MANUAL
MANAGERIAL INSTRUCTOR'S ECONOMICS
Twelfth Edition
Mark Hirschey
University of Kansas
SOUTH-WESTERN
CENGAGE Learning
PREFACE
Managerial Economics, Twelfth Edition is a practical guide to the application of economic
concepts in managerial decision making. The aim is to help students develop intuition about
how economic concepts can be used to both understand and improve managerial decisions. It
has been used successfully in both undergraduate and graduate courses. Typically the book is
covered in a single term, although instructors often omit one or more chapters in programs
where some material is covered in other classes.
Although a number of approaches to teaching managerial economics have proven
successful, many instructors have found that at least some practice with numerical problems is
essential if students are to obtain a working knowledge of the tools and techniques presented.
For this reason, I assign the end-of-chapter questions and problems to my own students, and then
use them as the basis for our discussion of the material. A large number of problems from the
public and not-for-profit sectors have been included to explicitly demonstrate the applicability of
managerial economics to management of these organizations. This does not detract from the
business administration focus of the material, but instead highlights the usefulness of techniques
presented for a wide range of organizations.
This Instructor's Manual provides suggested answers for the end-of-chapter questions
and detailed solutions to all problems in the text. "Answers" for the questions are designed to
outline possible areas of discussion and do not provide a definitive treatment of all the important
issues involved. All problems have been class tested to be straightforward and unambiguous.
Numerical manipulations are simplified to help students focus on the economics involved, and
not on the mathematical tools employed. Detailed solutions for two self-test problems are
included at the end of each chapter. Check figures for all end-of chapter problems can be found
at the end of the text.
Most of the end-of-chapter problems in this edition are either new or are extensively
revised versions of problems from the previous edition. In a few problems, subtle changes have
been made to emphasize a specific point even though the overall problem statement may appear
little changed. Do not assume the old solution to a problem still holds without checking it
against the current solution found in the Instructor's Manual.
Also with this edition, there is a new Test Bank available in hard-copy, and electronic
form. The Test features Bank 500 multiple-choice questions, and 485 solved problems that can
be used to create customized exams. Like end-of-chapter questions and problems in the text,
Test Bank questions and problems feature broad topical coverage and involve widely varying
levels of problem-solving complexity.
Modifications found in Managerial Economics, Twelfth Edition are aimed at expanding
coverage of topics included in earlier editions, and smoothing out materials that have proven
challenging for students. The preface to the text details some of the more substantial changes.
Due to a number of requests, I decided to include answers to the end-of-chapter problems in the
textbook itself. Making this material available to students has proven very useful in my classes,
and provides quick positive reinforcement as students work through the end-of-chapter
problems.
Managerial Economics, Twelfth Edition has benefited significantly from the many
comments and suggestions I have received from users of prior editions. I greatly appreciate this
interest, and would like to encourage future communication from both instructors and their
students. While I have worked hard to make the Instructor's Manual as error-free as possible,
undoubtedly some errors (or Agremlins@) and ambiguities have crept through. Any corrections
or suggestions for improvement are most welcome.
Finally, I would like to thank Christine Hauschel and Nicholas Hirschey for help with
proof-reading and problem checking.
Mark Hirschey
E-mail: [e-mail]
March, 2008
TABLE OF CONTENTS
Preface
iii
PART ONE: OVERVIEW OF MANAGERIAL ECONOMICS
Chapter 1:
Nature and Scope of Managerial Economics
1
Chapter 2:
Economic Optimization
12
Chapter 3:
Demand and Supply
48
PART TWO: DEMAND ANALYSIS AND ESTIMATION
Chapter 4:
Demand Analysis
77
Chapter 5:
Demand Estimation
104
Chapter 6:
Forecasting
139
PART THREE: PRODUCTION AND COMPETITIVE MARKETS
Chapter 7:
Production Analysis and Compensation Policy
168
Chapter 8:
Cost Analysis and Estimation
202
Chapter 9:
Linear Programming
230
Chapter 10:
Competitive Markets
288
Chapter 11:
Performance and Strategy in Competitive Markets
319
PART FOUR: IMPERFECT COMPETITION
Chapter 12:
Monopoly and Monopsony
370
Chapter 13:
Monopolistic Competition and Oligopoly
407
Chapter 14:
Game Theory and Competitive Strategy
439
Chapter 15:
Pricing Practices
463
PART FIVE: LONG-TERM INVESTMENT DECISIONS
Chapter 16:
Risk Analysis
496
Chapter 17:
Capital Budgeting
532
Chapter 18:
Organization Structure and Corporate Governance
567
Chapter 19:
Government in the Market Economy
588