1. ECONOMICS FOR MANAGERSBy
Mark Hirschey

2. Introduction
Chapter 1

3. 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

4. Chapter 1 KEY CONCEPTS managerial economics theory of the firm
expected value maximization
value of the firm
present value
optimize
satisfice
business profit
normal rate of return
economic profit
profit margin
return on stockholders' equity
frictional profit theory
monopoly profit theory
innovation profit theory
compensatory profit theory

5. 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.

7. 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.

9. 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.

10. 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.

11. 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.

13. 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.