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page i
MANAGERIAL
ECONOMICS
Foundations of Business Analysis and
Strategy
1
page ii
1 2 3 4 5 6 7 8 9 LCR 21 20 19
2
Cover Image: ©Shutterstock/rudall30
Compositor: SPi Global
All credits appearing on page or at the end of the book are considered to
be an extension of the copyright page.
The Internet addresses listed in the text were accurate at the time of
publication. The inclusion of a website does not indicate an endorsement
by the authors or McGraw-Hill Education, and McGraw-Hill Education
does not guarantee the accuracy of the information presented at these
sites.
mheducation.com/highered
3
page iii
MANAGERIAL
ECONOMICS
Foundations of Business Analysis and
Strategy
THIRTEENTH EDITION
Christopher R. Thomas
University of South Florida
S. Charles Maurice
Texas A&M University
Late Professor Emeritus
4
page iv
Mandel
Economics: The Basics
Fourth Edition
Schiller
Essentials of Economics
Eleventh Edition
PRINCIPLES OF ECONOMICS
Asarta and Butters
Principles of Economics
Second Edition
Colander
Economics, Microeconomics, and Macroeconomics
Eleventh Edition
5
Karlan and Morduch
Economics, Microeconomics, and Macroeconomics
Third Edition
Schiller
The Economy Today, The Micro Economy Today, and The Macro
Economy Today
Fifteenth Edition
Slavin
Economics, Microeconomics, and Macroeconomics
Twelfth Edition
6
Practical Econometrics
First Edition
Prince
Predictive Analytics for Business Strategy
First Edition
MANAGERIAL ECONOMICS
Baye and Prince
Managerial Economics and Business Strategy
Ninth Edition
INTERMEDIATE ECONOMICS
Bernheim and Whinston
Microeconomics
Second Edition
Frank
Microeconomics and Behavior
Ninth Edition
ADVANCED ECONOMICS
Romer
Advanced Macroeconomics
7
Fifth Edition
URBAN ECONOMICS
O’Sullivan
Urban Economics
Ninth Edition
LABOR ECONOMICS
Borjas
Labor Economics
Eighth Edition
PUBLIC FINANCE
Rosen and Gayer
Public Finance
Tenth Edition
ENVIRONMENTAL ECONOMICS
Field and Field
Environmental Economics: An Introduction
Eighth Edition
INTERNATIONAL ECONOMICS
Appleyard and Field
8
International Economics
Ninth Edition
Pugel
International Economics
Seventeenth Edition
9
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page v
page vi
10
page vii
S. Charles Maurice
Chuck Maurice was professor emeritus of economics at Texas A&M
University. Professor Maurice published numerous articles on
microeconomic theory in the top economic journals. He co-wrote two
scholarly books on natural resource depletion: The Doomsday Myth and
The Economics of Mineral Extraction.
11
page viii
PREFACE
WHY MANAGERIAL ECONOMICS?
The growing influence of microeconomics and industrial organization
economics in every field of business analysis has transformed the role of
managerial economics in business school curricula. Economists have
understood for some time that every modern course in business strategy
and organizational architecture must draw from key areas of
advancement in microeconomics and industrial organization. While
many business schools have been quick to adopt “strategy” as a
fundamental theme in their curricula, this new emphasis on strategy too
often falls on the shoulders of a single, one-semester course in business
strategy. In a single course, it is extremely difficult, if not impossible, to
teach business students managerial economics and cover all of the
valuable topics in business strategy and organization. In any case, a
thorough foundation in managerial economics is required in order to
understand how to use the many new and important developments in
microeconomics and industrial organization.
The objective of Managerial Economics, then, is to teach and apply
the foundation topics in microeconomics and industrial organization
essential for making both the day-to-day business decisions that
maximize profit as well as the strategic decisions designed to create and
protect profit in the long run. In so doing, we believe Managerial
Economics helps business students become architects of business tactics
and strategy instead of middle managers who plod along the beaten path
of others.
PEDAGOGICAL HIGHLIGHTS
The Thirteenth Edition of Managerial Economics maintains all the
pedagogical features that have made previous editions successful. These
features follow.
12
Emphasis on the Economic Way of Thinking
The primary goal of this book has always been, and continues to be, to
teach students the economic way of thinking about business decisions
and strategy. Managerial Economics develops critical thinking skills and
provides students with a logical way of analyzing both the routine
decisions of managing the daily operations of a business as well as the
longer-run strategic plans that seek to manipulate the actions and
reactions of rival firms.
13
Problem accomplishes two things: (1) It encourages students to master
concepts by taking small “bites” instead of trying to “gulp” the whole
chapter at once, and (2) It allows students to pinpoint any areas of
confusion so that interaction with the instructor—in the classroom or in
the office—will be more productive. When students finish working the
Technical Problems, they will have practiced all of the technical skills
required to tackle the Applied Problems.
Applied Problems—Following the Technical Problems, each chapter
has a set of Applied Problems that serve to build critical thinking skills
as well as business decision-making skills. These problems, much like
the “word problems” in a math textbook, are a mix of stylized business
situations and real-world problems taken from Bloomberg
Businessweek, The Economist, Forbes, The Wall Street Journal, and
other business news publications. Business students frequently find
classroom discussion of the Applied Problems among the most
valuable lessons of their entire business training. Answers to Applied
Problems are available in the Instructor's Manual.
14
Self-Contained Empirical Analysis
The Thirteenth Edition continues to offer a self-contained treatment of
statistical estimation of demand, production, and cost functions. While
this text avoids advanced topics in econometrics and strives to teach
students only the fundamental statistical concepts needed to estimate
demand, production, and cost, the explanations of statistical procedures
nonetheless maintain the rigor found in the rest of the book. For those
instructors who do not wish to include empirical analysis in their
courses, the empirical content can be skipped with no loss of continuity.
Wide Audience
Managerial Economics is appropriate for undergraduate courses in
managerial economics and introductory business strategy courses. At the
MBA and Executive MBA level, this book works well for “boot camp”
or “toolkit” courses in managerial economics, and can also be used as a
supplemental text for business strategy and organizational architecture
courses. The self-contained nature of the book is especially valuable in
night classes, online courses, and Executive MBA courses where
students typically have a somewhat limited opportunity to meet with
instructors for help outside class.
SUPPLEMENTS
The following ancillaries are available for quick download and
convenient access via the Instructor Resource material available through
McGraw-Hill Connect®.
page x
15
A Web Chapter is also available, which, like the appendices, covers a
special interest topic. Unlike the appendices, the Web Chapter is more
robust in length and contains all the elements of a chapter, including a
summary, Technical Problems, and Applied Problems. The following
Web Chapter is available:
Test Bank
The Test Bank offers well over 1,500 multiple-choice and fill-in-the-
blank questions categorized by level of difficulty, AACSB learning
categories, Bloom’s taxonomy, and topic.
Instructor’s Manual
Written by the author, the Instructor’s Manual contains Answers to the
end-of-chapter Applied Problems and the Mathematical Exercises.
Beginning with this Thirteenth Edition, the Homework Exercises section
moves from the Student Workbook to the Instructor’s Manual. Instructors
can assign any or all of these Homework Exercises to students for extra
practice. Since the students do not have access to the answers, the
Homework Exercises provide an additional set of problems for grading
beyond those already available in the Test Bank. In contrast to the Test
Bank questions, Homework Exercises are not multiple-choice questions
and are designed to look very similar to Technical and Applied Problems
found in the textbook.
PowerPoint Presentations
16
PowerPoint Presentations contain animated figures and tables presented
in each chapter to make presentations flow in a step-by-step fashion. You
can edit, print, or rearrange the slides to fit the needs of your course.
17
As always, I continue to rely on the valuable suggestions I regularly
receive from both students and instructors for guidance in making
changes and improvements to this book. I strongly encourage you to
contact me directly (crthomas1@usf.edu) with any thoughts and ideas
you might have for improving the textbook or the accompanying
supplements.
A WORD TO STUDENTS
One of the primary objectives in writing this book is to provide you, the
student, with a book that enhances your learning experience in
managerial economics. However, the degree of success you achieve in
your managerial economics course will depend, in large measure, on the
effectiveness of your study techniques. I would like to offer you this one
tip on studying: Emphasize active study techniques rather than passive
study techniques. Passive study techniques are the kinds of study
routines that do not require you to “dig out” the logic for yourself. Some
examples of passive study activities include reading the text, reviewing
class notes, and listening to lectures. These are “passive” in nature
because the authors of your textbook or your instructor are providing the
analytical guidance and logic for you. You are simply following someone
else’s reasoning process, working your mind only hard enough to follow
along with the authors or instructor. Passive techniques do not cause your
brain to “burn” new neural pathways or networks. Generally speaking,
students gravitate toward passive study methods because they are easier
and less exhausting than active study methods.
Active study techniques require you to think and reason for yourself.
For example, when you close your book, put aside your lecture notes,
and try to explain a concept to yourself—perhaps sketching a graph or
developing your own numerical example. Only then are you forcing your
brain to “burn” a logical path of neurons that will make sense to you
later. The better you can explain the “how” and “why” of key concepts
and principles in this book, the more thorough will be your
understanding and the better you will perform on exams. Of course,
some passive study is necessary to become familiar with the material, but
genuine understanding and the ability to use the decision-making skills
of managerial economics require emphasis on active, rather than passive,
study techniques.
18
page xii
FOR INSTRUCTORS
19
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