ECON 350 Ch. 1

question

Manager

answer

directs resources to achieve stated goals and makes decisions

question

Economics

answer

decision making with scarce resources

question

Managerial Economics

answer

Direct Scarce Resources to reach a goal

question

Principles of Effective Management

answer

1. ID Goals & Contriants
2. Nature/Importance of Profits
3. Incentives
4. Markets
5. time value of money
6. marginal analysis
7. data-driven decisions

question

1. ID Goals & Contraints

answer

Define goals and KPIs

question

Accounting Profits

answer

Revenue - Expenses

question

Economic Profits

answer

tot Revenue (explicit) - tot opportunity cost (implicit)

question

opportunity cost

answer

explicit costs + implicit costs

question

Economic Profit Ex.

answer

pizzeria acc costs (20,000), rev (100,000)
opportunity cost work instead (30,000), rent building (100,000)
Economic Profit ((20,000+30,000+100,000)-100,000) = -50,000

question

Profits as a Signal

answer

Profit indicate were resources are most highly valued

question

Five Forces Framework

answer

1. entry
2. power of input suppliers
3. power of buyers
4. industry rivalry
5. substitutes and complements

question

Consumer-Producer Rivalry

answer

Buyer and seller try to "rip off" each other, back and forth bargaining with a threshold value

question

Consumer-Consumer Rivalry

answer

\/ consumer buying power, compete against other consumer for scarce resources

question

Producer-Producer Rivalry

answer

\/ producer power, compete for consumers

question

Time Value of Money

answer

$1 today > $1 in future

question

Present Value (PV)

answer

amount invested today to get a value in the future with a given interest rate

PV = FV/(1+i)^n

question

Opportunity Cost of Waiting

answer

OCW = FV - PV

question

Net Present Value (NPV)

answer

NPV = PV - Co
*Co is current costs

question

Marginal Principal

answer

Goal MB = MC so MNB = 0
threshold where increase gives no return

question

incremental cost/revenues

answer

additional c/r from yes/no decisions

question

t statistic

answer

A Ratio
parmeter estimate : standard error

question

t-statistic principle

answer

| t-statistic | > 2, can be 95% confident parameter is not zero

1 of 22

question

Manager

answer

directs resources to achieve stated goals and makes decisions

question

Economics

answer

decision making with scarce resources

question

Managerial Economics

answer

Direct Scarce Resources to reach a goal

question

Principles of Effective Management

answer

1. ID Goals & Contriants
2. Nature/Importance of Profits
3. Incentives
4. Markets
5. time value of money
6. marginal analysis
7. data-driven decisions

question

1. ID Goals & Contraints

answer

Define goals and KPIs

question

Accounting Profits

answer

Revenue - Expenses

question

Economic Profits

answer

tot Revenue (explicit) - tot opportunity cost (implicit)

question

opportunity cost

answer

explicit costs + implicit costs

question

Economic Profit Ex.

answer

pizzeria acc costs (20,000), rev (100,000)
opportunity cost work instead (30,000), rent building (100,000)
Economic Profit ((20,000+30,000+100,000)-100,000) = -50,000

question

Profits as a Signal

answer

Profit indicate were resources are most highly valued

question

Five Forces Framework

answer

1. entry
2. power of input suppliers
3. power of buyers
4. industry rivalry
5. substitutes and complements

question

Consumer-Producer Rivalry

answer

Buyer and seller try to "rip off" each other, back and forth bargaining with a threshold value

question

Consumer-Consumer Rivalry

answer

\/ consumer buying power, compete against other consumer for scarce resources

question

Producer-Producer Rivalry

answer

\/ producer power, compete for consumers

question

Time Value of Money

answer

$1 today > $1 in future

question

Present Value (PV)

answer

amount invested today to get a value in the future with a given interest rate

PV = FV/(1+i)^n

question

Opportunity Cost of Waiting

answer

OCW = FV - PV

question

Net Present Value (NPV)

answer

NPV = PV - Co
*Co is current costs

question

Marginal Principal

answer

Goal MB = MC so MNB = 0
threshold where increase gives no return

question

incremental cost/revenues

answer

additional c/r from yes/no decisions

question

t statistic

answer

A Ratio
parmeter estimate : standard error

question

t-statistic principle

answer

| t-statistic | > 2, can be 95% confident parameter is not zero

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ECON 350 Ch. 1

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