Professional Documents
Culture Documents
CH 01
CH 01
Chapter 1
The Nature and Scope
of Managerial Economics
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright ©2004 by South-Western, a division of Thomson Learning. All rights reserved.
Managerial Economics
Defined
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright ©2004 by South-Western, a division of Thomson Learning. All rights reserved.
Managerial Decision Problems
MANAGERIAL ECONOMICS
Application of economic theory
and decision science tools to solve
managerial decision problems
OPTIMAL SOLUTIONS TO
MANAGERIAL DECISION PROBLEMS
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright ©2004 by South-Western, a division of Thomson Learning. All rights reserved.
Theory of the Firm
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright ©2004 by South-Western, a division of Thomson Learning. All rights reserved.
Alternative Theories
• Sales maximization
– Adequate rate of profit
• Management utility maximization
– Principle-agent problem
• Satisficing behavior
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright ©2004 by South-Western, a division of Thomson Learning. All rights reserved.
Definitions of Profit
• Business Profit: Total revenue minus
the explicit or accounting costs of
production.
• Economic Profit: Total revenue minus
the explicit and implicit costs of
production.
• Opportunity Cost: Implicit value of a
resource in its best alternative use.
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright ©2004 by South-Western, a division of Thomson Learning. All rights reserved.
Theories of Profit
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright ©2004 by South-Western, a division of Thomson Learning. All rights reserved.
Function of Profit
• Profit is a signal that guides the
allocation of society’s resources.
• High profits in an industry are a signal
that buyers want more of what the
industry produces.
• Low (or negative) profits in an industry
are a signal that buyers want less of
what the industry produces.
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright ©2004 by South-Western, a division of Thomson Learning. All rights reserved.
Business Ethics
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright ©2004 by South-Western, a division of Thomson Learning. All rights reserved.
The Changing Environment of
Managerial Economics
• Globalization of Economic Activity
– Goods and Services
– Capital
– Technology
– Skilled Labor
• Technological Change
– Telecommunications Advances
– The Internet and the World Wide Web
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright ©2004 by South-Western, a division of Thomson Learning. All rights reserved.