Expert answer:Managerial Economics paper help (2 pages)
Answer & Explanation:write a brief paper (2 total) for two of the articles.Each paper should be double spaced with 12 pt. font and no longer than 2 pages. Each paper should contain a synopsis of the article, address the problem the article presented, determine if the economic agent in the article had enough information to make the correct decision, and propose alternative answers to the problem at hand. Make sure to point out any concept in chapter 5 that can be applied. You will want to keep in mind that some articles may not have a problem or the problem may not be obvious. If there doesn’t appear to be a problem, put yourself in that person’s shoes and ask yourself what potential problem could arise and how would you attempt to answer it.This is my textbook,Managerial Economics 4e- Luke M. Froeb .pdf Articles: http://www.wnd.com/2016/01/mark-cuban-1st-thing-to-do-if-you-win-1-4-powerball/ http://www.royalgazette.com/article/20151231/BUSINESS03/151239969
managerial_economics_4e__luke_m._froeb_.pdf
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MANAGERIAL
ECONOMICS
A Problem Solving Approach
4e
Luke M. Froeb
Vanderbilt University
Mikhael Shor
University of Connecticut
Brian T. McCann
Vanderbilt University
Michael R. Ward
University of Texas, Arlington
Australia • Brazil • Mexico • Singapore • United Kingdom • United States
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Managerial Economics: A Problem Solving
Approach, Fourth Edition
Luke M. Froeb, Brian T. McCann,
Mikhael Shor, Michael R. Ward
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For our families: Lisa, Jake, Halley, Chris, Leslie, Jacob,
Eliana, Cindy, Alex, and Chris
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BRIEF CONTENTS
Preface: Teaching Students to Solve Problems
SECTION I
Problem Solving and Decision Making
1
2
3
4
5
SECTION II
6
7
8
9
10
11
SECTION III
SECTION IV
SECTION V
151
153
183
Strategic Games 185
Bargaining 205
Uncertainty
17
18
19
20
65
More Realistic and Complex Pricing
Direct Price Discrimination 163
Indirect Price Discrimination 171
Strategic Decision Making
15
16
51
Simple Pricing 67
Economies of Scale and Scope 83
Understanding Markets and Industry Changes 95
Market Structure and Long-Run Equilibrium 113
Strategy: The Quest to Keep Profit from Eroding 125
Foreign Exchange, Trade, and Bubbles 137
Pricing for Greater Profit
12
13
14
1
Introduction: What This Book Is About 3
The One Lesson of Business 15
Benefits, Costs, and Decisions 27
Extent (How Much) Decisions 39
Investment Decisions: Look Ahead and Reason Back
Pricing, Costs, and Profits
xiii
215
Making Decisions with Uncertainty 217
Auctions 231
The Problem of Adverse Selection 241
The Problem of Moral Hazard 253
v
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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
vi
BRIEF CONTENTS
SECTION VI
Organizational Design
21
22
23
SECTION VII
Getting Employees to Work in the Firm’s Best Interests 267
Getting Divisions to Work in the Firm’s Best Interests 279
Managing Vertical Relationships 293
Wrapping Up
24
265
305
You Be the Consultant
307
Epilogue: Can Those Who Teach, Do?
Glossary
313
315
Index 321
Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
CONTENTS
Preface: Teaching Students to Solve Problems
SECTION I
Problem Solving and Decision Making
CHAPTER 1
INTRODUCTION: WHAT THIS BOOK IS ABOUT 3
1.1 Using Economics to Solve Problems
1.2 Problem-Solving Principles 4
1.3 Test Yourself 6
1.4 Ethics and Economics 7
1.5 Economics in Job Interviews 9
Summary & Homework Problems 11
End Notes 13
CHAPTER 2
xiii
1
3
THE ONE LESSON OF BUSINESS 15
2.1 Capitalism and Wealth 16
2.2 Does the Government Create Wealth? 18
2.3 Why Economics Is Useful to Business 18
2.4 Wealth Creation in Organizations 21
Summary & Homework Problems 22
End Notes 23
CHAPTER 3
BENEFITS, COSTS, AND DECISIONS 27
3.1 Background: Variable, Fixed, and Total Costs 28
3.2 Background: Accounting Versus Economic Profit 29
3.3 Costs Are What You Give Up 31
3.4 Sunk-Cost Fallacy 32
3.5 Hidden-Cost Fallacy 34
3.6 A Final Warning 35
Summary & Homework Problems 36
End Notes 38
CHAPTER 4
EXTENT (HOW MUCH) DECISIONS 39
4.1
4.2
4.3
4.4
4.5
Background: Average and Marginal Costs 40
Marginal Analysis 41
Incentive Pay 44
Tie Pay to Performance Measures That Reflect Effort
Is Incentive Pay Unfair? 46
45
vii
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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
viii
CONTENTS
Summary & Homework Problems
End Notes 50
CHAPTER 5
47
INVESTMENT DECISIONS: LOOK AHEAD AND REASON BACK 51
5.1 Compounding and Discounting 51
5.2 How to Determine Whether Investments Are Profitable
5.3 Break-Even Analysis 54
5.4 Choosing the Right Manufacturing Technology 55
5.5 Shut-Down Decisions and Break-Even Prices 56
5.6 Sunk Costs and Post-Investment Hold-Up 57
5.7 Anticipate Hold-Up 58
Summary & Homework Problems 59
End Notes 62
SECTION II
Pricing, Costs, and Profits
CHAPTER 6
SIMPLE PRICING 67
65
6.1 Background: Consumer Values and Demand Curves
6.2 Marginal Analysis of Pricing 70
6.3 Price Elasticity and Marginal Revenue 72
6.4 What Makes Demand More Elastic? 74
6.5 Forecasting Demand Using Elasticity 76
6.6 Stay-Even Analysis, Pricing, and Elasticity 77
6.7 Cost-Based Pricing 78
Summary & Homework Problems 78
End Notes 81
CHAPTER 7
52
68
ECONOMIES OF SCALE AND SCOPE 83
7.1 Increasing Marginal Cost 84
7.2 Economies of Scale 86
7.3 Learning Curves 87
7.4 Economies of Scope 89
7.5 Diseconomies of Scope 90
Summary & Homework Problems 91
End Notes 93
CHAPTER 8
UNDERSTANDING MARKETS AND INDUSTRY CHANGES 95
8.1 Which Industry or Market? 95
8.2 Shifts in Demand 96
8.3 Shifts in Supply 97
8.4 Market Equilibrium 99
8.5 Predicting Industry Changes Using Supply and Demand 100
8.6 Explaining Industry Changes Using Supply and Demand 103
8.7 Prices Convey Valuable Information 104
8.8 Market Making 106
Summary & Homework Problems 108
End Notes 111
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CONTENTS
CHAPTER 9
ix
MARKET STRUCTURE AND LONG-RUN EQUILIBRIUM 113
9.1 Competitive Industries 114
9.2 The Indifference Principle 116
9.3 Monopoly 120
Summary & Homework Problems 121
End Notes 123
CHAPTER 10
STRATEGY: THE QUEST TO KEEP PROFIT FROM ERODING 125
10.1 A Simple View of Strategy 126
10.2 Sources of Economic Profit 127
10.3 The Three Basic Strategies 132
Summary & Homework Problems 133
End Notes 135
CHAPTER 11
FOREIGN EXCHANGE, TRADE, AND BUBBLES 137
11.1 The Market for Foreign Exchange 138
11.2 The Effects of a Currency Devaluation 141
11.3 Bubbles 142
11.4 How Can We Recognize Bubbles? 144
11.5 Purchasing Power Parity 146
Summary & Homework Problems 147
End Notes 149
SECTION III
CHAPTER 12
Pricing for Greater Profit
151
MORE REALISTIC AND COMPLEX PRICING 153
12.1 Pricing Commonly Owned Products 154
12.2 Revenue or Yield Management 156
12.3 Advertising and Promotional Pricing 157
12.4 Psychological Pricing 158
Summary & Homework Problems 160
End Notes 162
CHAPTER 13
DIRECT PRICE DISCRIMINATION 163
13.1 Introduction 163
13.2 Direct Price Discrimination 166
13.3 Robinson-Patman Act 167
13.4 Implementing Price Discrimination Schemes
13.5 Only Schmucks Pay Retail 169
Summary & Homework Problems 169
End Notes 170
CHAPTER 14
168
INDIRECT PRICE DISCRIMINATION 171
14.1
14.2
14.3
14.4
Introduction 171
Indirect Price Discrimination 172
Volume Discounts as Discrimination 176
Bundling Different Goods Together 177
Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
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x
CONTENTS
Summary & Homework Problems
End Notes 181
178
SECTION IV
Strategic Decision Making
183
CHAPTER 15
STRATEGIC GAMES 185
15.1 Sequential-Move Games 186
15.2 Simultaneous-Move Games 188
15.3 What Can I Learn from Studying Games Like the Prisoners’ Dilemma?
15.4 Other Games 195
Summary & Homework Problems 200
End Notes 203
CHAPTER 16
194
BARGAINING 205
16.1 Strategic View of Bargaining 205
16.2 Nonstrategic View of Bargaining 208
16.3 Conclusion 210
Summary & Homework Problems 211
End Notes 214
SECTION V
CHAPTER 17
Uncertainty
215
MAKING DECISIONS WITH UNCERTAINTY 217
17.1 Random Variables and Probability 217
17.2 Uncertainty in Pricing 222
17.3 Run Experiments to Reduce Uncertainty 223
17.4 Minimizing Expected Error Costs 224
17.5 Risk Versus Uncertainty 226
Summary & Homework Problems 227
End Notes 230
CHAPTER 18
AUCTIONS 231
18.1 Oral Auctions 232
18.2 Second-Price Auctions 233
18.3 First-Price Auctions 234
18.4 Bid Rigging 234
18.5 Common-Value Auctions 236
Summary & Homework Problems 238
End Notes 240
CHAPTER 19
THE PROBLEM OF ADVERSE SELECTION 241
19.1
19.2
19.3
19.4
19.5
Insurance and Risk 241
Anticipating Adverse Selection 242
Screening 244
Signaling 247
Adverse Selection and Internet Sales 248
Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
CONTENTS
Summary & Homework Problems
End Notes 251
CHAPTER 20
xi
249
THE PROBLEM OF MORAL HAZARD 253
20.1 Introduction 253
20.2 Insurance 254
20.3 Moral Hazard Versus Adverse Selection 255
20.4 Shirking 256
20.5 Moral Hazard in Lending 258
20.6 Moral Hazard and the 2008 Financial Crisis 260
Summary & Homework Problems 260
End Notes 263
SECTION VI
CHAPTER 21
Organizational Design
265
GETTING EMPLOYEES TO WORK IN THE FIRM’S BEST INTERESTS 267
21.1 Principal-Agent Relationships 268
21.2 Controlling Incentive Conflict 269
21.3 Marketing Versus Sales 271
21.4 Franchising 272
21.5 A Framework for Diagnosing and Solving Problems
Summary & Homework Problems 275
End Notes 278
CHAPTER 22
273
GETTING DIVISIONS TO WORK IN THE FIRM’S BEST INTERESTS 279
22.1 Incentive Conflict Between Divisions 279
22.2 Transfer Pricing 281
22.3 Organizational Alternatives 283
22.4 Budget Games: Paying People to Lie 285
Summary & Homework Problems 288
End Notes 291
CHAPTER 23
MANAGING VERTICAL RELATIONSHIPS 293
23.1 How Vertical Relationships Increase Profit 294
23.2 Double Marginalization 295
23.3 Incentive Conflicts Between Retailers and Manufacturers 295
23.4 Price Discrimination 297
23.5 Antitrust Risks 298
23.6 Do Not Buy a Customer or Supplier Simply Because It Is Profitable
Summary & Homework Problems 300
End Notes 302
SECTION VII
CHAPTER 24
Wrapping Up
299
305
YOU BE THE CONSULTANT 307
24.1 Truck Leasing 307
Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
xii
CONTENTS
24.2
24.3
24.4
24.5
24.6
24.7
Manufacturer Hiring 308
American Airlines 309
Law Firm Pricing 309
Cash Flow at a Forklift Dealership 310
Managing Interest-Rate Risk at Banks 311
What You Should Have Learned 312
Epilogue: Can Those Who Teach, Do?
Glossary
313
315
Index 321
Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
PREFACE
Teaching Students to Solve Problems1
by Luke Froeb
When I started teaching MBA students, I taught economics as I had learned
it, using models and public policy applications. My students complained so
much that the dean took me out to the proverbial woodshed and gave me an
ultimatum, “improve customer satisfaction or else.” With the help of some
disgruntled students who later became teaching assi …
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