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Cover

Managerial Economics in a Global Economy

Ninth edition

Dominick Salvatore

Publication Date - July 2018

ISBN: 9780190848255

792 pages
Hardcover
7-1/2 x 9-1/4 inches

In Stock

Retail Price to Students: $194.99

The true global choice for managerial economics

Description

Managerial Economics in a Global Economy, Ninth Edition, synthesizes economic theory, decision sciences, and business administration to train students in making managerial decisions in the modern, globalized world. With an international perspective and a wealth of relevant examples, this text illustrates how local economic decision-making is now inescapably global.

New to this Edition

  • Approximately one-third of the case studies are new or completely rewritten
  • New case studies on Big Data and Big Data Analytics (Chapter 3)
  • New material on Behavioral Economics and Marketing (Chapter 5)
  • Completely rewritten sections, including Managerial Economics in a More Risky, Crisis-Prone, and Sluggish Global Economy (Chapter 1), Managerial Economics and the Internet (Chapter 1), and Barometric Methods of Forecasting (Chapter 6)
  • Revised and updated "Managerial Economics at Work" boxes
  • Almost double the number of end-of-chapter Spreadsheet Problems across the text

About the Author(s)

Dominick Salvatore is Distinguished Professor of Economics and Business and Director of the Global Economic Policy Center at Fordham University. He is also Honorary Professor at Shanghai Finance University, Nanjing Finance and Economics University, Hunan University, and the University of Pretoria. He also acts as a consultant to the Economic Policy Institute, the World Bank, the International Monetary Fund, the United Nations, and various other global banks and corporations.

Professor Salvatore has authored International Economics (2016) and Microeconomics: Theory and Applications (Oxford University Press, 2009), coauthored Income Distribution (Oxford University Press, 2006), and edited Where Is the World Economy Headed? (2017) and Why Is World Growth Slowing Down? (2016). He has also been the editor of Open Economies Review and The American Economist, and he serves as the current coeditor of the Journal of Policy Modeling.

Reviews

"Interesting, well-written, and global--a good text!" --Evelina Mengova, Governors State University

"This is the flagship textbook for managerial economics." --Daniel Farhat, Radford University

"The breadth of material and range of topics allow instructors to assemble a course that is appropriate for undergraduate economics students, business students, and students pursuing an MBA." --David McClough, Ohio Northern University

Table of Contents

    PART ONE: INTRODUCTION

    CHAPTER 1. The Nature and Scope of Managerial Economics
    1-1 The Scope of Managerial Economics
    Definition of Managerial Economics
    Relationship to Economic Theory
    Relationship to the Decision Sciences
    Relationship to the Functional Areas of Business Administration Studies

    1-2 The Basic Process of Decision Making
    CASE STUDY 1-1 Peter Drucker-The Man Who Invented Management
    CASE STUDY 1-2 The Management Revolution
    1-3 The Theory of the Firm
    Reasons for the Existence of Firms and Their Functions
    The Objective and Value of the Firm
    Constraints on the Operation of the Firm
    Limitations of the Theory of the Firm
    BOX 1 Managerial Economics at Work: The Objective and Strategy of Firms in the Cigarette Industry
    1-4 The Nature and Function of Profits
    Business versus Economic Profit
    Theories of Profit
    Function of Profit

    CASE STUDY 1-3 Profits in the Personal Computer Industry
    1-5 Business Ethics
    CASE STUDY 1-4 Business Ethics at Boeing
    CASE STUDY 1-5 Enron-Andersen and Other Financial Disasters
    CASE STUDY 1-6 The Global Financial Crisis
    1-6 The International Framework of Managerial Economics
    CASE STUDY 1-7 The Rise of the Global Corporation
    CASE STUDY 1-8 The Global Business Leader
    CASE STUDY 1-9 Global Most Admired Companies
    1-7 Managerial Economics in a More Risky, Crisis-Prone, and Sluggish Global Economy
    CASE STUDY 1-10 Terrorism, Cyber Espionage, Financial Crises, and Globalization
    1-8 Managerial Economics and the Internet
    CASE STUDY 1-11 The Most Important Internet Site Addresses for Managerial Economics
    Summary
    Discussion Questions
    Problems
    Appendix to Chapter 1: Solving Managerial Decision Problems Using Spreadsheets
    Microsoft Excel
    Example
    Solution

    Spreadsheet Problem
    Supplementary Readings

    CHAPTER 2. Demand, Supply, and Equilibrium Analysis
    2-1 Market Analysis
    2-2 Market Demand
    Demand Schedule and Demand Curve
    Changes in Demand

    2-3 Market Supply
    Supply Schedule and Supply Curve
    Changes in Supply

    2-4 When Is a Market in Equilibrium?
    2-5 Adjustment to Changes in Demand and Supply: Comparative Static Analysis
    CASE STUDY 2-1 Equilibrium Price by Auction
    Adjustment to Changes in Demand
    Adjustment to Changes in Supply

    CASE STUDY 2-2 Changes in Demand and Supply and Coffee Prices
    2-6 Domestic Demand and Supply, Imports, and Prices
    CASE STUDY 2-3 Lower Consumer Prices with Imports
    2-7 Interfering with versus Working through the Market
    CASE STUDY 2-4 Rent Control Harms the Housing Market
    CASE STUDY 2-5 The Economics of U.S. Farm Support Programs
    CASE STUDY 2-6 Working through the Market with an Excise Tax
    BOX 2 Managerial Economics at Work: Nonclearing Financial and Other Markets
    Summary
    Discussion Questions
    Problems
    Spreadsheet Problems
    Appendix to Chapter 2 The Algebra of Demand, Supply, and Equilibrium
    Market Equilibrium Algebraically
    Shifts in Demand and
    Supply, and Equilibrium
    The Effect of an Excise Tax
    Appendix Problems
    Supplementary Readings

    CHAPTER 3. Optimization Techniques and New Management Tools
    3-1 Methods of Expressing Economic Relationships
    3-2 Total, Average, and Marginal Relationships
    Total, Average, and Marginal Cost
    Geometric Derivation of the Average- and Marginal-Cost Curves
    CASE STUDY 3-1 Total, Average, and Marginal Cost in the
    U.S. Steel Industry
    3-3 Optimization Analysis
    Profit Maximization by the Total-Revenue and Total-Cost Approach
    Optimization by Marginal Analysis
    CASE STUDY 3-2 Optimal Pollution Control
    3-4 Constrained Optimization
    CASE STUDY 3-3 Pursuing Multiple Objectives under Constraints by Global Corporations
    3-5 New Management Tools for Optimization
    Benchmarking
    Total Quality Management

    CASE STUDY 3-4 Benchmarking at Xerox, Ford, and Mobil
    Reengineering
    CASE STUDY 3-5 Total Quality Management at Johnson & Johnson, Motorola,
    General Electric and Ford
    CASE STUDY 3-6 Reengineering at GE
    The Learning Organization
    CASE STUDY 3-7 Applying Learning-Organization Principles at Ford and Southwest Airlines
    Big Data and Big Data Analytics
    CASE STUDY 3-8 Big Data Analytics at Amazon, MIT, and Johns Hopkins School of Medicine
    3-6 Other Management Tools for Optimization
    3-7 New Management Tools and Functional Specialization
    CASE STUDY 3-9 The American Business Model
    CASE STU DY 3-10 When Governance Rules Fail, Public Trust Is Eroded
    BOX 3 Managerial Economics at Work: Management Practices across the World
    Summary
    Discussion Questions
    Problems
    Spreadsheet Problems
    Appendix 1 to Chapter 3 Optimization Using Spreadsheets
    Appendix Problems
    Appendix 2 to Chapter 3 Differential Calculus and Optimization Techniques
    The Derivative and Rules of Differentiation
    The Concept of the Derivative
    Rules of Differentiation
    Optimization with Calculus
    Determining a Maximum or a Minimum by Calculus
    Distinguishing between a Maximum and a Minimum: The Second Derivative
    Multivariate Optimization
    Partial Derivatives
    Maximizing a Multivariable Function
    Constrained Optimization
    Constrained Optimization by Substitution
    Constrained Optimization by the
    Lagrangian Multiplier Method
    Appendix Problems
    Supplementary Readings
    INTEGRATING CASE STUDY 1 Steve Jobs: A Genius Departs: The Astonishing Career of the World's Most Revered Chief Executive
    Three-Way Marriage
    Oh, and One More Thing


    PART TWO: DEMAND ANALYSIS

    CHAPTER 4. Demand Theory
    4-1 The Demand for a Commodity
    An Individual's Demand for a Commodity
    From Individual to Market Demand

    CASE STUDY 4-1 The Demand for Big Macs
    The Demand Faced by a Firm
    4-2 Price Elasticity of Demand
    CASE STUDY 4-2 The Demand for Sweet Potatoes in the United States
    Point Price Elasticity of Demand
    Arc Price Elasticity of Demand
    Price Elasticity, Total Revenue, and Marginal Revenue
    Factors Affecting the Price
    Elasticity of Demand
    4-3 Income Elasticity of Demand
    CASE STUDY 4-3 Price Elasticities of Demand in the Real World
    CASE STUDY 4-4 Income Elasticities of Demand in the Real World
    4-4 Cross-Price Elasticity of Demand
    CASE STUDY 4-5 Cross-Price Elasticities of Demand in the Real World
    CASE STUDY 4-6 Substitution between Domestic and Foreign Goods
    4-5 Using Elasticities in Managerial Decision Making
    BOX 4 Managerial Economics at Work: Decision Time at the Aromatic Coffee Company
    CASE STUDY 4-7 Demand Elasticities for Alcoholic Beverages in the United States
    4-6 International Convergence of Tastes
    CASE STUDY 4-8 Gillette Introduces Space-Technology Global Razors
    CASE STUDY 4-9 Ford's World Car(s)
    4-7 Electronic Commerce
    CASE STUDY 4-10 E-Commerce at Amazon.com
    CASE STUDY 4-11 Amazon Puts an End to eBay Star Performance
    Summary
    Discussion Questions
    Problems
    Spreadsheet Problems
    Appendix to Chapter 4 Behind the Market Demand Curve-The Theory of Consumer Choice
    The Consumer's Tastes: Indifference Curves
    The Consumer's Constraints: The Budget Line
    The Consumer's Equilibrium
    Derivation of the Consumer's Demand Curve
    Income and Substitution Effects of a Price Change
    The Theory of Consumer Choice Mathematically

    Appendix Problems
    Supplementary Readings

    CHAPTER 5. Demand Estimation
    5-1 The Identification Problem
    5-2 Marketing Research Approaches to Demand Estimation
    Consumer Surveys and Observational Research
    CASE STUDY 5-1 Micromarketing: Marketers Zero in on Their Customers
    Consumer Clinics
    Market Experiments
    Behavioral Economics and Marketing

    CASE STUDY 5-2 Estimation of the Demand for Oranges by Market Experiment
    Virtual Shopping and Virtual Management
    CASE STUDY 5-3 Reaching Consumers in the Vanishing Mass Market
    5-3 Introduction to Regression Analysis
    5-4 Simple Regression Analysis
    The Ordinary Least-Squares Method
    Tests of Significance of Parameter Estimates
    Other Aspects of Significance Tests and Confidence Intervals
    Test of Goodness of Fit and Correlation

    5-5 Multiple Regression Analysis
    The Multiple Regression Model
    The Coefficient of Determination and Adjusted R2
    Analysis of Variance
    Point and Interval Estimates

    5-6 Problems in Regression Analysis
    Multicollinearity
    Heteroscedasticity
    Autocorrelation

    5-7 Demand Estimation by Regression Analysis
    Model Specification
    Collecting Data on the Variables
    Specifying the Form of the Demand Equation
    Testing the Econometric Results

    5-8 Estimating the Demand for U.S. Imports and Exports
    CASE STUDY 5-4 Estimation of the Demand for Air Travel over the North Atlantic
    CASE STUDY 5-5 Price and Income Elasticities of Imports and Exports in the Real World
    CASE STUDY 5-6 The Major Commodity Exports and Imports of the United States
    CASE STUDY 5-7 The Major Trade Partners of the United States
    CASE STUDY 5-8 The Top U.S. International Exporters
    BOX 5 Managerial Economics at Work: BlackBerry Crumbles
    Summary
    Discussion Questions
    Problems
    Appendix to Chapter 5 Regression Analysis with Excel
    Simple Regression
    Multiple Regression Analysis
    Appendix Problems
    Supplementary Readings

    CHAPTER 6. Demand Forecasting

    6-1 Qualitative Forecasts
    Survey Techniques
    Opinion Polls
    Soliciting a Foreign Perspective
    6-2 Time-Series Analysis
    CASE STUDY 6-1 Forecasting the Number of McDonald's Restaurants Worldwide
    Reasons for Fluctuations in Time-Series Data
    Trend Projection
    Seasonal Variations
    CASE STUDY 6-2 Forecasting New-Housing Starts with Time-Series Analysis
    6-3 Smoothing Techniques
    Moving Averages
    Exponential Smoothing
    CASE STUDY 6-3 Forecasting Lumber Sales with Smoothing Techniques
    6-4 Barometric Methods
    CASE STUDY 6-4 Forecasting the Level of Economic Activity with Composite and Diffusion Indexes
    CASE STUDY 6-5 The Index of Leading Indicators Goes Global
    6-5 Econometric Models
    Single-Equation Models
    CASE STUDY 6-6 Forecasting the Demand for Air Travel over the North Atlantic
    Multiple-Equation Models
    CASE STUDY 6-7 Economic Forecasts with Large Econometric Models
    BOX 6 Managerial Economics at Work: Risks in Demand Forecasting
    6-6 Input-Output Forecasting
    Summary
    Discussion Questions
    Problems
    Appendix to Chapter 6 Forecasting Fluctuations in Time-Series Analysis Using Excel
    Forecasting New-Housing Starts with Regression Analysis
    Adjusting the Trend Forecasts of New-Housing Starts
    for Seasonal Variations by the Ratio-to-Trend Method
    Adjusting the Trend Forecasts of New-Housing Starts for Seasonal Variations by Using Seasonal Dummies
    Appendix Problems
    Supplementary Readings
    INTEGRATING CASE STUDY 2 Ford's Bet: It's a Small World After All
    Ford in the U.S. Automobile Industry
    Staking Ford's Future
    Epilogue

    INTEGRATING CASE STUDY 3 Estimating and Forecasting the U.S. Demand for Electricity


    PART THREE: PRODUCTION AND COST ANALYSIS

    CHAPTER 7. Production Theory and Estimation
    7-1 The Organization of Production and the Production Function
    The Organization of Production
    The Production Function
    7-2 The Production Function with One Variable Input
    Total, Average, and Marginal Product
    The Law of Diminishing Returns and Stages of Production

    7-3 Optimal Use of the Variable Input
    CASE STUDY 7-1 Labor Productivity and Total Compensation in the United States and Abroad
    7-4 The Production Function with Two Variable Inputs
    Production Isoquants
    Economic Region of Production
    Marginal Rate of Technical Substitution
    Perfect Substitutes and Complementary Inputs
    7-5 Optimal Combination of Inputs
    Isocost Lines
    Optimal Input Combination for Minimizing Costs or Maximizing Output
    Profit Maximization
    Effect of Change in Input Prices

    CASE STUDY 7-2 Substitutability between Gasoline Consumption and Driving Time
    7-6 Returns to Scale
    CASE STUDY 7-3 Returns to Scale in U.S. Manufacturing Industries
    CASE STUDY 7-4 General Motors Decides Smaller Is Better
    7-7 Empirical Production Functions
    CASE STUDY 7-5 Output Elasticities in U.S. Manufacturing Industries
    7-8 The Innovation Process
    Meaning and Importance of Innovations
    CASE STUDY 7-6 How Do Firms Get New Technology?
    How Innovative Is Your Company's Culture?
    The Open Innovation Model

    CASE STUDY 7-7 Open Innovations at Procter & Gamble
    The Next Step in Open Innovation
    7-9 Innovation and Global Competitiveness
    Innovations and the International Competitiveness of U.S. Firms
    BOX 7 Managerial Economics at Work: How Xerox Lost and Regained International Competitiveness and Became a Leader in Information Technology
    The New Computer-Aided Production Revolution, 3-D Printing, and the International Competitiveness of U.S. Firms
    CASE STUDY 7-8 The New U.S. Digital Factory
    CASE STUDY 7-9 The Euro and the International
    Competitiveness of European Firms
    Summary
    Discussion Questions
    Problems
    Spreadheet Problems
    Appendix to Chapter 7 Production Analysis with Calculus
    Constrained Output Maximization
    Constrained Cost Minimization
    Profit Maximization

    Appendix Problems
    Supplementary Readings

    CHAPTER 8. Cost Theory and Estimation
    8-1 The Nature of Costs
    8-2 Short-Run Cost Functions
    Short-Run Total and Per-Unit Cost Functions
    Short-Run Total and Per-Unit Cost Curves

    CASE STUDY 8-1 Per-Unit Cost Curves in the Cultivation of Corn and in Traveling
    8-3 Long-Run Cost Curves
    Long-Run Total Cost Curves
    Long-Run Average and Marginal Cost Curves

    CASE STUDY 8-2 The Long-Run Average Cost Curve in Electricity Generation
    8-4 Plant Size and Economies of Scale
    CASE STUDY 8-3 The Shape of the Long-Run Average Cost Curves in Various Industries
    8-5 Learning Curves
    CASE STUDY 8-4 To Reduce Costs, Firms Often Look Far Afield
    8-6 Minimizing Costs Internationally-The New Economies of Scale
    International Trade in Inputs
    BOX 8 Managerial Economics at Work: Dell PCs and Apple iPhones and iPads Sold in the United States Are Anything but American!
    The New International Economies of Scale
    Immigration of Skilled Labor

    8-7 Logistics or Supply-Chain Management
    CASE STUDY 8-5 Logistics at National Semiconductors, Saturn, and Compaq
    8-8 Cost-Volume-Profit Analysis and Operating Leverage
    Cost-Volume-Profit Analysis
    Operating Leverage

    CASE STUDY 8-6 Breakeven Analysis for Lockheed's Tri-Star and Europe's Airbus Industrie
    8-9 Empirical Estimation of Cost Functions
    Data and Measurement Problems in Estimating Short-Run Cost Functions
    The Functional Form of Short-Run Cost Functions

    CASE STUDY 8-7 Estimates of Short-Run and Long-Run Cost Functions
    Estimating Long-Run Cost Functions with Cross-Sectional Regression
    Analysis
    Estimating Long-Run Cost Functions with Engineering and Survival Techniques

    Summary
    Discussion Questions
    Problems
    Spreadsheet Problems
    Appendix to Chapter 8 Cost Analysis with Calculus
    Appendix Problems
    Supplementary Readings
    INTEGRATING CASE STUDY 4 Competition in High-Tech Industries in the Age of Disruptive Innovations
    INTEGRATING CASE STUDY 5 The Third Industrial Revolution
    Toward a Third Dimension
    The Shock of the New



    PART FOUR: MARKET STRUCTURE AND PRICING PRACTICES

    CHAPTER 9. Market Structure: Perfect Competition, Monopoly, and Monopolistic Competition

    9-1 Market Structure and Degree of Competition
    9-2 Perfect Competition
    Meaning and Importance of Perfect Competition
    Price Determination under Perfect Competition
    CASE STUDY 9-1 Competition in the New York Stock Market
    Short-Run Analysis of a Perfectly Competitive Firm
    Short-Run Supply Curve of the Competitive Firm and Market
    Long-Run Analysis of
    a Perfectly Competitive Firm
    CASE STUDY 9-2 Long-Run Adjustment in the U.S. Cotton
    Textile Industry
    9-3 Competition in the Global Economy
    Domestic Demand and Supply, Imports, and Prices
    The Dollar Exchange Rate and the International Competitiveness of U.S. Firms

    CASE STUDY 9-3 Foreign Exchange Quotations of the Dollar
    CASE STUDY 9-4 The Exchange Rate of the U.S. Dollar and the
    Profitability of U.S. Firms
    9-4 Monopoly
    Sources of Monopoly
    CASE STUDY 9-5 Barriers to Entry and Monopoly by Alcoa
    Short-Run Price and Output Determination under Monopoly
    Long-Run Price and Output Determination under Monopoly

    CASE STUDY 9-6 The Market Value of Monopoly Profits in the
    New York City Taxi Industry
    Comparison of Monopoly and
    Perfect Competition
    BOX 9 Managerial Economics at Work: De Beers Abandons Its Diamond Monopoly
    9-5 Monopolistic Competition
    Meaning and Importance of Monopolistic Competition
    CASE STUDY 9-7 The Monopolistically Competitive Restaurant Market
    Short-Run Price and Output Determination under Monopolistic Competition
    Long-Run Price and Output Determination under Monopolistic Competition
    Product Variation and Selling Expenses under Monopolistic Competition
    CASE STUDY 9-8 Advertisers Are Taking on Competitors by Name . . . and Being Sued
    Summary
    Discussion Questions
    Problems
    Spreadsheet Problems
    Appendix to Chapter 9 Profit Maximization with Calculus
    Appendix Problems
    Supplementary Readings

    CHAPTER 10. Oligopoly and Firm Architecture
    10-1 Oligopoly and Market Concentration
    Oligopoly: Meaning and Sources
    CASE STUDY 10-1 Brands: Thrive or Die
    Concentration Ratios, the Herfindahl Index, and Contestable Markets
    CASE STUDY 10-2 Industrial Concentration in the United States
    10-2 Oligopoly Models
    The Cournot Model
    The Kinked Demand Curve Model
    Cartel Arrangements

    CASE STUDY 10-3 The Organization of Petroleum
    Exporting Countries (OPEC) Cartel
    Price Leadership

    10-3 Profitability and Efficiency Implications of Oligopoly
    Porter's Strategic Framework
    Efficiency Implications of Oligopoly

    CASE STUDY 10-4 Firm Size and Profitability
    CASE STUDY 10-5 Measuring the Pure Efficiency of Operating Units
    10-4 The Sales Maximization Model
    10-5 The March of Global Oligopolists
    CASE STUDY 10-6 The Globalization of the Automobile Industry
    CASE STUDY 10-7 Rising Competition in Global Banking
    CASE STUDY 10-8 The Globalization of the Pharmaceutical Industry
    BOX 10 Managerial Economics at Work: Multinational Corporations Follow Better Management Practices Than National Corporations
    10-6 The Architecture of the Ideal Firm and the Creative Company
    The Architecture of the Ideal Firm
    The Evolution of the Creative Company

    CASE STUDY 10-9 Firm Architecture and Organizational Competitiveness of High-Performance Organizations
    CASE STUDY 10-10 The Most Innovative Companies in the World
    10-7 The Virtual Corporation and Relationship Enterprises
    The Virtual Corporation
    Relationship Enterprises

    CASE STUDY 10-11 Relationship Enterprises in Aerospace, Airlines, Telecommunications, and Automobiles
    Summary
    Discussion Questions
    Problems
    Spreadsheet Problems
    Appendix to Chapter 10 Oligopoly Theory Mathematically
    The Cournot Model
    The Kinked Demand Curve Model
    The Centralized Cartel Model
    The Market-Sharing Cartel
    The Sales Maximization Model

    Appendix Problems
    Supplementary Readings

    CHAPTER 11. Game Theory and Strategic Behavior
    11-1 Strategic Behavior and Game Theory
    CASE STUDY 11-1 Military Strategy and Strategic Business Decisions
    11-2 Dominant Strategy and Nash Equilibrium
    Dominant Strategy
    Nash Equilibrium

    CASE STUDY 11-2 Dell Computers and Nash Equilibrium
    11-3 The Prisoners' Dilemma
    11-4 P rice and Nonprice Competition, Cartel Cheating, and Prisoners' Dilemma
    Price Competition and the Prisoners' Dilemma
    CASE STUDY 11-3 The Airlines' Fare War and the Prisoners' Dilemma
    Nonprice Competition, Cartel Cheating, and the Prisoners' Dilemma
    11-5 Repeated Games and Tit-for-Tat Strategy
    11-6 Strategic Moves
    Threat, Commitments, and Credibility
    Entry Deterrence

    CASE STUDY 11-4 Wal-Mart's Preemptive Expansion Marketing Strategy
    11-7 Strategic Behavior and International Competitiveness
    BOX 11 Managerial Economics at Work: Companies' Strategic Mistakes and Failures
    11-8 Sequential Games and Decision Trees
    CASE STUDY 11-5 Airbus's Decision to Build the A380 and Boeing's Sonic Cruiser Response and the 747-8
    Summary
    Discussion Questions
    Problems
    Spreadsheet Problems
    Supplementary Readings

    CHAPTER 12. Pricing Practices
    12-1 Pricing of Multiple Products
    Pricing of Products with Interrelated Demands
    Plant Capacity Utilization and Optimal Product Pricing
    Optimal Pricing of Joint Products Produced in Fixed Proportions
    Optimal Pricing and Output of Joint Products Produced in Variable Proportions
    CASE STUDY 12-1 Optimal Pricing and Output by Gillette
    12-2 Price Discrimination
    Meaning of and Conditions for Price Discrimination
    First- and Second-Degree Price Discrimination
    Third-Degree Price Discrimination Graphically
    CASE STUDY 12-2 Price Discrimination by Con Edison
    Third-Degree Price Discrimination Algebraically
    12-3 International Price Discrimination and Dumping
    BOX 12 Managerial Economics at Work: Kodak Antidumping Disputes with Fuji and Loss of Market
    12-4 Transfer Pricing
    Meaning and Nature of Transfer Pricing
    Transfer Pricing with No External Market for the Intermediate Product
    Transfer Pricing with a Perfectly Competitive Market for the Intermediate Product
    Transfer Pricing with an Imperfectly Competitive Market for the Intermediate Product
    CASE STUDY 12-3 Transfer Pricing by Multinationals Operating in Emerging Markets
    CASE STUDY 12-4 Transfer Pricing in Advanced Countries
    12-5 Pricing in Practice
    Cost-Plus Pricing
    Evaluation of Cost-Plus Pricing
    Incremental Analysis in
    Pricing
    CASE STUDY 12-5 Incremental Pricing at Continental Airlines
    Peak-Load Pricing, Two-Part Tariff, Tying, and Bundling
    CASE STUDY 12-6 Peak-Load Pricing by Con Edison
    CASE STUDY 12-7 Bundling in the Leasing of Movies
    Other Pricing Practices
    CASE STUDY 12-8 No-Haggling Value Pricing in Car Buying
    CASE STUDY 12-9 Name Your Price at Priceline
    Discussion Questions
    Problems
    Spreadsheet Problems
    Appendix to Chapter 12 Third-Degree Price Discrimination with Calculus
    Appendix Problems
    Supplementary Readings
    INTEGRATING CASE STUDY 6 E-Books Rewrite Bookselling
    INTEGRATING CASE STUDY 7 Has Apple Peaked and Are Its Best Days Behind It?
    INTEGRATING CASE STUDY 8 Pricing on the Internet


    PART FIVE: REGULATION, RISK ANALYSIS, AND CAPITAL BUDGETING

    CHAPTER 13. Regulation and Antitrust: The Role of Government in the Economy
    13-1 Government Regulation to Support Business and to Protect Consumers, Workers, and the Environment
    Government Regulations That Restrict Competition
    CASE STUDY 13-1 Restrictions on Competition in the Pricing of Milk in New York City and the Nation
    Government Regulations to Protect Consumers, Workers, and the Environment
    CASE STUDY 13-2 The FDA Steps Up Regulation of the Food and Drug Industry
    CASE STUDY 13-3 Regulation Greatly Reduced Air Pollution
    13-2 Externalities and Regulation
    The Meaning and Importance of Externalities
    Policies to Deal with Externalities
    13-3 Public Utility Regulation
    Public Utilities as Natural Monopolies
    CASE STUDY 13-4 The Market for Dumping Rights
    Difficulties in Public Utility Regulation
    CASE STUDY 13-5 Regulated Electricity Rates for Con Edison
    13-4 Antitrust: Government Regulation of Market Structure and Conduct
    Sherman Act (1890)
    Clayton Act (1914)
    Federal Trade Commission Act (1914)
    Robinson-Patman Act (1936)
    Wheeler-Lea Act (1938)
    Celler-Kefauver Antimerger Act (1950)
    13-5 Enforcement of Antitrust Laws and the Deregulation Movement
    Enforcement of Antitrust Laws: Some General Observations
    Enforcement of Antitrust Laws: Structure
    CASE STUDY 13-6 The IBM and AT&T Cases
    CASE STUDY 13-7 Antitrust and the New Merger Boom
    Enforcement of Antitrust Laws: Conduct
    CASE STUDY 13-8 The Microsoft Antitrust Case
    The Deregulation Movement
    13-6 Regulation of International Competition
    CASE STUDY 13-9 Deregulation of the Airline Industry: An Assessment
    CASE STUDY 13-10 Voluntary Export Restraints on Japanese Automobiles to the United States
    13-7 The Effect of Taxation on Business Decisions
    BOX 13 Managerial Economics at Work: Corporate Tax Rates around the World and Multinationals' Behavior
    CASE STUDY 13-11 U.S. Border Taxes and Export Subsidies
    Summary Discussion Questions
    Problems
    Spreadsheet Problems
    Supplementary Readings

    CHAPTER 14. Risk Analysis
    14-1 Risk and Uncertainty in Managerial Decision Making
    CASE STUDY 14-1 The Risk Faced by Coca-Cola in Changing Its Secret Formula
    CASE STUDY 14-2 The 10 Biggest Failures in the United States
    14-2 Measuring Risk with Probability Distributions
    Probability Distributions
    An Absolute Measure of Risk: The Standard Deviation
    Measuring Probabilities with the Normal Distribution
    A Relative Measure of Risk: The Coefficient of Variation
    CASE STUDY 14-3 RiskMetrics: A Method of Measuring Value at Risk
    14-3 Utility Theory and Risk Aversion
    CASE STUDY 14-4 The Purchase of Insurance and Gambling by the Same Individual-A Seeming Contradiction
    14-4 Adjusting the Valuation Model for Risk
    Risk-Adjusted Discount Rates
    Certainty-Equivalent Approach
    CASE STUDY 14-5 Adjusting the Valuation Model for Risk in the Real World
    14-5 Other Techniques for Incorporating Risk into Decision Making
    Decision Trees
    Simulation
    14-6 Decision Making under Uncertainty
    The Maximin Criterion
    The Minimax Regret Criterion
    Other Methods of Dealing with Uncertainty
    CASE STUDY 14-6 Spreading Risks in the Choice of a Portfolio
    14-7 Foreign-Exchange Risks and Hedging
    BOX 14 Managerial Economics at Work: How Foreign
    Stocks Have Benefited a Domestic Portfolio
    CASE STUDY 14-7 Information, Risk, and the Collapse of Long-Term
    Capital Management
    14-8 Information and Risk
    Asymmetric Information and the Market for Lemons
    The Insurance Market and Adverse Selection
    The Problem of Moral Hazard
    The Principal-Agent Problem
    CASE STUDY 14-8 Do Golden Parachutes Reward Failure?
    Auctions
    CASE STUDY 14-9 Auctioning of the Airwaves
    Summary
    Discussion Questions
    Problems
    Spreadsheet Problems
    Supplementary Readings

    CHAPTER 15. Long-Run Investment Decisions: Capital Budgeting
    15-1 Capital Budgeting: An Overview
    Meaning and Importance of Capital Budgeting
    Overview of the Capital Budgeting Process

    CASE STUDY 15-1 Cost-Benefit Analysis and the SST
    15-2 The Capital Budgeting Process
    Projecting Cash Flows
    CASE STUDY 15-2 The Eurotunnel: Another Bad French-British Investment?
    Net Present Value (NPV)
    Internal Rate of Return (IRR)
    Comparison of NPV and IRR

    CASE STUDY 15-3 Pennzoil's $3 Billion Capital Budgeting Challenge
    CASE STUDY 15-4 Capital Budgeting for Investments in Human Capital
    BOX 15 Managerial Economics at Work: Is a College Education Still Worth It?
    15-3 Capital Rationing and the Profitability Index
    15-4 The Cost of Capital
    The Cost of Debt
    The Cost of Equity Capital: The Risk-Free Rate Plus Premium
    The Cost of Equity Capital: The Dividend Valuation Model
    The Cost of Equity Capital: The Capital Asset Pricing Model (CAPM)
    The Weighted Cost of Capital

    CASE STUDY 15-5 The Choice between Equity and Debt
    CASE STUDY 15-6 Capital Budgeting Techniques of Major U.S. Firms
    15-5 Reviewing Investment Projects After Implementation
    15-6 The Cost of Capital and International Competitiveness
    Summary
    Discussion Questions
    Problems
    Spreadsheet Problems
    Supplementary Readings
    INTEGRATING CASE STUDY 9 How the U.S. Airline Industry Found Its Edge
    INTEGRATING CASE STUDY 10 How Silicon Valley Conquered the Carriers
    INTEGRATING CASE STUDY 11 Turning Networks into Software Will Trigger a Storm in the Telecom World
    Introductory Comment
    Concluding Comments


    APPENDIXES

    APPENDIX A COMPOUND ING, DISCOUNTING, AND PRESENT VALUE
    A-1 Future Value and Compounding
    A-2 Present Value and Discounting
    A-3 Future Value of an Annuity
    A-4 Present Value of an Annuity
    A-5 Compounding and Discounting Periods
    A-6 Determining the Interest Rate
    A-7 Perpetuities

    APPENDIX B INTEREST FACTOR TABLES
    Table B-1 Compound Value of $1
    Table B-2 Present Value of $1
    Table B-3 Future Value of an Annuity of $1 for n Periods
    Table B-4 Present Value of an Annuity of $1 for n Periods

    APPENDIX C STATISTICAL TABLES
    Table C-1 Areas under the Standard Normal Distribution
    Table C-2 Areas in the Tails of the t Distribution
    Table C-3 F Distribution for 5 Percent Significance
    Table C-4 Durbin-Watson Statistic for 5 Percent Significance Points of dL dU

    APPENDIX D ANSWERS TO SELECTED (ASTERISKED) PROBLEMS

    Glossary
    Index

Related Title

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Eighth edition

Francine D. Blau and Anne E. Winkler