Technology and Costs in Markets
Industries differ in regard to the technologies used to produce goods and services.
Within a given industry if the available technology is:
the same, firms will like
The Casual View
Market structure causes firms to behave in a certain way.
this behavior, or conduct, causes resources to be allocated in certain ways.
this resource allocation leads to good or bad performance.
The Structure- Conduct-Performance Paradigm
Introduction to Economics of Effective Management
Managerial economics defined
Economics of Effective Management
Identifying goals and constraints
Recognize the nature and importance of profits
The Time Value of Money:
Within a firm, incentives impact how resources are used and how hard workers work.
One role of a manager is to construct incentives to induce maximal effort
Two sides to every market transaction:
Much of the material in this note is factual and is intended to acquaint you with aspects of the
real world that are relevant for managers.
It provides an overview of the nature of various industries.
How concentrated are sales in one in
Potential for Entry
Optimal decisions by firms in an industry will depend on the ease with which new firms
can enter the market.
Several factors can create barriers to entry (or make entry difficult).
Economies of scale.
Measuring Industry Concentration
When an industry is compose of a very large number of firm, each of which is very
small, the four-firm concentration ratio is close to zero.
When four or fewer firms produce all of an industrys output, the four-firm
Managerial Economics Defined
What is termed the economics of a business is to determine the key factors that affect
the ability of a firm to earn an acceptable rate of return on its owners.
The most important of these factors are competition, technology a
The Concept of Opportunity Cost
Opportunity cost of using any resource is:
What firm owners must give up to use the resource
Owned by others & hired, rented, or leased
Owned & used by the firm
Business Firm Managers & Resources
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