Topic 5:
The Organization
of the Firm
ECON 3590B
Business Economics
Spring 2016
1
Introduction
In last topic we saw how a manager can
select the mix of inputs that minimizes the
cost of production
Unresolved important questions
1) what is the optimal way
Topic 8: Game Theory
Inside Oligopoly
ECON 3590B
Business Economics
Spring 2016
1
Oligopoly
Oligopoly refers to a situation where there are
relatively few large firms in an industry
No explicit number of firms is required for
oligopoly, usually is betwe
Topic 9: Pricing
Strategies for Firms
with Market Power
ECON 3590B
Business Economics
Spring 2016
1
Standard Pricing and Profits
for Firms with Market Power
Price
Profits from standard pricing
= $8
10
8
6
4
MC
2
P = 10 - 2Q
1
2
3
4
5
MR = 10 - 4Q
Quantity
ECON 3590A Business Economics
Fall 2016
Instructor:
Email:
Office:
Office Hours:
Hugo IP
[email protected]
ELB 1005
Mon 2:30 pm 4:30 pm or by appointment
Teaching Assistant:
Email:
Office:
Kevin LI
[email protected]
ELB 1017
Lecture Time:
M
ECON 3590 Business Economics
Exercise 1 Solution
Question 1
This decline represents a leftward shift in the supply curve for oil, and will result in an increase in the
equilibrium price of crude oil. Since oil is an input in producing gasoline, this will
ECON 3590 Business Economics
Exercise 4 Solution
Question 1
(a) The inverse demand function is P = 200 4Q.
Set P = MC to solve for the optimal number of units in a package.
200 4Q = 120 Q = 20
The optimal number of units in a package is 20 units.
(b) Tota
Topic 11:
Advanced Topics in
Business Strategy
ECON 3590B
Business Economics
Spring 2017
1
Introduction
Until now, we generally take the business
environment as given
Strategies for changing the business
environment
Changing the Timing of Decisions
Pene
Topic 10:
The Economics of
Information
ECON 3590B
Business Economics
Spring 2017
1
Introduction
Until now, we have discussed about how
consumers and firms make decisions under
perfect information
In this topic, we will present an overview of
some of the m
ECON 3590 Business Economics
Exercise 2 Solution
Question 1
Contracts requiring large specialized investments are expected to be longer than contracts requiring
relatively smaller specialized investments. The reason is that transaction costs increase once
ECON 3590 Business Economics
Exercise 2
Deadline: No Need to Submit
Question 1
The division of a large office services company that makes high-end copiers recently signed a
five-year, $25 million contract for IT services. If you were the manager of the di
ECON 3590 Business Economics
Exercise 1 Solution
Question 1
This decline represents a leftward shift in the supply curve for oil, and will result in an increase in the
equilibrium price of crude oil. Since oil is an input in producing gasoline, this will
Topic 4:
The Production
Process and Costs
ECON 3590B
Business Economics
Spring 2016
1
Production Analysis
Production Function: Q = F(K,L)
Under existing technology, the maximum
amount of output Q that can be produced
with K units of capital and L units o
Topic 2:
Market Forces:
Demand and Supply
ECON 3590B
Business Economics
Spring 2016
1
Changes in Demand
Price
Increase
in
demand
A
Decrease
in
demand
B
D1
D2
0
D0
Quantity
2
Demand Shifters
Income
Normal good / Inferior good
Prices of related goods
Subs
Topic 3: Quantitative
Demand Analysis
ECON 3590B
Business Economics
Spring 2016
1
Introduction
So far, our analysis of the impact of changes
in prices and income on consumer demand
has been qualitative rather than quantitative
focused on the big picture,
Topic 1: Introduction
ECON 3590B
Business Economics
Spring 2016
1
Business Economics /
Managerial Economics
Fundamental goal: Tools to make sound
managerial decisions from
intermediate microeconomics
game theory
industrial organization
Focus: Applicati
Topic 6:
The Nature of Industry
ECON 3590B
Business Economics
Spring 2016
1
Preview:
Approaches to Studying Industry
The Structure-Conduct-Performance Paradigm:
1) Causal View (Bain, 1950s)
Market
Structure
Conduct
Performance
2) The Feedback Critique
No
Topic 7: Managing in
Monopolistic, and
Monopolistically
Competitive Markets
ECON 3590B
Business Economics
Spring 2016
1
Market Structures
Monopoly
Monopolistic competition
Oligopoly
2
Monopoly
A market structure in which a single firm
serves an entire mar
ECON 3590 Business Economics
Exercise 1
Deadline: No Need to Submit
Question 1
As a result of increased tensions in the Middle East, oil production is down by 1.21 million barrels per
daya 5 percent reduction in the worlds supply of crude oil. Explain the
ECON 3590B Business Economics
Exercise 4
Deadline: No Need to Submit
Question 1
This past year, Used Imported Autos sold very few cars and lost over $500000. As a
consequence, its manager is contemplating two strategies to increase its sales volume. The
l
