Week_1_Lecture

Week_1_Lecture - 1-2AChapter Outline•This chapter introduces the new student to economics and reviews the basics for those students who have

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Unformatted text preview: 1-2AChapter Outline•This chapter introduces the new student to economics and reviews the basics for those students who have previously taken an economics course.•Several definitions and six basic principles of management from an economist’s point of view open the chapter•Present value analysis is used to address the profit maximization problem of the firm.•A brief overview of marginal analysis is presented1-9AUnderstanding Markets•In studying managerial economics, it is important to remember that there are two sides to every transaction in a market: for every buyer there is a seller. The final outcome of the market process depends on the relative power of buyers and sellers in the market place. The bargaining position of consumers and producers in the market is limited by three sources of rivalry that exists in economic transactions.1-17AMarginal Analysis•Marginal analysis is one of the most important tools.•Marginal analysis states that optimal managerial decisions involve comparing the marginal benefits of a decision with the marginal costs.6-2AChapter Outline•This chapter develops the optimal choice for input procurement and the principal-agent problems, as it relates to managerial compensation and worker incentives. The manager must decide which inputs the firm will purchase from other firms via spot exchange or contract and which inputs it will manufacture itself. The chapter also demonstrates a solution o the pricipal-agent problem.6-4AMethods of Procuring Inputs•Example of Spot Exchange: MSFT purchased 300 computer chips from a firm that ran an advertisement in the back of a computer magazine....
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This note was uploaded on 04/14/2008 for the course ECON 149 taught by Professor Sohrabian during the Spring '08 term at UC Irvine.

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Week_1_Lecture - 1-2AChapter Outline•This chapter introduces the new student to economics and reviews the basics for those students who have

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