Overview of Managerial Economics p. 1 Introduction p. 2 How Is Managerial Economics Useful? p. 3 Managerial Ethics p. 4 Theory of the Firm p.

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1 Overview of Managerial Economics p. 1 Introduction p. 2 How Is Managerial Economics Useful? p. 3 Managerial Ethics p. 4 Theory of the Firm p. 5 The World Is Turning to Capitalism and Democracy p. 8 Profit Measurement p. 8 Why Do Profits Vary Among Firms? p. 11 Google on Social Responsibility: Don't Be Evil p. 12 Role of Business in Society p. 13 The Internet Revolution p. 14 Structure of This Text p. 15 Summary p. 17 Case Study: Is Coca-Cola the "Perfect" Business? p. 18 Basic Economic Relations p. 21 Economic Optimization Process p. 21 Greed Versus Self-Interest p. 23 Expressing Economic Relations p. 23 Do Firms Really Optimize? p. 28 Marginal Analysis in Decision Making p. 28 Practical Applications of Marginal Analysis p. 32 How Entrepreneurs Shape the Economy p. 33 Information Brought Down the Berlin Wall p. 36 Incremental Concept in Economic Analysis p. 36 Summary p. 39 Case Study: Spreadsheet Analysis of the EOQ at the Neighborhood Pharmacy, Inc. p. 45 Statistical Analysis of Economic Relations p. 47 Data Summary and Description p. 48 Measures of Central Tendency p. 48 Sampling Technology for TV Advertising p. 54 Measures of Dispersion p. 54 Hypothesis Testing p. 57 Market Experiments on the Web p. 60 Economic Relations p. 60 Regression Analysis p. 61 Lies, Damn Lies, and Government Statistics p. 65 Judging Regression Model Fit p. 67 Judging Variable Significance p. 72 Spreadsheet and Statistical Software for the PC p. 74 Summary p. 74 Case Study: Demand Estimation for The San Francisco Bread Co. p. 83

2 Demand Analysis and Estimation p. 87 Demand and Supply p. 88 Basis for Demand p. 89 How the Internet Affects Demand and Supply p. 90 Market Demand Function p. 90 Demand Curve p. 92 Basis for Supply p. 95 ISP Customers Learn About Demand and Supply p. 96 Market Supply Function p. 97 The Import Supply Battle in the U.S. Auto Industry p. 99 Supply Curve p. 100 Demand and Supply Conditions for Economists p. 103 Market Equilibrium p. 104 Summary p. 109 Case Study: Spreadsheet Analysis of Demand and Supply for Sunbest Orange Juice p. 115 Demand Analysis and Estimation p. 117 Measuring Market Demand p. 118 Demand for Oranges: A Classic Market Experiment p. 120 Demand Sensitivity Analysis: Elasticity p. 121 Price Elasticity for Airline Passenger Service p. 124 Price Elasticity of Demand p. 125 Price Elasticity and Marginal Revenue p. 129 Ag Price Supports p. 132 Price Elasticity and Optimal Pricing Policy p. 133 Cross-Price Elasticity of Demand p. 135 Haggling in the Car Business p. 137 Income Elasticity of Demand p. 138 Summary p. 140 Case Study: Demand Estimation for Mrs. Smyth's Pies p. 146 Forecasting p. 149 Forecasting Applications p. 150 Economic Forecasting: The Art and the Science p. 152 Qualitative Analysis p. 152 Trend Analysis and Projection p. 153 The Dire Prediction Business p. 159 Business Cycle p. 160 The Stock Market and the Business Cycle p. 167 Exponential Smoothing p. 167 How Good Is Your Forecasting Ability? p. 171 Econometric Forecasting p. 172 Judging Forecast Reliability p. 174

3 Choosing the Best Forecast Technique p. 176 Summary p. 178 Case Study: Forecasting Global Performance for a Mickey Mouse Organization p. 185 Production and Competitive Markets p. 189 Production Analysis and Compensation Policy p. 190 Production Functions p. 191 Total, Marginal, and Average Product p. 193 Total Quality Management p. 196 Law of Diminishing Returns to a Factor p. 197 Input Combination Choice p. 199 What's Wrong with Manufacturing? p. 204 Marginal Revenue Product and Optimal Employment p. 204 Optimal Combination of Multiple Inputs p. 207 Optimal Levels of Multiple Inputs p. 210 A Jobless Recovery? p. 211 Returns to Scale p. 212 Production Function Estimation p. 215 BLS Statistics p. 216 Productivity Measurement p. 217 Summary p. 220 Case Study: Employee Productivity Among the Largest S&P; 500 Firms p. 226 Cost Analysis and Estimation p. 229 What Makes Cost Analysis Difficult? p. 230 Opportunity Costs p. 231 GE's " " Plan p. 233 Incremental and Sunk Costs in Decision Analysis p. 233 Short-Run and Long-Run Costs p. 234 Short-Run Cost Curves p. 236 Gaps in GAAP? p. 237 Long-Run Cost Curves p. 239 What in the Heck Is FASB? p. 243 Minimum Efficient Scale p. 244 Firm Size and Plant Size p. 245 Bigger Isn't Always Better p. 251 Learning Curves p. 251 Economies of Scope p. 254 Cost-Volume-Profit Analysis p. 255 Summary p. 260 Case Study: Estimating the Costs of Nursing Care for Regional Hospitals p. 265 Linear Programming p. 269 Basic Characteristics p. 270

4 Karmarkar's LP Breakthrough p. 271 Production Planning for a Single Product p. 271 LP: More Than a Visual Approach p. 278 Production Planning for Multiple Products p. 278 Graphic Specification and Solution p. 280 Algebraic Specification and Solution p. 285 LP on the PC! p. 289 Dual in Linear Programming p. 289 Dual Specification p. 291 Solving the Dual Problem p. 292 It's a RIOT on the Internet! p. 295 Summary p. 296 Case Study: An LP Pension Funding Model p. 305 Rules for Forming the Dual LP Problem p. 307 Competitive Markets p. 311 Competitive Environment p. 312 Benefits from Free Trade p. 313 Factors That Shape the Competitive Environment p. 313 Competitive Market Characteristics p. 315 Is the Stock Market Perfectly Competitive? p. 316 Profit Maximization in Competitive Markets p. 317 Marginal Cost and Firm Supply p. 321 Dot.com p. 323 Competitive Market Supply Curve p. 324 Competitive Market Equilibrium p. 326 The Enron Debacle p. 329 Summary p. 330 Case Study: Profitability Effects of Firm Size for DJIA Companies p. 337 Performance and Strategy in Competitive Markets p. 339 Competitive Market Efficiency p. 340 The Wal-Mart Phenomenon p. 344 Market Failure p. 344 Role for Government p. 346 Corn Growers Discover Oil! p. 347 Subsidy and Tax Policy p. 348 Tax Incidence and Burden p. 350 Measuring Economic Profits p. 354 Price Controls p. 355 Business Profit Rates p. 357 Wonderful Businesses p. 360 Market Structure and Profit Rates p. 361

5 Competitive Market Strategy p. 363 Summary p. 365 Case Study: Profit Margins Among the Most Profitable S&P; 500 Companies p. 372 Imperfect Competition p. 375 Monopoly and Monopsony p. 376 Monopoly Market Characteristics p. 377 The NCAA Cartel p. 379 Profit Maximization Under Monopoly p. 379 Social Costs of Monopoly p. 383 Social Benefits of Monopoly p. 386 Is Ticketmaster a Monopoly? p. 388 Monopoly Regulation p. 389 Monopsony p. 394 Is This Why They Call It "Hardball"? p. 397 Antitrust Policy p. 398 Price Fixing by the Insurance Cartel p. 400 Competitive Strategy in Monopoly Markets p. 401 Summary p. 403 Case Study: Effect of R&D; on Tobin's q p. 410 Monopolistic Competition and Oligopoly p. 413 Contrast Between Monopolistic Competition and Oligopoly p. 414 Dell's Price War with Itself p. 415 Monopolistic Competition p. 416 Government-Guaranteed Oligopoly p. 419 Monopolistic Competition Process p. 420 Oligopoly p. 423 Cartels and Collusion p. 424 Oligopoly Output-Setting Models p. 425 Oligopoly Price-Setting Models p. 431 Contestable Airline Passenger Service Markets p. 436 Market Structure Measurement p. 436 Census Measures of Market Concentration p. 439 Horizontal Merger Guidelines p. 442 Summary p. 443 Case Study: Market Structure Analysis at Columbia Drugstores, Inc. p. 451 Game Theory and Competitive Strategy p. 455 Game-Theory Basics p. 456 Intel: Running Fast to Stay in Place p. 458 Prisoner's Dilemma p. 458 Nash Equilibrium p. 461 Infinitely Repeated Games p. 463

6 Wrigley's Success Formula p. 464 Finitely Repeated Games p. 465 Competitive Strategy p. 467 The "Tobacco" Issue p. 470 Pricing Strategies p. 470 Network Switching Costs p. 473 Nonprice Competition p. 473 Summary p. 477 Case Study: Time Warner, Inc., Is Playing Games with Stockholders p. 484 Pricing Practices p. 487 Pricing Rules-of-Thumb p. 488 Markup Pricing Technology p. 489 Markup Pricing and Profit Maximization p. 490 Price Discrimination p [cent] for a Gallon of Gas in Dayton, Ohio p. 495 Price Discrimination Example p. 495 Multiple-Product Pricing p. 499 Joint Products p. 500 Do Colleges Price Discriminate? p. 503 Joint Product Pricing Example p. 503 Transfer Pricing p. 507 Why Some Price Wars Never End p. 509 Global Transfer Pricing Example p. 509 Summary p. 513 Case Study: Pricing Practices in the Denver, Colorado, Newspaper Market p. 519 Long-Term Investment Decisions p. 521 Risk Analysis p. 522 Concepts of Risk and Uncertainty p. 523 Internet Fraud p. 525 Probability Concepts p. 525 Standard Normal Concept p. 531 Why Lotteries Are Popular p. 533 Utility Theory and Risk Analysis p. 533 Employee Stock Options p. 535 Adjusting the Valuation Model for Risk p. 536 Decision Trees and Computer Simulation p. 540 Game Theory at the FCC p. 543 Uses of Game Theory in Risk Analysis p. 545 Summary p. 549 Case Study: Stock-Price Beta Estimation for the Royal Dutch Petroleum Company p. 557 Capital Budgeting p. 561

7 Capital Budgeting Process p. 562 Steps in Capital Budgeting p. 563 Market-Based Capital Budgeting p. 565 Cash Flow Estimation Example p. 565 Capital Budgeting Decision Rules p. 568 Is the Sun Setting on Japan's Vaunted MOF? p. 573 Project Selection p. 574 Federal Government Support for R&D; p. 578 Cost of Capital p. 578 Capital Allocation at Berkshire Hathaway, Inc. p. 583 Optimal Capital Budget p. 583 Summary p. 586 Case Study: Sophisticated NPV Analysis at Level 3 Communications, Inc. p. 593 Government in the Market Economy p. 599 Externalities p. 600 How Do You Regulate a Global Economy? p. 602 Solving Externalities p. 602 Public Goods p. 604 Political Corruption p. 607 Benefit/Cost Concepts p. 608 Benefit/Cost Criteria p. 612 Free Trade Helps Everyone p. 616 Additional Methods for Improving Public Management p. 617 Regulatory Reform in the New Millennium p. 619 Price Controls for Pharmaceutical Drugs p. 621 Health Care Reform p. 622 Summary p. 624 Case Study: Oh, Lord, Won't You Buy Me a Mercedes-Benz (Factory)? p. 631 Appendices p. 635 Interest Factor Tables p. 635 Statistical Tables p. 643 Selected Check Figures for End-of-Chapter Problems p. 649 Index p. 655 Web Appendices Compounding and the Time Value of Money Math Analysis for Managers Table of Contents provided by Blackwell's Book Services and R.R. Bowker. Used with permission.