### Solution Manual for Managerial Economics 12th Edition by Mark Hirschey

#### Solution Manual for Managerial Economics 12th Edition by Mark Hirschey

The economic concepts presented in MANAGERIAL ECONOMICS, 12e, show students how to use common sense to understand business and solve managerial problems. This innovative text helps students develop and sharpen their economic intuition–an invaluable skill that helps students, as future managers, decide which products to produce, costs to consider, and prices to charge, as well as the best hiring policy and the most effective style of organization. With its unique integrative approach, the text presents the firm as a cohesive, unified organization and demonstrates that important business decisions are interdisciplinary. A basic valuation model is constructed and used as the underlying economic model of the firm; each topic is then related to an element of the value maximization model–a process that shows how management integrates accounting, finance, marketing, personnel, and production functions. The text also provides an intuitive guide to marginal analysis and basic economic relations. Once students grasp the importance of marginal revenue and marginal costs, the process of economic optimization becomes intuitively obvious. In addition, a wide variety of examples and simple numerical problems vividly illustrate the application of managerial economics to a vast assortment of practical situations. By studying the material in MANAGERIAL ECONOMICS, 12e, those seeking to further their business careers learn how to more effectively collect, organize, and analyze information. They gain powerful tools that can help them become more successful–and satisfied–in their careers.

### Additional ISBNs

1133460585, 9781133460589, 9780324749786

## Table of Content

Dedication

About the Author

Brief Contents

Contents

Preface

Changes in the 12th Edition

Part 1: Overview of Managerial Economics

Ch 1: Nature and Scope of Managerial Economics

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

Summary

Questions

Case Study: Is Coca-Cola the “Perfect” Business?

Selected References

Ch 2: Economic Optimization

Economic Optimization Process

Revenue Relations

Cost Relations

Profit Relations

Incremental Concept in Economic Analysis

Summary

Questions

Self-Test Problems and Solutions

Problems

Case Study: Spreadsheet Analysis of the EOQ at the Neighborhood Pharmacy, Inc.

Selected References

Appendix 2A: Math Analysis for Managers

Appendix 2B: Multivariate Optimization and the Lagrangian Technique

Ch 3: Demand and Supply

Basis for Demand

Market Demand Function

Demand Curve

Basis for Supply

Market Supply Function

Supply Curve

Market Equilibrium

Summary

Questions

Self-Test Problems and Solutions

Problems

Case Study: Spreadsheet Analysis of Demand and Supply for Sunbest Orange Juice

Selected References

Part 2: Demand Analysis and Estimation

Ch 4: Demand Analysis

Utility Theory

Indifference Curves

Budget Constraints

Individual Demand

Optimal Consumption

Demand Sensitivity Analysis: Elasticity

Price Elasticity Of Demand

Price Elasticity and Marginal Revenue

Price Elasticity and Optimal Pricing Policy

Cross-Price Elasticity of Demand

Income Elasticity of Demand

Summary

Questions

Self-Test Problems and Solutions

Problems

Case Study: Optimal Level of Advertising

Selected References

Ch 5: Demand Estimation

Interview and Experimental Methods

Simple Demand Curve Estimation

Simple Market Demand Curve Estimation

Identification Problem

Regression Analysis

Measures of Regression Model Significance

Judging Variable Significance

Summary

Questions

Self-Test Problems and Solutions

Problems

Case Study: Demand Estimation for Mrs. Smyth’s Pies

Selected References

Ch 6: Forecasting

Forecasting Applications

Qualitative Analysis

Trend Analysis and Projection

Business Cycle

Exponential Smoothing

Econometric Forecasting

Judging Forecast Reliability

Choosing the Best Forecast Technique

Summary

Questions

Self-Test Problems and Solutions

Case Study: Forecasting Global Performance for a Mickey Mouse Organization

Selected References

Part 3: Production and Competitive Markets

Ch 7: Production Analysis and Compensation Policy

Production Functions

Total, Marginal, and Average Product

Law of Diminishing Returns to a Factor

Input Combination Choice

Marginal Revenue Product and Optimal Employment

Optimal Combination of Multiple Inputs

Optimal Levels of Multiple Inputs

Returns to Scale

Productivity Measurement

Summary

Questions

Self-Test Problems and Solutions

Problems

Case Study: Worker Productivity Among Giant U.S. Corporations

Selected References

Appendix 7A: A Constrained Optimization Approach to Developing the Optimal Input Combination Relatio

Ch 8: Cost Analysis and Estimation

Economic and Accounting Costs

Role of Time in Cost Analysis

Short-Run Cost Curves

Long-Run Cost Curves

Minimum Efficient Scale

Firm Size and Plant Size

Learning Curves

Economies of Scope

Cost-Volume-Profit Analysis

Summary

Questions

Self-Test Problems and Solutions

Problems

Case Study: Estimating Hospitalization Costs for Regional Hospitals

Selected References

Ch 9: Linear Programming

Basic Assumptions

Production Planning for a Single Product

Production Planning for Multiple Products

Graphic Specification and Solution

Algebraic Specification and Solution

Dual in Linear Programming

Dual Specification

Solving the Dual Problem

Summary

Questions

Self-Test Problems and Solutions

Problems

Case Study: A LP Pension Funding Model

Appendix 9A: Rules for Forming the Dual Linear Programming Problem

Ch 10: Competitive Markets

Competitive Environment

Factors that Shape the Competitive Environment

Competitive Market Characteristics

Profit Maximization in Competitive Markets

Marginal Cost and Firm Supply

Competitive Market Supply Curve

Competitive Market Equilibrium

Summary

Questions

Self-Test Problems and Solutions

Problems

Case Study: Profitability Effects of Firm Size for DJIA Companies

Selected References

Ch 11: Performance and Strategy in Competitive Markets

Competitive Market Efficiency

Market Failure

Role for Government

Subsidy and Tax Policy

Tax Incidence and Burden

Price Controls

Business Profit Rates

Market Structure and Profit Rates

Competitive Market Strategy

Long-Run Firm Performance

Summary

Questions

Self-Test Problems and Solutions

Problems

Case Study: The Most Profitable S&P 500 Companies

Selected References

Part 4: Imperfect Competition

Ch 12: Monopoly and Monopsony

Monopoly Market Characteristics

Profit Maximization Under Monopoly

Social Costs of Monopoly

Social Benefits of Monopoly

Monopoly Regulation

Monopsony

Antitrust Policy

Competitive Strategy in Monopoly Markets

Summary

Questions

Self-Test Problems and Solutions

Problems

Case Study: Effect of R&D on Tobin’s q

Selected References

Ch 13: Monopolistic Competition and Oligopoly

Contrast Between Monopolistic Competition and Oligopoly

Monopolistic Competition

Monopolistic Competition Process

Oligopoly

Cartels and Collusion

Oligopoly Output-Setting Models

Oligopoly Price-Setting Models

Market Structure Measurement

Census Measures of Market Concentration

Summary

Questions

Self-Test Problems and Solutions

Problems

Case Study: Market Structure Analysis at Columbia Drugstores, Inc.

Selected References

Ch 14: Game Theory and Competitive Strategy

Game Theory Basics

Prisoner’s Dilemma

Nash Equilibrium

Infinitely Repeated Games

Finitely Repeated Games

Game Theory and Auction Strategy

Competitive Strategy

Pricing Strategies

Nonprice Competition

Summary

Questions

Self-Test Problems and Solutions

Problems

Case Study: Time Warner, Inc., Is Playing Games with Stockholders

Selected References

Ch 15: Pricing Practices

Pricing Rules-of-Thumb

Markup Pricing and Profit Maximization

Price Discrimination

Price Discrimination Example

Two-Part Pricing

Multiple-Product Pricing

Joint Products

Joint Product Pricing Example

Summary

Questions and Answers

Self-Test Problems and Solutions

Problems

Case Study: Pricing Practices in the Denver, Colorado, Newspaper Market

Selected References

Appendix 15A: Transfer Pricing

Part 5: Long-Term Investment Decisions

Ch 16: Risk Analysis

Concepts of Risk and Uncertainty

Probability Concepts

Standard Normal Concept

Utility Theory and Risk Analysis

Adjusting the Valuation Model for Risk

Decision Trees and Computer Simulation

Summary

Questions

Self-Test Problems and Solutions

Problems

Case Study: Stock-Price Beta Estimation for Google, Inc.

Selected References

Ch 17: Capital Budgeting

Capital Budgeting Process

Steps in Capital Budgeting

Cash Flow Estimation Example

Capital Budgeting Decision Rules

Project Selection

Cost of Capital

Optimal Capital Budget

Summary

Questions

Self-Test Problems and Solutions

Problems

Case Study: Sophisticated NPV Analysis at Level 3 Communications, Inc.

Selected References

Ch 18: Organization Structure and Corporate Governance

Organization Structure

Transaction Cost Theory of the Firm

The Firm’s Agency Problem

Organization Design

Decision Management and Control

Corporate Governance

Ownership Structure as a Corporate Governance Mechanism

Agreements and Alliances Among Firms

Legal and Ethical Environment

Summary

Questions

Self-Test Problems and Solutions

Problems

Case Study: Do Boards of Directors Make Good Corporate Watchdogs?

Selected References

Ch 19: Government in the Market Economy

Externalities

Solving Externalities

Public Goods

Optimal Allocation of Social Resources

Benefit–Cost Methodology

Benefit–Cost Criteria

Additional Methods of Improving Public Management

Regulatory Reform in the New Millennium

Health Care Reform

Summary

Questions

Self-Test Problems and Solutions

Problems

Case Study: Oh, Lord, Won’t You Buy Me a Mercedes-Benz (Factory)?

Selected References

Appendix A: Compounding and the Time Value of Money

Future Value (or Compound Value)

Present Value

Future Value versus Present Value

Future Value of an Annuity

Present Value of an Annuity

Present Value of an Uneven Series of Receipts

Annual Payments for Accumulation of a Future Sum

Annual Receipts from an Annuity

Determining Interest Rates

Semiannual and Other Compounding Periods

Summary

Appendix B: Interest Factor Tables

Appendix C: Statistical Tables

Selected Check Figures for End-of-Chapter Problems

Index

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