a monopoly, an oligopoly, and a cartel along with examples of each. It will discuss the welfare effects of monopolies and oligopolies. It will discuss how game theory explains the relations of firms within oligopolies and cartels and the financial purpose of OPEC and the past five years of the oil prices. Economics for the Global Manager The Organization of Petroleum Exporting Countries, or OPEC, economic structure and future actions are predicated on a contract from an economic firm. The difference between a monopoly, an oligopoly, and a cartel are simple and examples of each will be given. The welfare effects of monopolies and oligopolies will be discussed. Game theory explains the relations of firms within oligopolies and cartels. The economic purpose of OPEC and what has happened to oil prices over the past five year will be discussed. Differences /Examples One seller of a good or service which has no close substitute and has substantial control over the price and protection from rivalry through a barrier to entry is a monopoly. An industry that has moderately diminutive number of firms, barriers to access, price searching behavior and mutual interdependence is an oligopoly. A cartel...
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...Running Head: ECONOMICS FOR THE GLOBAL MANAGER Economics for the Global Manager BUS610 AIU Abstract This paper will discuss a U.S. multinational company named Time Warner that has revenues and cost. It will also discuss two operations under Time Warner operations that contribute to the profits. It will also discuss the means that the company uses to hedge against exchange rate risk. The paper will discuss the effectiveness of increase or decreasing the dollar’s exchange value on the company’s profitability. Economics for the Global Manager Introduction A global leader in media and entertainment, Time Warner Inc. has businesses in television networks, film, and TV entertainment and publishing. Time Warner Inc. uses its industry-leading operating scale and brand to create, package, and deliver high-quality content worldwide through multiple distribution outlets. The operating divisions of Time Warner Inc. are at the top of their categories including Warner Bros. Entertainment and Turner Broadcasting System which are measured by quality, popularity, and financial results. The union on Time Warner Inc. business and employees is based on the passion for storytelling and the commitment to gaining the competitive advantage (About Us, 2013). Revenues The programming services that are provided by Time Warner Inc. are subscription revenues based on contractual programming rates that are negotiated. The advertisements aired in a period are recognized...
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...Economics for the Global Manager BUS610 AIU Abstract This paper’s objective is to discuss the differences between microeconomics and macroeconomics and examples of each. It will discuss a personal microeconomic example with the factors that contributed to the decision. It will also discuss an example of a macroeconomic phenomenon and the results of the decision. Economics for the Global Manager Microeconomics is an analysis of how individuals and firms will make themselves as successful as possible in a world of shortages and the penalty of those individual decisions for markets and the entire economy. It will study how individuals and firms make decisions and how the individual decisions will affect markets (Perloff, 2012). Macroeconomic is an analysis of the performance of the whole economic system. It can forecast the national income by studying the major economic factors that have predictable patterns or trends and the influence they have on one another. The factors used are prices, balance of payment positions, gross national product, and employment / unemployment (Macroeconomics, 2013). The difference between microeconomics and macroeconomics is clear. Microeconomics is the study of the individuals / firms markets. It looks at the allocations of resources and the prices of goods. Macroeconomics is a study of the whole economic system. It looks at gross national product and how it affects unemployment. A microeconomic phenomenon example is taking a looks...
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...Economics for the Global Manager BUS610 AIU Economics for the Global Manager 1) $1 US = .80 Euros Won: 1,000,000 Euros $ 800,000.00 Won in US $ If the lotto winnings were exchanged from Euros to US dollars right away, the winner would receive $800,000.00 US. 2) Irish Bank 4% 1 yr CD US Bank 2% 1 yr CD $ 1,040,000.00 After 1 yr in Irish Bank CD $ 832,000.00 Exchanged to US dollars at .80 Euro = $1 US $ 816,000.00 After 1 yr in US Bank CD If the lotto winnings were left in an Irish Bank CD for 1 year with a 4% rate, the winner would receive 1,040,000.00 Euros, and after being exchanges into US dollars at .80 Euro equaling $1 US the winner would receive $832,000.00 US. If the lotto winnings were taken to a US Bank CD for a 1 year with a 2% rate, the winner would receive $816,000.00 US. The winner would do better off in the Ireland Bank CD. 3) $1 US = .85 Euros in Irish Bank 4% 1 yr CD $ 1,040,000.00 After 1 yr in Irish Bank CD $ 850,000.00 US If the exchange rate changed to $1 US = .85 Euros and the lotto winning were left in the Irish Bank CD for 1 year with a 4% rate, the winner would receive $1,040,000.00 in the Irish Bank CD and exchanged to $850,000.00 US. The winner would do better off in the Ireland Bank CD. 4) Banks use “covered interest arbitrage” to protect themselves when they make international financial investments by borrowing currency then converting it to a second currency to invest...
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...Economics for the Global Manager BUS610 AIU Economics for the Global Manager The Heckscher-Ohlin theory explains that countries trade goods and services with each other because the countries vary in the accessibility of the factors of production such as more machines than workers or more workers than machines. A country will specialize in the production of goods for which it is fitting to produce. According to the theory, a higher standard-of-living will occur in the countries who participate (Why Trade, 2013). The Ricardian Theory, also known as the theory of comparative advantage, dominates the theory of international trade. The theory forms the basis of the claim that free trade operates to the advantage of every nation. It was built on the basis of the concept of labor value (Ricardo’s Theory, 2013). While the Ricardian model is simple, it assumes labor as a factor to production. The Heckscher-Olin model is more realistic because it considers two factors of production—capital and labor. Capital cannot move from country to country but is mobile across national borders, according to the Heckscher-Olin model, which is key to many results. With a world that has significant capital mobility, the Ricardian theory of trade is more useful than Hackscher-Olin (Mankiw, 2007). Despite that the US has an great quantity of capital, the exports are labor intensive while imports were capital intensive, according to Leontief. America has a superior economic organization and...
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...BUS610-1005A-01 - Economics for the Global Manager 13 November 2010 Introduction In economics, there are many things which take places. They include performance, organization, activities and decision making. Economics, like many other subjects in life, can be studied at different levels. These things can be conducted at individual level, or at a common level. What we mean by individual level is they may be by individual company, firm or an entity business person. The way the different entities behave may differ due to their different demands and supply. What we mean by decision made at a common level is that it looks at the entire activities and behavior of the entire economy. This may be at national level, regional level or even global level. Difference between microeconomics and macroeconomics Economics is primarily split into two major sections, this are the macroeconomics and the microeconomics. The two are so much connected. Adjustment in one affects the other. Both of them work together in the world of economy. The macroeconomics can be considered to be the summation of microeconomics. However there exists a difference in the two. We shall be discussing on the distinction between the two in the subsequent few paragraphs. To begin with, the naming denotes that there is a difference between macro and microeconomics.’ macro’ stands for large in Greek, while 'micro’ stands for small in Greek. This is to explain that microeconomics covers the...
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...* Part A Introduction This section will analyse an example of an event which led to an emergence of a black market on sales of tickets due to decisions made on how tickets were to be distributed. Events such as major sporting events, concerts by popular artists, etc are particularly prone to this issue. Huge profits can be gained by selling these tickets on the black market and subsequently cause massive losses in revenue for the organisers of the event. Recommendations as to how to regulate such a market are also explained. This section will use President Elect Barack Obama’s recent inauguration to the Presidency of the United States as its example. These points can be explained through the analysis of the following topics: * The price mechanism and equilibrium price. * Changes in demand, supply and equilibrium price. * Price and the allocation of resources. The Event Barack Obama made history on January 20, 2009 as he was inaugurated as the first African American to be inaugurated to the Presidency of the United States. For people to attend such a massive event, 240,000 tickets were made available for reserved seating and standing areas around Capitol Hill. It was decided that these tickets were to be made available free of charge and distributed through the members and representatives of Congress when requested by members of the public. The price mechanism and the equilibrium price The price mechanism describes the way in which the prices charged...
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...WEEK ONE Homework. Answer all questions, a through f. On questions c, d, e and f show your math. If you do not show your math you do not receive points. The general demand function for a good, Good A, is… QD = 800 – 5*P + 0.02*M + 6*PR + 3*T + 5*PE + .4*N Where QD = quantity demanded of Good A per month P = the price of Good A M = average household income PR = the price of a related good, we’ll call it Good B T = a consumer taste index PE = the price consumers expect to pay next month for Good A N = the number of buyers in the market a. Is Good A a normal good or an inferior good? How do we know exactly? Good A is a normal good, and we know this because the sign on the coefficient in front of the income variable M is positive. (If the equation read QD = 800 – 5*P - 0.02*M … then it would be an inferior good.) The positive sign means that as income (M) increases, so too does the quantity demanded of this good. b. Are Good A and Good B complements or substitutes? How do we know exactly? Goods A and B are substitutes, and we know this because the sign on the coefficient in front of the “Price of Related Good” variable, PR, is positive. (If the equation read QD = 800 – 5*P + 0.02*M - 6*PR… then they would be complements.) The positive sign means that as the price of the OTHER good, Good B, increases the quantity demanded of this good, Good A, increases. This is because as the price of the other good, Good B, increases people are shifting...
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...Introduction and Objectives One of the most hotly contested aspects of United States (U.S.) trade policy is the program of subsidies the United States provides its farmers. Trade partners object to U.S. farm subsidies, saying they unfairly block out foreign competition and this has been one of the primary sticking points during trade negotiations. The counterargument holds that U.S. farm subsidies are necessary to prop up the U.S. farm industry, particularly given the role that has been assigned to corn-based ethanol in the United States energy security plan. This brings us to the issue at hand; do United States farming subsidies need to continue, or should they be eliminated? This work will attempt to clarify why both sides of the argument feel they are correct and it will also attempt to show that repairing or fixing farming subsidies, not completely eliminating the program is in our best interest as a country. Method Most of the research that was unearthed on this topic came from the professionals in the field. Among the research found are debates from the CATO institute, website articles from the National Center for Policy Analysis, and information from the Heritage Foundation. Findings and Observations As it is often argued, governments are going to be involved in agriculture and a country’s food supply. As is often the case, if governments are involved, you as a consumer want them to err on the side of more production, not less. Estimates of the future cost...
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...Economics – Group 1 Learning Miscellany 1) ------------------------------------------------- Introduction Economics is not an exact science, as it has to factor-in human behaviour. It assumes that the market is logical or rational in its behaviour. We know that the actions of humans are not always rational, hence events like the economic crash in 2008. No matter how much history teaches us, we still sometimes take irrational actions. The principals explained in Greg Mankiw’s book “The Principles of Economics” are based on ten principles, which are difficult to image in the real world. It is as if you have to “put on hold” your rational thoughts in order to understand the models used. The economy is influenced by government policies and businesses driven by profits. Businesses like governments can have beliefs that are motivated by left, central and right winged policies, depending upon where you live. These can influence how we manage society, either purely from a profit driven perspective or from an equal balancing of profit and social good. 2) ------------------------------------------------- Miscellany Weekly Learning Notes a. General Introduction (D) In recent weeks considerable national media attention was given to the story of people queueing to buy a development of new houses in Swords, North County Dublin. This raised the question whether we are witnessing the re-emergence of a “bubble” in the housing market and whether we had learned little from...
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...ECON 125-HK2. Economics for Managers Exam http://homeworkfy.com/downloads/econ-125-hk2-economics-for-managers-exam/ To Get this Tutorial Copy & Paste above URL Into Your Browser Hit Us Email for Any Inquiry at: Homeworkfy@gmail.com Visit our Site for More Tutorials: (http://homeworkfy.com/ ) > TAKE ASSESSMENT: EXAM 1 Question 1 2 points Save Which of the following economic systems abolishes all private property? communism socialism fascism all of the above Question 2 2 points Save The profit motive is one characteristic of a command economy. True False Question 3 2 points Save In a market system, the government enforces laws ensuring that private enterprises and conditions of competition will prevail. True False Question 4 2 points Save The most common type of business in the United States is the corporation. True False Question 5 2 points Save Laissez-faire is a policy of no government intervention in the economic activities of individuals and businesses. True False Question 6 2 points Save In a partnership, each partner’s liability is limited to his or her contribution to the partnership. True False Question 7 2 points Save There are no government-regulated markets in the U.S. economy. True False Question 8 2 points Save Which of the following is not among the United States’ economic goals? ...
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