MANAGERIAL ECONOMICS IN A GLOBAL ECONOMY

Instructor's Manual to Accompany MANAGERIAL ECONOMICS IN A GLOBAL ECONOMY EIGHTH EDITION DOMINICK SALVATORE Professor of Economics and Business Fordham University, New York Oxford University Pressii PREFACE Th ...

Instructor's Manual to Accompany MANAGERIAL ECONOMICS IN A GLOBAL ECONOMY EIGHTH EDITION DOMINICK SALVATORE Professor of Economics and Business Fordham University, New York Oxford University Pressii PREFACE The purpose of this manual is to facilitate the use of the text by the instructor. It contains the detailed outline of each chapter and the answers to all the end-of-chapter discussion questions and problems. The discussion questions at the end of each chapter of the text involve, for the most part, simple applications or recall of what is clearly explained in the text. Their function is to emphasize those concepts, theories, and tools that the student needs to learn and remember. I would encourage students to go over them on their own and check the answers in the text. I would assign the nonasterisked problems at the end of each chapter of the text to be done at home. These problems are challenging but not tricky or very time consuming. They are intended to enlist the active participation of students so as to make managerial economics truly come alive. The student can solve the asterisked problems and check their answers at the end of the book. The following ancillaries are available for this text (see the Preface to the text for the details of their content: Study Guide Computerized Test Bank Downloadable Power Point Analytical Business Calculator (ABC) I thank you for adopting this text and welcome any comment, suggestion, or opinion that you may have on the use of the text. You can correspond directly with me or through Oxford University Press, and I will personally acknowledge your letter and answer your questions. D. S.iii CONTENTS PART ONE: INTRODUCTION Ch. 1 The Nature and Scope of Managerial Economics 1 Ch. 2 The Basic Economic Model: Demand, Supply, and Equilibrium 12 Ch. 3 Optimization Techniques and New Management Tools 29 PART TWO: DEMAND ANALYSIS Ch. 4 Demand Theory 54 Ch. 5 Demand Estimation 76 Ch. 6 Demand Forecasting 97 PART THREE: PRODUCTION AND COST ANALYSIS Ch. 7 Production Theory and Estimation 122 Ch. 8 Cost Theory and Estimation 148 PART FOUR: MARKET STRUCTURE AND PRICING PRACTICES Ch. 9 Market Structure: Perfect Competition, Monopoly, and Monopolistic Competition 173 Ch. 10 Oligopoly and Firm Architecture 194 Ch. 11 Game Theory and Strategic Behavior 215 Ch. 12 Pricing Practices 225 PART FIVE: REGULATION, RISK ANALYSIS, AND CAPITAL BUDGETING Ch. 13 Regulation and Antitrust: The Role of Government in the Economy 252 Ch. 14 Risk Analysis 268 Ch. 15 Long-Run Investment Decisions: Capital Budgeting 2941 CHAPTER 1 THE NATURE AND SCOPE OF MANAGERIAL ECONOMICS 1-1 THE SCOPE OF MANAGERIAL ECONOMICS Definition of Managerial Economics Relationship to Economic Theory Relationship to Decision Sciences Relationship to the Functional Areas of Business Administration Studies 1-2 THE BASIC PROCESS OF DECISION-MAKING Case Study 1-1: Peter Drucker – The Man Who Invented Management Case Study 1-2: The Management Revolution 1-3 THE THEORY OF THE FIRM Reasons for the Existence of Firms and Their Functions The Objective and Value of the Firm Constraints on the Operation of the Firm Limitations of the Theory of the Firm Box 1 – Managerial Economics at Work: The Objective and Strategy of Firms in the Cigarette Industry 1-4 THE NATURE AND FUNCTION OF PROFITS Business versus Economic Profit Theories of Profit Function of Profit Case Study 1-3: Profits in the Personal Computer Industry 1-5 BUSINESS ETHICS Case Study 1-4: Business Ethics at Boeing Case Study 1-5: Enron-Andersen and Other Financial Disasters Case Study 1-6: The Global Financial Crisis 1-6 THE INTERNATIONAL FRAMEWORK OF MANAGERIAL ECONOMICS Case Study 1-7: The Rise of the Global Corporation Case Study 1-8: The Global Business Leader Case Study 1-9: Global Most Admired Companies 1-7 MANAGERIAL ECONOMICS IN A MORE RISKY, CRISIS-PRONE, AND SLUGGISH GLOBAL ECONOMY Case Study 1-10: Terrorism, Cyber Espionage, Financial Crisis, and GlobalizationPART ONE INTRODUCTION 2 1-8 MANAGERIAL ECONOMICS AND THE INTERNET Case Study 1-11: The Most Important Internet Site Addresses for Managerial Economics SUMMARY DISCUSSION QUESTIONS PROBLEMS APPENDIX TO CHAPTER 1: SOLVING MANAGERIAL DECISION PROBLEMS USING SPREADSHEETS Microsoft Excel Example Solution SPREADSHEET PROBLEM SUPPLEMENTARY READINGS KEY TERMS (in the order of their appearance) ______________________________________________________________________ Managerial economics Value of the firm Economic theory Constrained optimization Microeconomics Principal-agent problem Macroeconomics Satisficing behavior Model Business profit Mathematical economics Explicit costs Econometrics Economic profit Functional areas of business Implicit costs administration studies Business ethics Firm Sarbanes-Oxley Act Transaction costs Globalization of economic activity Circular flow of economic activity Internet Theory of the firm Information superhighway