SUMMARY OF THE MICROCHIP EXAMPLE
Given the Demand Equation, Q = f (P): Q = 8.5 - .05P
Calculate the Inverse Demand Equation:
.05 P = 8.5 - Q
20 (.05 P) = (8.5 - Q ) 20
P = 170 - 20 Q
Solve for, TR, MR and MC
TR = P x Q
TR = (170 - 20Q) Q
TR = 170 Q - 20 Q
CHAPTER 15 - ASYMMETRIC INFORMATION AND ORGANIZATIONAL DESIGN
Opening Case: Incentive Pay at DuPont, where standard pay raises were eliminated and replaced by an
incentive-based bonus system for all managers and employees, based on profit goals for each d
CHAPTER 14 - REGULATION, PUBLIC GOODS, AND BENEFIT-COST ANALYSIS
Opening Case: R&D for a new drug typically costs $200m. Burroughs Wellcome Co. developed
AZT for treatment of AIDS. Initial costs for patients were $5,000-$8,000 per year, making AZT one of
CHAPTER 12 - OLIGOPOLY
Oligopoly: Market or industry dominated by a small number of firms, whose decisions (price, output,
marketing) are interdependent.
Firms in oligopolistic markets face strategic decision-making, and must constantly take into account
CHAPTER 11 - MONOPOLY AND PRICE SEARCHERS
Cartel Case Study: NYC Taxis, p. 436 and 459.
Pure Monopoly: Market with a single (1) seller.
Near Monopoly: Market where a single firm, or several firms, has (have) 90% or more of the
CHAPTER 10 - PERFECT COMPETITION
In previous chapters, we have examined managerial decisions within (inside) the firm without regard to
the firm's external environment or "market structure." For the next 5 chapters, we look at the market
CHAPTER 7 - COST ANALYSIS
Profit maximizing decisions depend on accurate estimates and projections of costs. Examples: What
would be the cost of increasing production by X%, what is the impact on production costs if input costs
increase by X%, what produc
CHAPTER 6 - PRODUCTION
CASE STUDY: Office equipment company uses its salesforce of 18 to find new customers, renew
existing contracts, and capture customers from rivals. Production Issue: How to allocate salesforce
efficiently to maximize/increase total s
CHAPTER 5 - FORECASTING
Case Study: World's largest nickel mining company (30% market share) with nickel mines in Canada
does 10 yr. forecast in 1990 for: world nickel sales, nickel prices, competition and its own market
share, production costs (labor, ex
CHAPTER 4 - ESTIMATING DEMAND
Knowing (estimating) the demand for its product is crucial for a firm. Why?
We have been using demand equations (Qd = 580 - 2P) without indicating exactly where they come
from. In CH 4, we discuss how a firm can Estimate Dema
CHAPTER 3 - DEMAND ANALYSIS AND OPTIMAL PRICING
See opening quote (p. 79): There's no brand loyalty that the offer of a "penny off" can't overcome it.
OPENING CASE: AIRLINE TICKET PRICING, PRICE DISCRIMINATION
On a typical United Airlines flight from Chic
CHAPTER 2 - OPTIMAL DECISIONS USING MARGINAL ANALYSIS
CH 2 is devoted to two important topics that will be the basis for the next 8 chapters:
1. Simple economic model of the private, profit-maximizing firm.
2. Introduction to "Marginal Analysis," importan
CHAPTER 1 - INTRODUCTION TO ECONOMIC DECISION MAKING
Opening quote, see page 1.
Decision making is at the heart of most important business and govt. problems.
High-tech company: Undertake a promising but expensive R & D program?