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BSZ_IM_Ch02_4e - Managerial Economics and Organizational...

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Managerial Economics and Organizational Architecture Instructor’s Manual Part 1: Chapter Overview and Solutions Chapter 2: Page 1 CHAPTER 2 E CONOMISTS V IEW OF B EHAVIOR This chapter uses the cheating scandal at Merrill Lynch to illustrate how a manager’s view of behavior can affect decision making. It summarizes the economic view of behavior and contrasts it with other views. The chapter presents a graphical analysis of utility maximization and decision making under uncertainty. The concepts in this chapter are an important foundation for subsequent material in the book. A short case is provided (Interwest Healthcare Corporation). C HAPTER O UTLINE E CONOMIC B EHAVIOR : A N O VERVIEW Economic Choice Marginal Analysis Opportunity Costs Creativity of Individuals G RAPHIC T OOLS Individual Objectives Indifference Curves Constraints Individual Choice Changes in Choice M OTIVATING H ONESTY AT M ERRILL L YNCH M ANAGERIAL I MPLICATIONS A LTERNATIVE M ODELS OF B EHAVIOR Only-Money-Matters Model Happy-Is-Productive Model Good-Citizen Model Product-of-the-Environment Model W HICH M ODEL S HOULD M ANAGERS U SE ? D ECISION M AKING UNDER U NCERTAINTY Risk Aversion Certainty Equivalent and Risk Premium Risk Aversion and Compensation C ASE S TUDY : I NTERWEST H EALTHCARE C ORP . S UMMARY A PPENDIX : CONSUMER CHOICE
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