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    Managerial Economics 11 Edition

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    Mohamed Rafique
    This chapter introduces key concepts in managerial economics including the theory of the firm, profit measurement, and sources of profit variability. It discusses how managerial economics can help evaluate alternatives and make optimal decisions. The chapter also covers the role of businesses in society and their social responsibilities.

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    Attribution Non-Commercial (BY-NC)
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    Managerial Economics 11 Edition

    Uploaded by

    Mohamed Rafique
    25 views13 pages
    This chapter introduces key concepts in managerial economics including the theory of the firm, profit measurement, and sources of profit variability. It discusses how managerial economics can help evaluate alternatives and make optimal decisions. The chapter also covers the role of businesses in society and their social responsibilities.

    Original Title

    ME11--Ch. 1

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    This chapter introduces key concepts in managerial economics including the theory of the firm, profit measurement, and sources of profit variability. It discusses how managerial economics can help evaluate alternatives and make optimal decisions. The chapter also covers the role of businesses in society and their social responsibilities.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    25 views13 pages

    Managerial Economics 11 Edition

    Uploaded by

    Mohamed Rafique
    This chapter introduces key concepts in managerial economics including the theory of the firm, profit measurement, and sources of profit variability. It discusses how managerial economics can help evaluate alternatives and make optimal decisions. The chapter also covers the role of businesses in society and their social responsibilities.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
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    You are on page 1of 13

    MANAGERIAL

    ECONOMICS 11th Edition


    By
    Mark Hirschey
    Nature and Scope of
    Managerial Economics
    Chapter 1
    Chapter 1
    OVERVIEW
     How Is Managerial Economics Useful?
     Theory of the Firm
     Profit Measurement
     Why Do Profits Vary among Firms?
     Role of Business in Society
     Structure of this Text
    Chapter 1
    KEY CONCEPTS
     managerial economics  economic profit
     theory of the firm  profit margin
     expected value  return on stockholders'
    maximization equity
     value of the firm  frictional profit theory
     present value  monopoly profit theory
     optimize  innovation profit theory
     satisfice  compensatory profit
     business profit theory
     normal rate of return
    How Is Managerial Economics
    Useful?
     Evaluating Choice Alternatives
     Identify ways to efficiently achieve goals.
     Specify pricing and production strategies.
     Provide production and marketing rules to
    help maximize net profits.
     Making the Best Decision
     Managerial economics can be used to
    efficiently meet management objectives.
     Managerial economics can be used to
    understand logic of company, consumer, and
    government decisions.
    Theory of the Firm
     Expected Value Maximization
     Owner-managers maximize short-run profits.
     Primary goal is long-term expected value
    maximization.
     Constraints and the Theory of the Firm
     Resource constraints.
     Social constraints
     Limitations of the Theory of the Firm
     Alternative theory adds perspective.
     Competition forces efficiency.
     Hostile takeovers threaten inefficient managers.
    Profit Measurement
     Business Versus Economic Profit
     Business (accounting) profit reflects
    explicit costs and revenues.
     Economic profit.
     Profit
    above a risk-adjusted normal return.
     Considers cash and noncash items.

     Variability of Business Profits


     Business profits vary widely.
    Why Do Profits Vary
    Among Firms?
     Disequilibrium Profit Theories
     Rapid growth in revenues.

     Rapid decline in costs.

     Compensatory Profit Theories

     Better, faster, or cheaper than

    the competition is profitable.


    Role of Business in
    Society
     Why Firms Exist
     Business is useful in satisfying consumer
    wants.
     Business contributes to social welfare

     Social Responsibility of Business


     Serve customers.
     Provide employment opportunities.

     Obey laws and regulations.


    Structure of this Text
     Objectives
     Understand usefulness of
    economics in describing managerial
    behavior.
     Understand how economics can be
    used to improve managerial
    decisions.
     Appreciate vital role of business in
    society.

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