Managerial Economics MEC 290 Study Guide - Fall 2018, Comprehensive Midterm Notes - Workplace Politics, Whole Foods Market, Walmart
12 Oct 2018
School
Department
Professor
Managerial
Economics MEC 290
MIDTERM EXAM
STUDY GUIDE
Fall 2018
Day 1: 8/28/18
Managerial Economics:
▪ The study of how to direct scarce resources in a way that most efficiently achieves a
managerial goal
o With profit maximization usually being one of the overarching managerial goals
▪ The application of economic concepts and economic analysis to the problems of
formulating rational managerial decisions
o Where rational managerial decisions occur when the marginal benefit of a
decision outweighs the marginal cost of the decision
▪ A branch of economics that applies microeconomic analysis
▪ Managerial economics extracts concepts and techniques from microeconomic theories
HW: READ FIRST 2 Chapters
Day 2: 8/30/18
First-mover advantage
5 Tenents of Good Decision-Making (Foster)
1. Objectives that are Well Articulated and Defined
a. Financial and non-financial
b. Quantitative and qualitative
2. Realistic time Horizon to Achieve/Move Towards Objectives
a. Different industries tend to have different time horizons, subject to what
pressures they receive from shareholders and consumers
3. Alternatives Aggressively Pursued and Examined
a. Ephasizes the ipotae of eig ile ad illig to eploe/adapt to
change
4. Constraints Understood
a. Informed decision makers understand the nature of their constraints and how
binding they actually are
5. Uncertainty Explicitly Recognized
a. Recognizing – and trying to gauge - the potential risks and uncertainty with
decisions, can lead to better decision-making
i. Identifying educated but fruitful investments, versus investments that are
likely less stable
ii. The analytics revolution has tried to provide decision makers with more
information in order to help manage/reduce risk and/or produce more
efficient solutions
Porter’s 5 Fores
1. Supplier power
2. Buyer power
3. Threat of new entry
find more resources at oneclass.com
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4. Competitive power
5. Threat of substitution
3 Assumptions of Market Participants
1. Goal-oriented
a. People are utility maximizers
b. Companies are profit maximizers
2. Rational
a. Decision are made with careful deliberation and weighing of expected benefits
and costs
3. Scarcity of resources
a. Time, money, and any other resource you can think of tend to be scarce
Opportunity costs and other costs
▪ Explicit costs – money used in the pursuit of a goal that could otherwise have been
spent on an alternative objective
▪ Implicit costs – osts assoiated ith the idiiduals use of his o he o tie ad
other resources in pursuit of a particular activity
▪ Economic cost aka opportunity cost = explicit costs + implicit costs
▪ OTHER COSTS
▪ Accounting costs = osts epoted i opaies et ioe stateets
generated by accountants
▪ Sunk costs = costs that have already been incurred and are beyond recovery
Production Possibility Frontier (PPF) - a depiction of all the different combinations of goods
that a rational actor with certain personal goals can attain with a fixed amount of resources
SUPPLY AND DEMAND
Determinants of demand other than price
▪ Income
o Normal goods
o Inferior goods
▪ Prices of related goods
o Complements
o Substitutes
▪ Tastes or preferences
▪ Number of buyers
▪ Consumer expectations
SHIFTS VS MOVEMENTS ALONG A DEMAND CURVE
▪ Movement along a demand curve:
find more resources at oneclass.com
find more resources at oneclass.com
