1 Manager, Profits and markets

1 Manager Profits - Manager Profits and markets Important Concepts Economic Profit Value Maximization Principal/Agent Problem Market Structure

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Important Concepts § Economic Profit § Value Maximization § Principal/Agent Problem § § Ownership of the residual 11 Manager, Profits and markets
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What is economics? Human beings, those creatures are plagued with wants; Unlimited wants Society is blessed with limited productive resources to satisfy our wants; Limited resources Economist attempts to reconcile unlimited wants with unlimited resources. How? The blunt reality is that total of all our material wants is many times greater than the productive capacity of our limited resources. This underlying reality provides our definition of economics: the social science concerned with the efficient use of limited or scarce resources to achieve maximum satisfaction of human 22 Scarcity and choice
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In short: two fundamental facts together constitute the economizing problem and provide a foundation for the field of economics. Society’s material wants that, the material wants of its citizens and institutions, are virtually unlimited and insatiable. Economic resources are limited or scarce 33 Manager, Profits and markets
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Principle1: The role of managers is to make decisions. Business firm come all sizes and small and large firm differ greatly in the number of mangers they have and in the magnitude of resources they command, but one thing is certain: no firm has unlimited resources. Because of this, mangers must make decisions about how the resources available to the firm are employed. Firms resources: capital, human, material, and 44 The economic principle for mangers :
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Principle 2: Decisions are always among alternatives and decision alternative always have costs and benefits. Opportunity cost of using any resource is What we must forego when we make that choice Accurate and complete concept of cost Used when making or analyzing decisions Everything you actually sacrifice in making the choice The methods of measuring opportunity cost differ for various kinds of inputs used by business. Business utilize two kinds of inputs. 55
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This note was uploaded on 10/02/2011 for the course MGE 429041 taught by Professor Isseyteh during the Spring '10 term at SUNY Buffalo.

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1 Manager Profits - Manager Profits and markets Important Concepts Economic Profit Value Maximization Principal/Agent Problem Market Structure

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