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MANAGERIAL

ECONOMICS
2.10.2013

Associate Professor PhD Silvia MĂRGINEAN


silvia_marginean@yahoo.com
Office hours: Wednesday, 15-17, Room E34

Assistant Professor PhD Alin OPREANA


 This course introduces a set of economic concepts and
frameworks that can be applied to many of the major concerns of
business management
Course  Managerial economics is a branch of economics that applies
microeconomic analysis to business decisions.
description
 The objective is to show how microeconomic analysis can inform
managerial decisions aimed at maximizing the present value of a
firm’s profits.
 reading over course material before lecture helps get the most out
of lecture
 We’ll try:
 30% - In-class tests based on Multiple Choice
Grading Quiz for each chapter
 30% - Homework, class attendance and
participation to projects and cases/discussions
 40% - Final exam
 Michael R.Baye, Managerial Economics and Business Strategy, 6th edition,
McGraw Hill International Edition 2009
 On-line resources:

 http://highered.mcgraw-hill.com/sites/0073375683/information_center_view0/
Textbook  http://highered.mcgraw-hill.com/sites/0073375969/student_view0/

 http://highered.mcgraw-
hill.com/sites/0073523224/information_center_view0/book_preface.html
Class Topic Readings
1 Introduction to Managerial Economics
2 The Fundamentals of Managerial Economics pp.1-34
3 Market Forces: Demand and Supply pp.35-72
4 Quantitative Demand Analysis pp. 73-116
5 The Theory of Individual Behavior pp.117-154
6 The Production Process and Costs pp.155-201
7 The Organization of the Firm pp.202-234
Course 8 The Nature of Industry pp.235-263
overview 9 Managing in Competitive, Monopolistic, and pp.264-312
Monopolistically Competitive Markets
10 Basic Oligopoly Models pp.313-349
11 Game Theory: Inside Oligopoly pp.350-394
12 Pricing Strategies for Firms with Market Power pp.395-432
13 The Economics of Information pp.433-472
14 Advanced Topics in Business Strategy. A 473-581
Manager’s Guide to Government in the
Marketplace
Key  Headlines
pedagogical  Learning objectives
features  Demonstration problems
Baye  Inside business applications

Managerial  Calculus and Noncalculus alternatives


 Key terms and marginal definitions
Economics and
 End of chapter problems
Business  Case study
Strategy
Overview
Chapter 1: I. Introduction
The II. The Economics of Effective Management
– Identify Goals and Constraints
Fundamentals – Recognize the Role of Profits
of – Five Forces Model
– Understand Incentives
Managerial – Understand Markets
Economics – Recognize the Time Value of Money
– Use Marginal Analysis
 LO1 Summarize how goals, constraints, incentives, and market
rivalry affect economic decisions.
 LO2 Distinguish economic versus accounting profits and costs.
 LO3 Explain the role of profits in a market economy.
 LO4 Apply the five forces framework to analyze the sustainability
Learning of an industry’s profits.
objectives  LO5 Apply present value analysis to make decisions and value
assets.
 LO6 Apply marginal analysis to determine the optimal level of a
managerial control variable.
 LO7 Identify and apply six principles of effective managerial
decision making.
On Tuesday software giant Amcott posted a year-end operating loss
of $3.5 million. Reportedly, $1.7 million of the loss stemmed from its
foreign language division.
With short-term interest rates at 7 percent, Amcott decided to use
$20 million of its retained earnings to purchase three-year rights to
Magicword, a software package that converts generic word
processor files saved as French text into English. First-year sales
revenue from the software was $7 million, but thereafter sales were
halted pending a copyright infringement suit filed by Foreign, Inc.
Headline Amcott lost the suit and paid damages of $1.7 million. Industry
insiders say that the copyright violation pertained to “a very small
component of Magicword.”
Ralph, the Amcott manager who was fired over the incident, was
quoted as saying, “I’m a scapegoat for the attorneys [at Amcott]
who didn’t do their homework before buying the rights to
Magicword. I projected annual sales of $7 million per year for three
years. My sales forecasts were right on target.”
Do you know why Ralph was fired?
Answering the
headline
Managerial  Manager
 A person who directs resources to achieve a stated goal.
Economics  Economics
 The science of making decisions in the presence of scare resources.

I. Introduction  Managerial Economics


 The study of how to direct scarce resources in the way that most
efficiently achieves a managerial goal.