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Managerial Economics

Managerial economics combines economic theory and concepts with business situations in order to increase efficiency in business decisions. Managerial economics is seen as the application of economic theory in allocating a firm’s resources. It is beneficial to a manager’s decisions regarding a firm’s customer base, competitors, and strategic future decisions.

Managerial economics uses approaches from micro and macro economics and applies them when making decisions about resource allocation and utilization. Statistics and other mathematical concepts are used in the decision-making process. 

The most commonly used economic techniques are risk analysis, production analysis, pricing analysis, and capital budgeting. Risk analysis uses models to quantify risk and asymmetric information and uses the data to decide how to manage risk. Production analysis is a microeconomic technique that analyzes production efficiency, costs and economies of scale, and optimum factor allocation. Production analysis is also used to estimate a firm’s cost function. Pricing analysis is another microeconomic technique that is used to make pricing decisions. This entails transfer pricing, price discrimination, price elasticity estimations, and optimal pricing methods. Capital budgeting is an investment theory that assesses a firm’s capital purchasing decisions.

This branch of economics focuses on the theory of demand, theory of capital and investment, environmental issues, production, and profit. Managerial economics provides analytic tools and techniques that show the best method or decision to using the optimal level of resources and how to allocate them efficiently.


Categories within Managerial Economics

Estimation & Forecasting

Postings: 50

Estimation and forecasting refers to the estimation of a demand function of a firm or market through various processes.


Postings: 3

Setting goals and plans is how a company or firm moves forward and is the drive behind most managerial decisions and actions.

Production Function

Postings: 76

A production function measures the physical output of a firm’s production process to the physical inputs or factors of production.

Pricing & Output Decisions

Postings: 204

Pricing and output decisions focus on where to set the price for the product and how much quantity to supply.

Break-Even Analysis

Postings: 72

Break-even point (BEP) is most commonly used in cost accounting and is the point where cost or expenses are equal to revenue.

Game Theory

Postings: 128

Game theory looks at how strategic decisions are formed and how they are implemented.

Risk Analysis

Postings: 192

In managerial economics, risk refers to a situation where there are different outcomes and the probabilities of these outcomes cannot be measured with complete certainty.

Quantitative Excel Graphing Exercise: Drespie Corn Products

You are the new owner of Drespie Corn Products and Refineries. You are interested in your company's cost and revenue relationships as well as its future pricing strategies. Accordingly, you have developed the following relationships, which you believe to be accurate on the basis of historical data: P = $50 - $0.005Q TC = $

Managerial Economics: Vanda-Laye oven mittens

I need some help with this assignment, specifically with the equation portion done in excel. I would greatly appreciate the help. You are an economist for the Vanda-Laye Corporation, which produces and distributes outdoor cooking supplies. The company has come under new ownership and management and will be undergoing change

Market Structure and Related Concepts for Apple, Inc.

Describe the dominant characteristics of the industry in which APPLE operates, addressing the following questions: -Who are your main competitors? -Are they significant barriers to entry? -What is your company's market share? -What is the market share of your main competitors? -What is the four-firm concentration ratio in

Relationship between elasticity and total revenue

You are the Chief Financial Officer of Heavy Buds and are faced with the task of raising sales revenue per the units sold by your firm. Heavy Buds sold 120 million packs of beer annually at $3 per pack. The Chief Executive Officer suggested that you could raise an additional $120 million in annual revenue from any different qu

Free Enterprise

1. In reading "Rewarding Work: How to Restore Participating and Self-Support to Free Enterprise" a plan to help the working poor speaks about different options. What are some market incentives that includes one of the ten principles of economics that works welfare programs? Is the Phelps' plan an improvement over current gove

Delta Airlines - Acquisition of Refinery

Read the excerpt below from an article titled "Delta buys refinery, becoming first airline to make own fuel" (Reuters, 5/1/2012). The more context­ specific your answers are the better. a. What might be the value­ generating benefits of this vertical integration? What transaction costs might be reduced? b. What costs migh

Risk Averse Investment Decision

Q1. Consider a market characterized by the following inverse demand and supply functions: P =10-2Q and P = 2 + 2Q. a. Draw the Demand and Supply curves. b. Compute the surplus received by consumers and producers in a perfectly competitive equilibrium. Q2. Recently the National Association of Broadcasters imposed restrict

Macroeconomic Aggregates

1) Explain the difference between the short run and the long run as it relates to the firm's production function. Why is this distinction important to a firm's manager? 2) Explain why a firm maximizes its profits by producing the level of output at which marginal revenue equals marginal costs. 3) Explain how labor resistan

Sotheby's and Christie's and Cover Gifts

Please reference both attachments. Please provide the responses to A, B, C & D in regards to the first attachment in a Word doc only. Please provide a one paragraph response for each. Please provide the responses to Question 1 in regards to the second attachment in a Word doc only. Please provide a two paragraph response.

The difference between economic profit and accounting profit

Jaynet spends $25,000 per year on painting supplies and storage space. She recently received two job offers from a famous marketing firm - one offer was for $125,000 per year, and the other was for $105,000. However, she turned both jobs down to continue a painting career. If Jaynet sells 35 paintings per year at a price of $5

Wages, Unequal Pay, and Movie Pricing

In regards to the below explanation, why are wages decreasing and employment increasing in Great Britain? Please provide your opinion. The simplest explanation is that supply is increasing: as supply increases output increases real prices fall and output increases. The Financial Times shows the data and puts forward seve

Budget and Marginal Rate of Substitution

Upscale hotels in the United States recently cut their prices by 25% in an effort to bolster dwindling occupancy rates among business travelers. A survey performed by a major research organization indicated that businesses are wary of current economic conditions and are now resorting to electronic media, such as the Internet an

Demands and Costs of Perfect Competition

See attachment for graph. The top graph summarizes the demand and costs for a firm that operates in a perfectly competitive market. a. What level of output should this firm produce in the short run? b. What price should this firm charge in the short run? c. What is the firm's total cost at this level of output? d. What

Competitive Industry and Perfect Competition

1. If an industry is perfectly competitive then a single producer is a price taker? Why? Explain with examples. 2. What is the supply curve of a perfectly competitive firm? Is it different from that of the market supply curve? Explain with examples

Market Power and Monopoly

1. An industry consists of three firms with sales of $300,000, $700,000 and $250,000. a. Calculate the Herfindahl-Hirschman index (HHI). SHOW ALL WORK b. Calculate the four-firm concentration ratio (C4). SHOW ALL WORK c. Based on the FTC and DOJ Horizontal Merger Guidelines described in the text, do you think the Department

Firms/markets, Labor and Capital

see attachment: Instructions: 1. Answer all questions and show work 2. Do not change the question format. 1. The own-price elasticity of demand for apples is -1.2. If the price of apples falls by 5%, what will happen to the quantity of apples demanded? A. It will increase 5%. B. It will fall 4.3%. C. It will incre

Economics: Cost Analysis

1. An economist estimated that he cost function of single-prodcut firm is C(Q) = 100 + 20Q + 15Q2 + 10Q3 Based on this information, determine: a. The fixed cost of producing 10 units of output b. The variable cost of producing 10 units of output c. The total cost of producing 10 units of output d. The average fixed cos

Product maximization v. Cost minimization

Cost minimization for a given level of production is equivalent or identical the concept of product maximization for a given cost level. True of False. Explain. Please offer examples and the use of graphs where necessary.

Managerial Economics and Opportunity Set

A recent newspaper circular advertised the following special on tires: "Buy three, get the fourth tire for free—limit one free tire per customer." If a consumer has $360 to spend on tires and other goods and each tire usually sells for $40, how does this deal impact the consumer's opportunity set?

Wages in a highly competitive market

A firm's product sells for $4 per unit in a highly competitive market. The firm produces output using capital (which it rents at $ 25 per hour) and labor (which is paid a wage of $30 per hour under a contract for 20 hours of labor services). Complete the following table and use that information to answer the questions that foll

Consumer Spending and Consumption

A consumer must spend all of her income on two goods (X and Y). In each of the following scenario, indicate whether the equilibrium consumption of goods X and Y will increase or decrease. Assume good X is a normal good and good Y is an inferior good. a. Income doubles b. Income quadruples and all price double c. Income and

Calculating the optimal price and markup

Text below is unformatted, please see attached file for specifics. You are the manager of a monopoly that sells a product to two groups of consumers in different parts of the country. Group 1's elasticity of demand is -2, while group 2's is -3. Your marginal cost of producing the product is $30. a. Determine your optimal m

Calculating the optimal price in the given case

text below is unformatted, please see attached for specifics. The manager of a local monopoly estimates that the elasticity of demand for its product is constant and equal to -2. The firm's marginal cost is constant at $15 per unit. a. Express the firm's marginal revenue as a function of its price. MR = x P b. Det

Cost Function: Fixed, Variable, and Total Costs

Text is unformatted, please see file attached for specifics. 38. An economist estimated that the cost function of a single-product firm is: C(Q) = 60 + 30Q + 25Q2 + 5Q3. Based on this information, determine the following: a. The fixed cost of producing 10 units of output. $ b. The variable cost of producing 10