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Managerial Decisions

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Describe in economic terms a managerial decision....Should our company hire temporary workers or hire new workers to handle increase demand for our product? Should we buy a new machine or upgrade the old one?
What is the optimal level of parts we should order and keep on the shelf?
Should we lease or buy a car? Should we rent or buy a house? Should I start a new business?

Each question above is answered in a single sentence. The answer has implications influencing future actions, ie. the answer is meaningful and useful. Use clear economic language in a manner that demonstrates understanding of cost benefit analysis, briefly explain the economic terms and concepts. Include a description of...above...detail the understanding of the process

Further define a managerial question to be analyzed. Identify opportunities and alternatives being evaluated. Describes and identify factors or costs that will influence the analysis Includes factors and costs that may seem important (and are important for other questions) and explain why they are not important to this question. Limit answer to ten most important factors or costs (you should have at least this many).
(3 implicit and 3 explicit costs) *Two should not be important to this question and at least six should be important to answering this question.

Demonstrate your understanding of what makes a cost or factor relevant to economic reasoning.Measure how factors or costs from the previous section are to be measured and the values you plan to use in your analysis (or range of values). State the reliability of the number. For example, I don't expect you to include every possible value of a factor, you may make assumptions. If you make an assumption about a number how likely is it to change, and/or how comfortable are you with the stability of the number.

Demonstrate your ability to apply economic reasoning and not get the correct answer (or politically correct answer). If you apply good reasoning, your answer may be wrong because of a poor assumption, that is acceptable. With experience, your ability to make good assumptions will improve. Use the measurements from above and apply good economic reasoning and solve the problem. Explain what method you're going to apply and why this method is appropriate (This is to demonstrate that you understand the economic concepts).

States your observations about the process. You have an answer, based upon the reliability of the measurement of the factors or costs how likely is that answer to change. You may want to identify some (not more that three) assumptions that if their value were different would give a different answer. For example, buying a house versus renting may the choice when interest rates are 5%, but if they go to 20%, renting may be the better choice.

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Make a Managerial Decision

Describe in economic terms a managerial decision....Should our company hire temporary workers or hire new workers to handle increase demand for our product? Temporary workers, Hiring temporary workers increases the variable cost, on the other hand hiring permanent workers will increase the fixed costs. Should we buy a new machine or upgrade the old one? Up gradation, buying a new machine increases the fixed cost; the up gradation also increases the fixed cost but that which can be changed in a shorter period of time.
What is the optimal level of parts we should order and keep on the shelf? The optimal level of parts we should order is the point where the marginal cost of ordering and keeping the parts is equal to the marginal revenue of keeping the parts on the shelf. (MR= MC)
Should we lease or buy a car? If net present value of the lease payments is more than the cost of buying the car, it should be bought. Otherwise it should be leased. Should we rent or buy a house? If the net present value of the rent paid for the house is more than the price of the house the house should be bought. Should I start a new business? Yes, if it earns more profit than if the money were invested.

Each question above is answered in a single sentence. The answer has implications influencing future actions, ie. the answer is meaningful and useful. Use clear economic language in a manner that demonstrates understanding of cost benefit analysis, briefly explain the economic terms and concepts. Include a description of...above...detail the understanding of the process
Marginal costs are change in total costs divided by ...

Solution Summary

Managerial Decision are discussed very comprehensively in this explanation..

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Managerial Decision Making: Example Problems

Sources need to be referenced at the end of the written response.

1. Discuss your most recent decision to purchase a major item i.e. entertainment center, automobile, home, etc. In what way did the acquisition utility or the transactional utility come into play for you?

2. Explain the availability, representativeness, and affect heuristics. In your answer, compare the three and discuss the positive and negative aspects of each.

3. Lately, the stock market has experienced unprecedented volatility - wild ups and downs. Discuss how stock trading has created a lot of this volatility and the decisions for stock traders to buy and sell wildly in terms of hyperbolic discounting.

4. Bernard Madoff, a once highly regarded member of the Wall Street community, recently pleaded guilty of running a $50 billion ponzi scheme. Research the driving forces behind his seemingly unethical behavior and discuss your findings. How did favoritism and bounded ethicality come into play in this case?

5. Read the case Fairness in Punishment from the link: http://www.solutionlibrary.com/business/management/managerial-decision-making-fairness-in-punishment_7nel. Discuss the Decatur School Board's decision to adopt a "no tolerance on school violence" in terms of fairness. How did implicit attitudes, perhaps, influence the school board's decision to punish such a disproportionate number of African-American students?

6. Recently, the American International Group (AIG), a global insurance and financial services organization, accepted billions of dollars from the United States Government in order to remain solvent and in operation. After receiving this money, the organization decided to pay over $160 million in bonuses. Discuss the ethical problems associated with this decision. Could in-group favoritism play a role in this decision? If you were the CEO, what decision would you have made?

7. Research the subject of the Enron and Arthur Andersen relationship. Discuss your findings in terms of the application of ethics in the various decisions made by the Enron and Arthur Andersen teams. How did bounded ethicality play a role in these decisions?

8. Eventually, the United States and Iran will have to sit down and negotiate the use of nuclear power. Discuss the issues that could be involved in such a negotiation. What cognitive mistakes might be made by the negotiators in this case? How could these mistakes be overcome in order to reach an acceptable agreement?

9. Assume that you are part of a mediation team that has been brought in to help overcome an impasse between negotiators who are deliberating the use of embryonic stem cells for a research project. The decision makers are polarized along ethical and religious lines. Since this is a potentially emotional issue, what would you do in order to break this impasse? How could the fixed pie concept come into play in this situation?

10. Recently, General Motors and the United Auto Workers had to sit down and negotiate a change in the labor agreement, in order to keep the company from going bankrupt. Consider what might have gone on during these negotiations and discuss how framing might have been used, and what issues might have been discussed, in order to reach an acceptable agreement.

11. Research Kurt Lewin's model for change. Then, discuss the three-staged de-biasing process (unfreezing, change, and refreezing) and explain the mechanisms that make each of them hard to implement. In your discussion, include how you believe such a process can help you, personally, to improve your decision-making.

12. Describe the concept of analogical reasoning. Then, considering your last purchase decision, discuss how analogical reasoning could have helped you to improve your decision and increase your satisfaction with the product or service that you purchased.

13. Bazerman and Moore suggest that we should understand the biases of others. Discuss this concept in terms of why it is important for us to understand other peoples' biases. In your discussion, focus on how you might be able to improve your decision-making in a group setting.

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