MANAGERIAL ECONOMICS 11th Edition
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Transcript MANAGERIAL ECONOMICS 11th Edition
MANAGERIAL
th
ECONOMICS 11 Edition
By
Mark Hirschey
Nature and Scope of
Managerial Economics
Chapter 1
Chapter 1
OVERVIEW
How Is Managerial Economics Useful?
Theory of the Firm
Profit Measurement
Why Do Profits Vary among Firms?
Role of Business in Society
Structure of this Text
Chapter 1
KEY CONCEPTS
managerial economics
theory of the firm
expected value
maximization
value of the firm
present value
optimize
satisfice
business profit
normal rate of return
economic profit
profit margin
return on stockholders'
equity
frictional profit theory
monopoly profit theory
innovation profit theory
compensatory profit
theory
How Is Managerial Economics
Useful?
Evaluating Choice Alternatives
Identify ways to efficiently achieve goals.
Specify pricing and production strategies.
Provide production and marketing rules to
help maximize net profits.
Making the Best Decision
Managerial economics can be used to
efficiently meet management objectives.
Managerial economics can be used to
understand logic of company, consumer, and
government decisions.
Theory of the Firm
Expected Value Maximization
Constraints and the Theory of the Firm
Owner-managers maximize short-run profits.
Primary goal is long-term expected value
maximization.
Resource constraints.
Social constraints
Limitations of the Theory of the Firm
Alternative theory adds perspective.
Competition forces efficiency.
Hostile takeovers threaten inefficient managers.
Profit Measurement
Business Versus Economic Profit
Business (accounting) profit reflects
explicit costs and revenues.
Economic profit.
Profit
above a risk-adjusted normal return.
Considers cash and noncash items.
Variability of Business Profits
Business profits vary widely.
Why Do Profits Vary
Among Firms?
Disequilibrium
Profit Theories
Rapid growth in revenues.
Rapid decline in costs.
Compensatory Profit Theories
Better, faster, or cheaper than
the competition is profitable.
Role of Business in
Society
Why Firms Exist
Business is useful in satisfying consumer
wants.
Business contributes to social welfare
Social Responsibility of Business
Serve customers.
Provide employment opportunities.
Obey laws and regulations.
Structure of this Text
Objectives
Understand
usefulness of
economics in describing managerial
behavior.
Understand how economics can be
used to improve managerial
decisions.
Appreciate vital role of business in
society.