Managerial Economics
           Principles
               v. 1.0
    This is the book Managerial Economics Principles (v. 1.0).
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    Table of Contents
       Chapter 1: Introduction to Managerial Economics ....................................................... 1
           Why Managerial Economics Is Relevant for Managers..............................................................................2
           Managerial Economics Is Applicable to Different Types of Organizations..............................................4
           The Focus of This Book.................................................................................................................................. 5
           How to Read This Book.................................................................................................................................. 6
       Chapter 2: Key Measures and Relationships................................................................... 7
           Revenue, Cost, and Profit.............................................................................................................................. 8
           Economic Versus Accounting Measures of Cost and Profit.....................................................................10
           Revenue, Cost, and Profit Functions.......................................................................................................... 12
           Breakeven Analysis...................................................................................................................................... 16
           The Impact of Price Changes ...................................................................................................................... 18
           Marginal Analysis......................................................................................................................................... 22
           The Conclusion for Our Students............................................................................................................... 25
           The Shutdown Rule...................................................................................................................................... 26
           A Final Word on Business Objectives......................................................................................................... 28
       Chapter 3: Demand and Pricing....................................................................................... 30
           Theory of the Consumer.............................................................................................................................. 31
           Is the Theory of the Consumer Realistic?..................................................................................................34
           Determinants of Demand............................................................................................................................ 36
           Modeling Consumer Demand...................................................................................................................... 39
           Forecasting Demand.................................................................................................................................... 41
           Elasticity of Demand.................................................................................................................................... 43
           Consumption Decisions in the Short Run and the Long Run ..................................................................47
           Price Discrimination.................................................................................................................................... 48
       Chapter 4: Cost and Production....................................................................................... 51
           Average Cost Curves.................................................................................................................................... 52
           Long-Run Average Cost and Scale.............................................................................................................. 55
           Economies of Scope and Joint Products.....................................................................................................60
           Cost Approach Versus Resource Approach to Production Planning......................................................62
           Marginal Revenue Product and Derived Demand ....................................................................................64
           Marginal Cost of Inputs and Economic Rent.............................................................................................67
           Productivity and the Learning Curve ........................................................................................................ 69
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       Chapter 5: Economics of Organization........................................................................... 72
           Reasons to Expand an Enterprise............................................................................................................... 73
           Classifying Business Expansion in Terms of Value Chains......................................................................74
           Horizontal Integration ................................................................................................................................ 76
           Vertical Integration..................................................................................................................................... 77
           Alternatives to Vertical Integration .......................................................................................................... 78
           Conglomerates.............................................................................................................................................. 80
           Transaction Costs and Boundaries of the Firm.........................................................................................81
           Cost Centers Versus Profit Centers............................................................................................................ 83
           Transfer Pricing........................................................................................................................................... 84
           Employee Motivation................................................................................................................................... 86
           Manager Motivation and Executive Pay....................................................................................................89
       Chapter 6: Market Equilibrium and the Perfect Competition Model...................... 91
           Assumptions of the Perfect Competition Model.......................................................................................92
           Operation of a Perfectly Competitive Market in the Short Run .............................................................93
           Perfect Competition in the Long Run ........................................................................................................ 96
           Firm Supply Curves and Market Supply Curves.......................................................................................98
           Market Equilibrium.................................................................................................................................... 100
           Shifts in Supply and Demand Curves....................................................................................................... 102
           Why Perfect Competition Is Desirable..................................................................................................... 108
           Monopolistic Competition ........................................................................................................................ 112
           Contestable Market Model........................................................................................................................ 113
           Firm Strategies in Highly Competitive Markets.....................................................................................115
       Chapter 7: Firm Competition and Market Structure ................................................ 117
           Why Perfect Competition Usually Does Not Happen .............................................................................118
           Monopoly.................................................................................................................................................... 120
           Oligopoly and Cartels................................................................................................................................. 122
           Production Decisions in Noncartel Oligopolies ......................................................................................124
           Seller Concentration.................................................................................................................................. 127
           Competing in Tight Oligopolies: Pricing Strategies ...............................................................................129
           Competing in Tight Oligopolies: Nonpricing Strategies........................................................................132
           Buyer Power............................................................................................................................................... 136
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