C6-1-ProcuringInputs_2010-03-17 - Procuring Inputs Chapter...

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Procuring Inputs Chapter 6 – The Organization of the Firm ECON 303 Managerial Economics, Spring 2010 Edward L. Millner , Department of Economics Copyright Millner 2009-10 Before class Read the Learning Objectives for this chapter Organize your notes from the previous class. Studies show that if you review and organize your notes the day you take them you will retain 80% of the information for 8 weeks. Read the review material. Write down answers to the Review Questions that are due. Be ready to submit your answers with your “clicker” at 11:00. Work on each of the Lecture Problems . Read the notes linked to them and the pages in the book that the notes reference. Pay close attention to the demonstration problems in the book. Jot down an answer, an outline to an answer, the beginning of an answer, or “I am lost”, next to each question. Be ready to read aloud upon request what you have written. Read what is next . Learning Objectives The student will understand that in many instances inputs may not be efficiently acquired “off the shelf” in a spot market and, further, that human inputs do not automatically work efficiently: managers must attend carefully to issues of input acquisition and motivation. Demonstrable outcomes are the abilities to: Discuss intelligently the advantages and disadvantages of the three methods of procuring inputs and identify when each is likely to be optimal, Identify factors that reduce the optimal length of long-term contracts for input procurement, Identify when managerial compensation creates an incentive problem and what changes in the compensation could improve managerial performance. Review An analyst can determine how an action will affect profit by comparing incremental revenue with incremental cost o Don’t worry about fixed costs o Don’t be mislead by averages o Be sure to include all relevant costs, explicit and implicit Click here to return to the top of the file. Lecture Problems Procuring Inputs, p. 1 of 5
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Question 3, p. 228 Identify whether each of the following transactions involves spot exchange, contract, or vertical integration . a. Barnacle Inc., has a legal obligation to purchase 2 tons of structural steel per week to manufacture conveyor frames.
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C6-1-ProcuringInputs_2010-03-17 - Procuring Inputs Chapter...

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