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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 firmâ€™s resources. It is beneficial to a managerâ€™s decisions regarding a firmâ€™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 firmâ€™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 firmâ€™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.

## BrainMass Categories within Managerial Economics

### Estimation & Forecasting

Solutions: 50

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

### Goal-Creation

Solutions: 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

Solutions: 84

A production function measures the physical output of a firmâ€™s production process to the physical inputs or factors of production.

### Short- and Long-Run Cost Functions

Solutions: 92

To understand short and long run cost functions, it is important to understand the concept of cost.

### Pricing & Output Decisions

Solutions: 205

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

### Break-Even Analysis

Solutions: 73

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

Solutions: 131

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

### Risk Analysis

Solutions: 188

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.

### Marginal revenue and monopoly

The accompanying diagram shows the demand, marginal revenue, and marginal cost of a monopolist. Below the graph is the market demand curve. TABLE Showing Market Demand Price Quantity Total Revenue Average Revenue 18 10 ------------ ------------------- 17 15

### Costs of Production: Fixed, variable and total costs

Cost functions, a part of the definition of profit, are useful to gauge the performance of the business. Suppose an economist estimated that the cost function of a single-product firm as: C(Q) = 10 + 10Q + 10Q2 + 10Q3 Based on this information, determine the followings and show all steps (first, you must define each of the te

### Labor and Capital, Costs

5) A manager hires labor and rents capital equipment in a very competitive market. Currently the wage rate is \$6 per hour and capital is rented at \$12 per hour. If the marginal product of labor is 50 units of output per hour and the marginal product of capital is 75 units of output per hour, is the firm using the cost-minimizi

### 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 contextÂ­ specific your answers are the better. a. What might be the valueÂ­ 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

### Incentive Conflict and Organizational Architecture

Identify an incentive conflict in your firm, or one you have read about, that reduced firm value. As part of your answer discuss whether or not one or more of the legs of the organizational stool was unbalanced, and if so, how that contributed to the conflict.

### Factors Affecting Pricing Decisions

What factors must a firm consider when deciding to raise or lower its price?

### 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

### Several Economics Questions

Please reference the attachment. Please provide the response via attachment only. 1. With regards to the below explanation, is RG III a sunk cost? Please provide a substantial one-two paragraph response. The moment the owner Daniel Snyder signed off on trading those draft picks to the St. Louis Rams to get Griffin, those p

### Long-Term Unemployment and the U.S. Economy

Please analyze and discuss the long-term implications for the U.S. Economy of the following: Increasing long-term unemployment for full-time positions

### Long-term implications for the U.S. Economy of Employer Health Coverage

Does employer health coverage have a long term effect on the US Economy?

### 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

### Do business losses mean closing the doors

If a firm makes a loss in the short run, should it shut down? If no, discuss. If yes, discuss.Offer examples

### 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 freeâ€”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