MANAGERIAL ECONOMICS BY FROEB (PROBLEM SOLVING APPROACH)

MANAGERIAL ECONOMICS BY FROEB (PROBLEM SOLVING APPROACH) CONTENTS Preface: Teaching Students to Solve Problems xiii CHAPTER 1 INTRODUCTION: WHAT THIS BOOK IS ABOUT 3 Using Economics to Solve Problems 3 Problem Solving Principles 4 Test Yourself 5 Ethics and Economics 6 Economics in Job Interviews 8 Summary & Homework Problems 10 End Notes 10 CHAPTER 2 THE ONE LESSON OF BUSINESS 11 Capitalism and Wealth 12 Does the Government Create Wealth? 13 Why Economics is Useful to Business 14 Wealth Creation in Organizations 16 Summary & Homework Problems 17 End Notes 19 CHAPTER 3 BENEFITS, COSTS, AND DECISIONS 21 Background: Variable, Fixed, and Total Costs 22 Background: Accounting Versus Economic Profit 23 Costs are What You Give Up 25 Sunk-Cost Fallacy 26 Hidden-Cost Fallacy 28 A Final Warning 28 Summary & Homework Problems 29 End Notes 31 CHAPTER 4 EXTENT (HOW MUCH) DECISIONS 33 Background: Average and Marginal Costs 34 Marginal Analysis 35 Incentive Pay 37 Tie Pay to Performance Measures that Reflect Effort 38 Is Incentive Pay Unfair? 39 vii viii CONTENTS Summary & Homework Problems 40 End Notes 42 CHAPTER 5 INVESTMENT DECISIONS: LOOK AHEAD AND REASON BACK 45 Compounding and Discounting 45 How to Determine Whether Investments are Profitable 46 Breakeven Analysis 47 Choosing the Right Manufacturing Technology 48 Shutdown Decisions and Breakeven Prices 49 Sunk Costs and Post-Investment Hold-Up 50 Anticipate Hold-Up 51 Summary & Homework Problems 52 End Notes 55 CHAPTER 6 SIMPLE PRICING 59 Background: Consumer Values and Demand Curves 60 Marginal Analysis of Pricing 62 Price Elasticity and Marginal Revenue 64 What Makes Demand More Elastic? 66 Forecasting Demand Using Elasticity 67 Stay-Even Analysis, Pricing, and Elasticity 68 Cost-Based Pricing 69 Summary & Homework Problems 69 End Notes 72 CHAPTER 7 ECONOMIES OF SCALE AND SCOPE 73 Increasing Marginal Cost 74 Economies of Scale 75 Learning Curves 76 Economies of Scope 78 Diseconomies of Scope 79 Summary & Homework Problems 80 End Notes 82 CHAPTER 8 UNDERSTANDING MARKETS AND INDUSTRY CHANGES 85 Which Industry or Market? 85 Shifts in Demand 86 Shifts in Supply 88 Market Equilibrium 89 Predicting Industry Changes Using Supply and Demand 90 Explaining Industry Changes Using Supply and Demand 92 Prices Convey Valuable Information 95 Market Making 96