01 Jan the quantity demanded

Module 1 discussion

Every time we have to make a choice we are faced with an opportunity cost. Using an example in your professional life, identify a situation where you were presented with a choice, the opportunity cost of the choice you made, and the process you used to make your choice. As part of your discussion, explain whether or not responsible stewardship played a role in your choice. Remember to use the appropriate economic concepts and terminology that are applicable to your answer.

Module 2 discussion

What factors must a firm consider when deciding to raise or lower its price? In answering this question think about the content in Chapters 4 and 5 and use a real-world example that helps illustrate your answer.

Module 3 discussion

View the video at the link below and share your thoughts on the economic concepts that you believe are applicable. You can also view this video by using the NBC Learn link in the student resources folder.

In your response, provide a rationale on whether or not a firm has to possess market power in order to raise prices.

Module 4 discussion

If a firm has created value, is it also always able to capture that value? How does a firm create value and then what must it be able to do to capture that value? In your answer, provide an example of a firm that has been able to create value. Then discuss whether or not you believe it has captured that value and if so how it was captured and if not why it was not able to do so.

Module 5 discussion

Identify an incentive conflict in your firm, or one you have read about, that reduced firm value. As part of your answer, discuss whether or not one or more of the legs of the organizational stool was unbalanced, and if so, how that contributed to the conflict.

Module 6 discussion

Should decision management and decision control be separated? As part of your discussion, provide a real-world example (or provide a fictitious example) of a firm where the control (correctly) resides with the same individual as well as an example of a firm where the control is (correctly) separated.

Module 7 discussion

W. Edwards Deming, often referred to as the leading quality guru in the United States, and psychologist Alfie Kohn support the idea that incentive pay is not a motivator for individuals to do a good job. Yet economists argue that incentive compensation does work and as economist George Baker notes in his 1993 article in the Harvard Business Review titled “Rethinking Rewards,” “The problem is not that incentives can’t work but that they work too well.” What does Baker mean? Discuss the importance of a well-developed compensation plan in attracting and retaining good employees and how to keep those plans from “working too well.”

Module 8 discussion

Describe an experience that you have had working on a team. As part of your response discuss how the team was evaluated. Also discuss whether or not the free-rider problem existed on your team. If it did exist also discuss how/if the problem was addressed. If the problem did not exist discuss why not or how the problem was managed.

Module 1 case assignment

For each module you will need to complete case study questions from your text Managerial Economics And Organizational Architecture. Read the scenario provided in the text and then answer the questions provided. Please see your syllabus for more information.

Chapter 2 “Analyzing Managerial Decisions: Interwest Healthcare Corp.”

Chapter 3 “Analyzing Managerial Decisions: Nobel Prize winner F.A. Hayek on the ‘Miracle’ of the Price System”

Module 2 case assignment

For each module you will need to complete case study questions from your text Managerial Economics And Organizational Architecture. Read the scenario provided in the text and then answer the questions provided. Please see your syllabus for more information.

Chapter 4 – “Analyzing Managerial Decisions: Setting Tuition and Financial Aid”

Chapter 5 – “Analyzing Managerial Decisions: Rich Manufacturing”

Module 3 case assignment

For each module you will need to complete case study questions from your text Managerial Economics And Organizational Architecture. Read the scenario provided in the text and then answer the questions provided. Please see your syllabus for more information.

Chapter 6 – “Analyzing Managerial Decisions: United Airlines”

Chapter 7 – “Analyzing Managerial Decisions: iTunes Music Pricing”

Module 4 case assignment

For each module you will need to complete case study questions from your text Managerial Economics And Organizational Architecture. Read the scenario provided in the text and then answer the questions provided. Please see your syllabus for more information.

Chapter 8 – “Analyzing Managerial Decisions: Leaving New York City for the Farmlands of Illinois”

Module 5 case assignment

For each module you will need to complete case study questions from your text Managerial Economics And Organizational Architecture. Read the scenario provided in the text and then answer the questions provided. Please see your syllabus for more information.

Chapter 10 – “Analyzing Managerial Decisions: eBay.com”

Chapter 11 – “Analyzing Managerial Decisions: Tipping in Restaurants”

Module 6 case assignment

For each module you will need to complete case study questions from your text Managerial Economics And Organizational Architecture. Read the scenario provided in the text and then answer the questions provided. Please see your syllabus for more information.

Chapter 12 – “Analyzing Managerial Decisions: Medford University”

Chapter 13 – “Analyzing Managerial Decisions: Bagby Copy Company”

Module 7 case assignment

For each module you will need to complete case study questions from your text Managerial Economics And Organizational Architecture. Read the scenario provided in the text and then answer the questions provided. Please see your syllabus for more information.

Chapter 14 – “Analyzing Managerial Decisions: Structuring Compensation Plans”

Module 8 case assignment

For each module you will need to complete case study questions from your text Managerial Economics And Organizational Architecture. Read the scenario provided in the text and then answer the questions provided. Please see your syllabus for more information.

Chapter 16 – “Analyzing Managerial Decisions: Why Teams Fail”

Mid-term Exam

1. (10 pts.) Stella Ann Freeman is having a difficult time deciding whether or not to purchase a new car. How would understanding the concept of opportunity costs help her make a decision?

2. (10 pts.) Referring to the table below, hiring a driver costs $10. Each machine costs $100. Which method should he use and why?

3. (10 pts.) Enron will be an example of a dysfunctional company for many years to come. It was clearly a company riddled with fraud and excess and its conduct drove it into bankruptcy. The text argues that individual behavior was not at the core of Enron’s problems. What were the problems with this corporation from an organizational architecture point of view?

4. (10 pts.) For many corporations such as utility companies, a major portion of the cost of production is fixed in the short run. Should these very large fixed costs be ignored when the executives are making output and pricing decisions? Why?

5. (10pts.) Choose a real-life example of a firm that you think is part of an oligopoly market and describe the characteristics of the market structure that explain why the firm would be classified as such.

6. (10 pts.; 2 pts each) You are the manager for Dunkin Donuts and know the following elasticities:

?= 1.5 ?I = 1.2 ? xy1 = 0.5 ? xy2 = -0.5

? is the price elasticity of demand for Dunkin Donuts (DD) glazed doughnuts, ?xy1is the cross elasticity of demand between DD glazed doughnuts and Krispy Kreme (KK) glazed doughnuts, ?xy2is the cross elasticity of demand between DD glazed doughnuts and DD French Vanilla coffee, and ?I is the income elasticity of DD glazed doughnuts.

a) If you want to increase your sales of glazed doughnuts by 30%, in what direction and by how much do you need to change the price?

b) If you make the percentage price change that you calculated in part a) will total revenue increase or decrease? How do you know?

c) Krispy Kreme lowers its price of glazed doughnuts by 20%. The demandforDunkin Donuts glazed doughnuts will change by what percentage and in what direction?

d) Dunkin Donuts raises the price of its French Vanilla coffee by 15%. The demand for Dunkin Donuts glazed doughnuts will change by what percentage and in what direction?

e) If average income increases by 5% by what percentage and in what direction will the demand for Dunkin Donuts glazed doughnuts change? Are DD glazed doughnuts a normal good or an inferior good and how do you know?

7. (10 pts.) Westinghouse and General Electric are competing on the newest version of clothes washer and dryer combinations. Two pricing strategies exist: price high or price low. The profit from each of the four possible combinations of decisions is given in the following payoff matrix:

Westinghouse’s price

High ($4000) Low ($2000)

General Electric’s

price High ($4000)

Low ($2000)

Payoffs in dollars of profit.

a) (2 pts.) Which strategy offers both Westinghouse and General Electric the best financial outcome?

b) (2 pts.) Does either firm have a dominant strategy? If yes, which firm and what strategy?

c) (4 pts.) The Nash equilibrium is for Westinghouse to set its price at __________ and earn a profit of __________ and for General Electric to set its price at ______________ and earn a profit of _____________.

d) (2 pts.) Why do we see that the strategy that results is not the strategy that offers both players the best financial outcome?

Final Exam

1. (10 pts.) Discuss how organizational architecture and corporate culture are related. Use an example of a real-life firm and discuss how its corporate culture blends with its organizational architecture.

2. (10 pts.) Billy Riggan is in charge of all technical developments at Always Round Tire. He makes all the choices concerning product innovations in the company. He finds that he is overworked and that several of his research scientists seem to be spending work hours playing tennis. What is going on?

3. (10 pts.) Always Round Tire tries to base its promotions on seniority (where education and training requirements are not necessary). The company finds that this system seems to work most of the time with shop floor supervisors and team managers. But the system breaks down for higher-level positions. Why?

4. (10 pts.) Economists believe the free rider problem is very important in complex business organizational structures. Still, businesses continue to build teams to solve problems or to deliver products to consumers. Often special rewards or bonuses are provided to the team rather than to the individuals on the team. Write a brief essay that either defends the economists’ concern or explain why economists are wrong on this issue.

5. (10 pts.) Many firms today use 360-degree performance evaluations. Make a case for this type of evaluation based on the informativeness principle. What problems may be encountered from implementation of such a system?

6. (10 pts.) Reflecting on what you have learned in this course, discuss the relevance of Responsible Stewardship in the context of economic analysis and organizational architecture.

Module 7 Term Paper

Term Paper: A final paper that focuses on the course content, applied in the setting of your current or past employer, will be due in Module 7. In this paper you will focus on the following:

1. Provide a description of the company that you work for. As part of your description include a

discussion of the type of organizational structure.

2. Describe an agency problem within the firm and discuss what you think is causing the problem

and how the problem might be better controlled.

3. Describe the job dimensions of the firm and discuss whether or not you believe the current design

is appropriate for the firm. Discuss any suggestions you might have for improving the job design.

Grouped by function or by product or geography or a matrix organization? Provide a diagram if

helpful to illustrate. Is this organization effective?

4. Describe the compensation package for executives and employees within the firm. Discuss

whether or not you believe that the compensation package is effective and any suggestions that

you might have for improving the compensation package.

While these questions focus on the latter half of the course, you should remain mindful of the economic

concepts that were developed in the beginning of the course. An “A” paper will demonstrate a thorough

understanding of the relevant topics, completely discuss each of the four points of the paper, use

terminology appropriate to the topic, and use word choice, spelling, and sentence structure appropriate

for graduate-level work.

Specific Formatting Instructions

1. All assignments must be completed as Word documents. If you do not have Word you can

use Microsoft WordPad and use the rich text format (.rtf extension).

2. All assignments must be prepared in the APA format, including references.

3. Cover page. Use a single cover page that contains:

a. the title of the assignment

b. your name

4. Margins. All page margins should be the default margins for your word processing program.

Use only the LEFT margin justification setting.

5. Page numbering. Please use page numbering for all pages except the cover page.

6. Spacing/Font. All papers should be single-spaced only (this includes spacing between

paragraphs) and a 12 point font.

7. Direct quotes/ paraphrasing. Direct quotes and paraphrasing MUST be referenced and cited

using APA guidelines. Although there is no limit on how many citations are in the paper, I will

use limits of 15% for quotations and 25% for unoriginal wording for this course. When more

than one quarter of a paper seems to be unoriginal, it usually indicates a problem. Even if

sources are properly cited and some of the words are changed, it raises the question of how

much original thinking went into the paper. There is a big difference between starting with a

blank page and writing your own thoughts, and building the paper around quotes,

paraphrased sources, and the altered wording of another author. You are encouraged to use

textbook concepts as you attempt to explain in your own words the answers to the

assignments rather than relying heavily on quoted material. Try to think about how you would

explain your answer to someone who has not taken a managerial economics class. High

scores on the originality report in Turnitin are not just a result of plagiarism; they can also

result from an incorrect quotation/citation methodology or from using words that have been

rearranged from your sources. If you use someone else’s work you must cite and reference it

appropriately.

8. References. You must include a separate References page in APA format with each paper.

Any source that is used to develop your paper must be included in this section.

9. File Name. The file that you submit to the Assignment box is the one that your instructor will grade. To facilitate the grading process, please save your file name as lastname_assignment name (e.g., caldwell_chapter 1 case study) so that when you upload the file it will be obvious to me who the file is from once it is downloaded for grading.

Use of Turnitin: You will be submitting your term paper to an Assignment box that is linked to Turnitin.

For those of you not familiar with Turnitin, it is a plagiarism identification service that can also assist students with term paper reference methodology. The Turnitin tool compares your writing against all published sources and also checks against prior class papers. You must cite all your source material including direct quotations, paraphrasing, and statements of fact. Click the Turnitin link under Resources in the course menu to download additional information on how the integration with the Assignment box works

Module 1 quiz

Question 1

The example of Enron shows that:

large incentives are the keys to getting people moving in a corporation.

business success is possible in a regulatory environment.

selection of people is the key to organizational success or failure.

organizational structure is extremely important in business success.

Question 2

If the technology, the nature of competition, or the regulatory environment changes in an industry, then:

organizations are created by random events, just like markets.

a good organizational architecture is always able to cope with changes.

the appropriate organizational architecture will change too.

organizational architecture is able to restore the former market environment.

Question 3

Economics provides a theory to explain:

how managers can cheat and get away with it.

how a successful business can be started.

how to compete in the market.

how people make choices.

Question 4

Benchmarking means:

copying from the best so as to become better.

blind copying.

looking at yourself and telling yourself you are the greatest.

looking at yourself and telling others what to do.

Question 5

A risk-averse agent:

only cares about expected payoff.

always prefers a certain payoff to a risky one.

cares about expected payoff, as well as the variability of a payoff.

only cares about the variability of a payoff.

Question 6

If employees conform to the economist’s view of behavior, managers will be most effective if they can:

influence the costs and benefits of employee actions.

fire bad employees.

improve employee satisfaction with the job.

communicate goals and objectives effectively to their employees.

Question 7

Marginal utility is the:

total amount spent to purchase one additional unit.

total happiness obtained from a consumption bundle.

additional utility obtained by consuming one additional unit.

additional utility obtained by lowering the price of a good.

Question 8

Assume the market for ceiling fans is perfectly competitive and currently in equilibrium. If the demand increases while the supply decreases, then:

Correct Answer

we can be certain the equilibrium price will increase.

both price and quantity will decrease.

we can be certain the equilibrium quantity will increase.

both price and quantity will increase.

Question 9

Assume the government introduces a $0.50 per gallon tax on gasoline. Which of the following is true?

The quantity of gasoline sold is likely to increase.

The quantity of subway and bus tickets sold is likely to increase.

The quantity supplied by producers will decrease.

The quantity of cars sold is likely to increase.

Question 10

According to Ronald Coase, for a free-market economy to work efficiently, there needs to be:

a well-developed tax code.

an allocation of private property rights with low transactions costs.

an allocation of private property rights with high transactions costs.

a low cost of malpractice insurance.

Question 11

Based on the following diagram if there was a $3.00 price floor:

there would be a surplus of 30.

the quantity demanded would be 65.

there would be a shortage of 30.

the quantity demanded would be 30.

Question 12

Assume D1 represents the current demand curve for skis. Which of the following would be likely to cause D1 to shift to D2?

A decrease in the price of skis.

An increase in the price of skis.

An increase in the price of snowboards.

An increase in the price of ski boots and clothing.