Intermediate Business Microeconomics. Text: Managerial Economics and Business Strategy, 8th Edition by Michael Baye & Jeffrey Prince, with Connect

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1 California State University, Fullerton Economics 3 Fall Semester, 04 P. Rottschaefer Intermediate Business Microeconomics In this course we shall analyze business decision making in a variety of market structures. We shall investigate topics such as: how to determine price; what the consumer wishes to purchase; how government policy affects our decision making; and how the producer determines hiring of inputs. By the end of this course the student should have a better understanding of the traditional microeconomic topics as well as how they apply in the business world. Economics 3 is similar to traditional Intermediate Microeconomics classes but with a heavier emphasis on production theory and problem solving in a business context using economic principles and methods. Text: Managerial Economics and Business Strategy, 8th Edition by Michael Baye & Jeffrey Prince, with Connect Instructor: Patricia Rottschaefer Office: SGMH 3387 Office Hours: MW 0:00 :00 am, :30 3:30 pm or by appointment Phone: (to leave messages) or Prerequisite: The prerequisites for this class are Econ 0 and Math 3. The corequisite is BUAD 30 and ISDS 36A or equivalent. If you have not successfully completed the prerequisites or are not currently enrolled in the corequisites, you are unqualified for this class. If you are unqualified, you must drop this class immediately, following the usual procedure. This will allow a qualified student to enroll. This class is not intended for Economics majors. Economics majors should enroll in Econ 30. You may not get credit for both Econ 3 and Econ 30. Note: The programs offered in Mihaylo College of Business and Economics (MCBE) at Cal State Fullerton are designed to provide every student with the knowledge and skills essential for a successful career in business. Since assessment plays a vital role in Mihaylo College s drive to offer the best, several assessment tools are implemented to constantly evaluate our program as well as our students progress. Students, faculty, and staff should expect to participate in MCBE assessment activities. In doing so, Mihaylo College is able to measure its strengths and weaknesses, and continue to cultivate a climate of excellence in its students and programs. This is a core course in the curriculum of the College of Business and Economics, and the following key perspectives are addressed as indicated in the course outline below: (i) Ethical issues; (ii) Global issues; (iii) Political, social, legal, regulatory and environmental issues; (iv) Technological issues; and (v) The impact of demographic diversity on organizations. Quizzes: There will be quizzes assigned in Connect (via Learn Smart) for each chapter to assist you in the understanding of the fundamental concepts we are covering. These quizzes will be completed online at the McGraw-Hill site at the Connect Portal. Each chapter will be graded with a maximum possible of points. I will take your total score and scale it so a maximum of 00 points is possible. All quizzes are required.

2 Exams: There will be 3 midterm exams and a comprehensive final exam. Each of these exams will contain an objective section and an essay/problem solving section. There are no make-up exams. Each midterm exam will be worth 00 points. If you miss a midterm exam, you shall receive a 0 score. To compute your total points, I shall include in the total score computation only the highest midterm exam scores. Homework: A number of problem sets will be made available in Titanium during the course of the semester. The problem sets will be due in class on the day indicated. Problem sets will be accepted up to one week after the due date at a penalty ( of the possible 00 points shall automatically be deducted). The points earned on the problem sets will be added together and scaled so that a maximum of 00 points is possible for the semester. Grading: Total points for the semester will be calculated as follows: A letter grade will be assigned as follows: Quizzes Problem Sets Midterms Final Total 00 points 00 points 400 points 300 points 000 points Points There will be no +/- grades issued this semester. Grade A B C D F Unprofessional conduct: Unprofessional conduct of any sort will not be tolerated. Conduct yourselves as if this was your job. Academic Dishonesty: Please refer to your current California State University catalog for the official policy on academic dishonesty. In the event you are caught cheating on an exam, you shall earn a zero for that exam and that exam shall NOT be dropped from your total points in the grade calculation. Semester Outline (this is tentative and subject to change) Week Date Chapters Covered Aug. Aug. 7 Sep. Sep.3, 3 Sep. 8 Sep. 0 4 Sep. Sep. 7 Sep. Sep. 4, Material Covered Introduction; Syllabus; Goals and Constraints of Firm (i, iv) Profit; Five Forces Framework (i, iii, iv, v) Labor Day Campus Closed Markets, Present Value (i, ii, iii, iv, v) Marginalism; Demand and Supply (ii, iii, iv) Demand and Supply cont.(ii, iii, iv) Demand and Supply cont., Elasticities (ii, iv) Elasticities cont. (iv) Midterm discuss Midterm ; Producer Theory Costs

3 6 Sep. Oct. 7 Oct. 6 Oct. 8 8 Oct. 3 Oct. Oct. 0 Oct. 0 Oct. 7 Oct. Nov. 3 Nov. Nov. 0 Nov. 3 Nov. 7 Nov. Nov. 4 Nov Dec. Dec. 3 Dec. 8 Dec. 0 Dec. Dec. 7 Dec., 6 6, , , Short-run and Long Run Profit Maximization and Applications (i, iii, iv) Economies of Scale, Economies of Scope; Organization of Firm; Specialization (i, ii, iii, iv) Input procurement; Principal-Agent Market Structure; Concentration; Mergers; Efficiency (i, ii, iii, iv, v) Midterm Discuss Midterm ; Perfect Competition SR & LR Profit Maximization (iii, iv) Monopoly Monopoly power; Barriers to entry; Monopolistic Competition; Oligopoly (iii, iv) Basic Oligopoly models(iii, iv) Oligopoly continued (iii, iv) More Oligopoly models (iii, iv) More Oligopoly models (iii, iv) More complex Oligopoly models (iii, iv) More complex Oligopoly models (iii, iv) Midterm 3 Discuss Midterm 3; Pricing Strategies (i, ii, iii, iv, v) More Pricing Strategies (i, ii, iii, iv, v) Fall Recess More Pricing Strategies (i, ii, iii, iv, v) Sec. Final :30 :30 am Sec. 40 Final :00 :00 pm AACSB core competencies: i. ii. iii. iv. v. Ethical issues Global issues Political, social, legal, regulatory and environmental issues Technological issues The impact of demographic diversity on organizations

4 Learning Outcomes for Economics 3 Overview: After taking this course, students should understand how to apply economic theory and methods to managerial decisions. They should be able to link external market forces to business output and pricing decisions, know how to apply marginal analysis to discrete business choices, and recognize the market structure in which a business operates and its effects on decision making. Students should be able to:. Recognize the difference between opportunity and accounting costs and understand the impact of opportunity costs on managerial decision making.. Understand the importance of converting future values to a present value and apply present value tools to calculations of the value of the firm, project choice and other applications. 3. Distinguish marginal impacts from total impacts and use marginal analysis for the determination of an optimal choice variable in a discrete and continuous setting. 4. Identify the factors in consumer demand and producer supply.. Determine a predicted market equilibrium graphically and algebraically. 6. Clarify the welfare impacts to society of a market equilibrium. 7. Determine the direction of market equilibrium changes following governmental interventions in a market. 8. Determine the direction of market equilibrium changes following external changes in a market (comparative statics).. Explain the concept of own-price and other elasticities. 0. Calculate elasticities using point estimates and functional formulas.. Identify the factors affecting an own-price elasticity for a firm s product.. Use own-price elasticity concepts to determine the optimal price/ quantity combination to maximize a firm s total revenue. 3. Obtain elasticities using different types of demand functions. 4. Analyze demand and supply function coefficients to analyze the nature of a good and its market impacts.. Clarify the relationship between inputs and outputs in a production function. 6. Distinguish the short-run and long-run frameworks for planning. 7. Calculate short-run measures of efficiency and use these measures to determine the optimal amount of a variable input for a profit-maximizing firm. 8. Conceptualize the long-run technology choice of a firm to minimize costs to achieve production goals.. Calculate the associated costs of input usage in the short and long-run. 0. Determine the optimal scale of firm production in relation to average costs.. Calculate concentration statistics and other ratios which identify the different types of market structure in which a firm operates.. Understand how market structure impacts a firm s pricing and quantity decisions. 3. Calculate the optimal quantity and pricing decisions of firms in different market structures (perfect competition, monopoly, monopolistic competition) to achieve profit maximization. 4. Apply the shutdown analysis to firms operating with short-run losses.. Use the tools of marginal analysis or game theory to determine pricing and quantity strategies for firms operating in an oligopolistic market structure.

5 ECONOMICS 3 AND THE B.A. IN BUSINESS ADMINISTRATION How does this class relate to others you will take in your B.A. in Business Administration? Below you will find a chart listing concepts covered in this class and how they relate to other subjects covered in your other classes. ECON3 Intermediate Business Microeconomics Key Concepts Link to Core Key Concept : Firm Goals, Choices & Costraints Key Concept : Opportunity (Implicit) Costs Vs. Accounting (Explicit) Costs Key Concept 3: Forces affecting Firm Outcomes Accounting 0B Key Concept : Net Present Value, Time Value Money Key Concept : Project Analysis/Value of the Firm Key Concept 3: Math Review (calculus, graphs) Finance 30 Key Concept : Optimization using table data and functions Key Concept : the Role of Marginal Analysis Key Concept 3: Review Key Concept : Demand analysis using table and function data Key Concept : Supply analysis using table and function data Key Concept 3: Market Price and Quantity Equilibrium Key Concept : Forecasting sales changes given demand shift factors Key Concept : Forecasting output changes with supply shift factors Key Concept 3: Impact of Govt. Price Interventions ISDS 36A Key Concept : Own-price elasticity of consumer responsiveness Key Concept : Use of elasticity to maximize total revenue Key Concept 3: Calculation and use of other elasticities Marketing 3 7 Key Concept : Distinguishing short vs. long-run firm production choices Key Concept : Productivity measures and choice of a variable input in the short-run Key Concept 3: Optimal mix (or location) of inputs for cost-minization in the long-run Management 33 Key Concept : Engineering production relationships (functions) 8 Key Concept : Costs (fixed and variable) derived from use of inputs Key Concept 3: Choices of scale (sales level) and unit costs Accounting 0B Key Concept : Definition of Transaction Costs Key Concept : Methods and Choice of Input Provision Key Concept 3: Different wage packages for incentives Management 46 Key Concept : Profit Maximization Analysis 0 Key Concept : Application of Profit Maximization in Perfect Competition Key Concept 3: Relevant Costs and Firm Shutdown Decisions Key Concept : Applications of Profit Maximization in Monopoly Key Concept : Barriers to Entry and Market Power Key Concept 3: Monopolistic Competition, Advertising Marketing 3 Key Concept : Profit Maximization in Oligopoly Settings Key Concept : Game Theory applied to -firm actions Key Concept 3: Summary of 4 Market Structures Key Concept : Pricing Strategies for Firms w/ Market Power 3 Key Concept : Levels of Price Discimination Key Concept 3: Two-part pricing, Block pricing, Bundling