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THE ECONOMICS OFMANAGERIAL DECISIONSA01 BLAI8235 01 SE FM ppi-xxxiv.indd 115/09/17 11:33 AM

The Pearson Series in moglu/Laibson/ListEconomics*Bade/ParkinFoundations of Economics*Berck/HelfandThe Economics of the EnvironmentBierman/FernandezGame Theory with Economic ApplicationsBlair/RushThe Economics of Managerial Decisions*BlanchardMacroeconomics*BoyerPrinciples of Transportation EconomicsBransonMacroeconomic Theory and PolicyBrucePublic Finance and the American EconomyCarlton/PerloffModern Industrial OrganizationCase/Fair/OsterPrinciples of Economics*ChapmanEnvironmental Economics: Theory, Application, and PolicyDaniels/VanHooseInternational Monetary & Financial EconomicsDownsAn Economic Theory of DemocracyFarnhamEconomics for ManagersFroyenMacroeconomics: Theories and PoliciesFusfeldThe Age of the EconomistGerberInternational Economics*GordonMacroeconomics*GreeneEconometric AnalysisGregory/StuartRussian and Soviet Economic Performance and StructureHartwick/OlewilerThe Economics of Natural Resource UseHeilbroner/MilbergThe Making of the Economic SocietyHeyne/Boettke/PrychitkoThe Economic Way of ThinkingHubbard/O’BrienEconomics*InEconMoney, Banking, and the Financial ghes/CainAmerican Economic HistoryHusted/MelvinInternational EconomicsJehle/RenyAdvanced Microeconomic TheoryKeat/Young/ErfleManagerial EconomicsKleinMathematical Methods for EconomicsKrugman/Obstfeld/MelitzInternational Economics: Theory & Policy*LaidlerThe Demand for MoneyLynnEconomic Development: Theory and Practice for a Divided WorldMillerEconomics Today*Miller/BenjaminThe Economics of Macro IssuesMiller/Benjamin/NorthThe Economics of Public IssuesMishkinThe Economics of Money, Banking, and Financial Markets*The Economics of Money, Banking, and Financial Markets, BusinessSchool Edition*Macroeconomics: Policy and Practice*MurrayEconometrics: A Modern IntroductionO’Sullivan/Sheffrin/PerezEconomics: Principles, Applications and conomics: Theory and Applications with Calculus*Perloff/BranderManagerial Economics and hackelford/Stamos/SchneiderEconomics: A Tool for Critically Understanding SocietyRobertsThe Choice: A Fable of Free Trade and ProtectionSchererIndustry Structure, Strategy, and Public PolicySchillerThe Economics of Poverty and DiscriminationShermanMarket RegulationStock/WatsonIntroduction to EconometricsStudenmundUsing Econometrics: A Practical GuideTodaro/SmithEconomic /Maex/O’NeillEconversations: Today’s Students Discuss Today’s IssuesWilliamsonMacroeconomics*denotes MyLab Economics titles. Visit www.pearson.com/mylab/economics to learn more.A01 BLAI8235 01 SE FM ppi-xxxiv.indd 215/09/17 11:33 AM

ROGER D. BLAIRUniversity of FloridaMARK RUSHUniversity of FloridaTHE ECONOMICS OFMANAGERIAL DECISIONSNew York, NYA01 BLAI8235 01 SE FM ppi-xxxiv.indd 315/09/17 11:33 AM

Vice President, Business, Economics, and UK Courseware:Donna BattistaDirector of Portfolio Management: Adrienne D’AmbrosioSenior Portfolio Manager: Christina MasturzoDevelopment Editor: Lena Buonnano, Karen TrostEditorial Assistant: Courtney PaganelliVice President, Product Marketing: Roxanne McCarleySenior Product Marketer: Tricia MurphyProduct Marketing Assistant: Marianela SilvestriManager of Field Marketing, Business Publishing:Adam GoldsteinSenior Field Marketing Manager: Carlie MarvelVice President, Production and Digital Studio, Arts andBusiness: Etain O’DeaDirector of Production, Business: Jeff HolcombManaging Producer, Business: Alison KalilContent Producer: Carolyn PhilipsOperations Specialist: Carol MelvilleDesign Lead: Kathryn FootManager, Learning Tools: Brian SuretteContent Developer, Learning Tools: Sarah PetersonManaging Producer, Digital Studio and GLP, Media Productionand Development: Ashley SantoraManaging Producer, Digital Studio: Diane LombardoDigital Studio Producer: Melissa HonigDigital Studio Producer: Alana ColesDigital Content Team Lead: Noel LotzDigital Content Project Lead: Noel LotzProject Manager: Susan McNally, Cenveo Publisher ServicesInterior Design: Cenveo Publisher ServicesCover Design: Carie Keller, Cenveo Publisher ServicesPrinter/Binder: LSC Communications, Inc. Willard, OhioCover Printer: Phoenix Color/HagerstownMicrosoft and/or its respective suppliers make no representations about the suitability of the informationcontained in the documents and related graphics published as part of the services for any purpose. All suchdocuments and related graphics are provided “as is” without warranty of any kind. Microsoft and/or itsrespective suppliers hereby disclaim all warranties and conditions with regard to this information, including all warranties and conditions of merchantability, whether express, implied or statutory, fitness for a particular purpose, title and non-infringement. In no event shall Microsoft and/or its respective suppliers beliable for any special, indirect or consequential damages or any damages whatsoever resulting from loss ofuse, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or inconnection with the use or performance of information available from the services.The documents and related graphics contained herein could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Microsoft and/or its respectivesuppliers may make improvements and/or changes in the product(s) and/or the program(s) describedherein at any time. Partial screen shots may be viewed in full within the software version specified.Microsoft and Windows are registered trademarks of the Microsoft Corporation in the U.S.A. andother countries. This book is not sponsored or endorsed by or affiliated with the Microsoft Corporation.Copyright 2019 by Pearson Education, Inc. or its affiliates. All Rights Reserved. Manufactured in theUnited States of America. This publication is protected by copyright, and permission should be obtainedfrom the publisher prior to any prohibited reproduction, storage in a retrieval system, or transmission inany form or by any means, electronic, mechanical, photocopying, recording, or otherwise. For information regarding permissions, request forms, and the appropriate contacts within the Pearson EducationGlobal Rights and Permissions department, please visit www.pearsoned.com/permissions/.Acknowledgments of third-party content appear on the appropriate page within the text.PEARSON, ALWAYS LEARNING, and MYLAB are exclusive trademarks owned by Pearson Education,Inc. or its affiliates in the U.S. and/or other countries.Unless otherwise indicated herein, any third-party trademarks, logos, or icons that may appear in thiswork are the property of their respective owners, and any references to third-party trademarks, logos,icons, or other trade dress are for demonstrative or descriptive purposes only. Such references are not intended to imply any sponsorship, endorsement, authorization, or promotion of Pearson’s products bythe owners of such marks, or any relationship between the owner and Pearson Education, Inc., or its affiliates, authors, licensees, or distributors.Library of Congress Cataloging-in-Publication Data is on file at the Library of Congress.ISBN-10: 0133548236ISBN-13: 9780133548235A01 BLAI8235 01 SE FM ppi-xxxiv.indd 415/09/17 11:33 AM

For Chau, our kids and our grandkidsRoger D. BlairFor Sue’s memory and our kidsMark B. RushA01 BLAI8235 01 SE FM ppi-xxxiv.indd 515/09/17 11:33 AM

ABOUT THE AUTHORSRoger D. Blair is the Walter J. Matherly Professor and chair of economics at theUniversity of Florida. He has been a visiting professor at the University of Hawaiiand the University of California–Berkeley as well as Visiting Scholar in Residence,Center for the Study of American Business, Washington University. Professor Blair’sresearch centers on antitrust economics and policy. He has published 10 books and200 journal articles. He has also served as an antitrust consultant to numerous corporations, including Intel, Anheuser-Busch, TracFone, Blue Cross–Blue Shield, WasteManagement, Astellas Pharma, and many others.Mark Rush is a professor of economics at the University of Florida. Prior to teaching at Florida, he was an assistant professor of economics at the University ofPittsburgh. He has spent eight months at the Kansas City Federal Reserve Bank as aVisiting Scholar. Professor Rush has taught MBA classes for many years and has wonteaching awards for his classes. He has published in numerous professional journals,including the Journal of Political Economy; the Journal of Monetary Economics; theJournal of Money, Credit, and Banking; the Journal of International Money and Finance;and the Journal of Labor Economics.A01 BLAI8235 01 SE FM ppi-xxxiv.indd 615/09/17 11:33 AM

BRIEF CONTENTSPART 1 ECONOMIC FOUNDATIONS123Managerial Economics and Decision Making 1Demand and Supply33Measuring and Using Demand86PART 2 MARKET STRUCTURE AND MANAGERIALDECISIONS456789Production and CostsPerfect Competition138186Monopoly and Monopolistic Competition227Cartels and Oligopoly 274Game Theory and Oligopoly318A Manager’s Guide to Antitrust Policy371PART 3 MANAGERIAL DECISIONS1011Advanced Pricing Decisions 414Decisions About Vertical Integrationand Distribution 46512Decisions About Production, Products,and Location 49913141516Marketing Decisions: Advertising and Promotion 541Business Decisions Under Uncertainty587Managerial Decisions About Information635Using Present Value to Make MultiperiodManagerial Decisions 677Content on the Web:Appendix: The Business PlanChapter: Franchising DecisionsA01 BLAI8235 01 SE FM ppi-xxxiv.indd 715/09/17 11:33 AM

CONTENTSPART 1ECONOMIC FOUNDATIONS1Managerial Economics and Decision Making1Managers at Sears Holdings Use Opportunity Cost to Make Tough DecisionsIntroduction1.11.21Managerial Economics and Your Career2Firms and Their Organizational StructureDefinition of a Firm 3The Legal Organization of Firms1.3133Profit, Accounting Cost, and Opportunity CostGoal: Profit Maximization 6Total Revenue 7Accounting Cost and Opportunity Cost68DECISION SNAPSHOT Sunk Costs in the Stock Market11DECISION SNAPSHOT Opportunity Cost at Singing the BluesBlueberry Farm 13Comparing Accounting Cost and Opportunity CostUsing Opportunity Cost to Make Decisions 1715SOLVED PROBLEM Resting Energy’s Opportunity Cost1.4Marginal Analysis1718The Marginal Analysis Rule 18Using Marginal Analysis 19SOLVED PROBLEM How to Respond Profitably to Changes inMarginal Cost20Revisiting How Managers at Sears Holdings Used Opportunity Cost toMake Tough Decisions 21Summary: The Bottom Line22Key Terms and Concepts 23Questions and Problems23MyLab Economics Auto-Graded Excel ProjectsAPPENDIX The Calculus of Marginal AnalysisA. Review of Mathematical Results 28B. Marginal Benefit and Marginal Cost 29C. Maximizing Total Surplus 29D. Maximizing Total Surplus: Example 30Calculus Questions and Problems252831viiiA01 BLAI8235 01 SE FM ppi-xxxiv.indd 815/09/17 11:33 AM

Contents   ix2Demand and Supply 33Managers at Red Lobster Cope with Early Mortality Syndrome33Introduction 332.1 Demand 34Law of Demand 34Demand Curve 35Factors That Change Demand 37DECISION SNAPSHOT Demand for the Cadillac EscaladeChanges in Demand: Demand Function41SOLVED PROBLEM Demand for Lobster Dinners2.2Supply414344Law of Supply 44Supply Curve 44Factors That Change Supply 46Changes in Supply: Supply Function49SOLVED PROBLEM The Supply of Gasoline-Powered Cars and the Priceof Hybrid Cars2.350Market Equilibrium51Equilibrium Price and Equilibrium Quantity 51Demand and Supply Functions: Equilibrium 53SOLVED PROBLEM Equilibrium Price and Quantity of Plush Toys2.4Competition and Society5454Total Surplus 54Consumer Surplus 58Producer Surplus 59SOLVED PROBLEM Total Surplus, Consumer Surplus, and Producer Surplusin the Webcam Market 602.5Changes in Market Equilibrium61Use of the Demand and Supply Model When One Curve Shifts: Demand 61Use of the Demand and Supply Model When One Curve Shifts: Supply 63Use of the Demand and Supply Model When Both Curves Shift 64Demand and Supply Functions: Changes in Market Equilibrium 68SOLVED PROBLEM Demand and Supply for Tablets Both Change2.6Price Controls7070Price Ceiling 70Price Floor 72SOLVED PROBLEM The Effectiveness of a Minimum WageMANAGERIALAPPLICATION2.7Using the Demand and Supply Model7475Predicting Your Costs 75Predicting Your Price 76Revisiting How Managers at Red Lobster Coped with Early Mortality SyndromeSummary: The Bottom Line7878Key Terms and Concepts 79Questions and Problems80MyLab Economics Auto-Graded Excel ProjectsA01 BLAI8235 01 SE FM ppi-xxxiv.indd 98315/09/17 11:33 AM

x   Contents3Measuring and Using Demand 86Managers at the Gates Foundation Decide to Subsidize Antimalarial DrugsIntroduction3.18687Regression: Estimating Demand87The Basics of Regression Analysis 88Regression Analysis 89Regression Results: Estimated Coefficients and EstimatedDemand Curve 92SOLVED PROBLEM Regression Analysis at Your Steak Chain3.2Interpreting the Results of Regression Analysis9494Estimated Coefficients 94Fit of the Regression 99SOLVED PROBLEM Confidence Intervals and Predictions for the Demandfor Doors3.3100Limitations of Regression Analysis101Specification of the Regression Equation 101Functional Form of the Regression Equation 102SOLVED PROBLEM Which Regression to Use?3.4Elasticity104105The Price Elasticity of Demand 105DECISION SNAPSHOT Advertising and the Price Elasticityof Demand117Income Elasticity and Cross-Price Elasticity of Demand117SOLVED PROBLEM The Price Elasticity of Demand for a egression Analysis and Elasticity120Using Regression Analysis 120Using the Price Elasticity of Demand 122Using the Income Elasticity of Demand Through the Business Cycle122Revisiting How Managers at the Gates Foundation Decided to SubsidizeAntimalarial Drugs 123Summary: The Bottom Line123Key Terms and Concepts 124Questions and Problems124MyLab Economics Auto-Graded Excel Projects128CASE STUDY Decision Making Using Regression 130APPENDIX The Calculus of Elasticity 133A. Price Elasticity of Demand for a Linear and a Log-Linear Demand Function 133B. Total Revenue Test 134C. Income Elasticity of Demand and Cross-Price Elasticity of Demand 135Calculus Questions and Problems 136A01 BLAI8235 01 SE FM ppi-xxxiv.indd 1015/09/17 11:33 AM

Contents   xiPART 2MARKET STRUCTURE AND MANAGERIAL DECISIONS4Production and Costs138Pizza Hut Managers Learn That Size Matters138Introduction 1384.1 Production 139Production Function 139Short-Run Production Function 141Long-Run Production Function 145SOLVED PROBLEM Marginal Product of Labor at a Bicycle Courier Service4.2Cost Minimization147Cost-Minimization Rule 148Generalizing the Cost-Minimization Rule149SOLVED PROBLEM Cost Minimization at a Construction Firm4.3Short-Run Cost147150150Fixed Cost, Variable Cost, and Total Cost 151Average Fixed Cost, Average Variable Cost, and Average Total CostMarginal Cost 153152DECISION SNAPSHOT Input Price Changes and Changes in the Marginal Costof an Eiffel Tower Tour 154Competitive Return 156Shifts in Cost Curves 157DECISION SNAPSHOT Changes in Input Prices and Cost Changes at ShagangGroup159SOLVED PROBLEM Calculating Different Costs at a Caribbean Restaurant4.4Long-Run Cost161162Long-Run Average Cost 162Economies of Scale, Constant Returns to Scale, and Diseconomiesof Scale 166MANAGERIALAPPLICATION4.5SOLVED PROBLEM Long-Run Average Cost169Using Production and Cost Theory170Effects of a Change in the Price of an Input 170Economies and Diseconomies of Scale 171Revisiting How Pizza Hut Managers Learned That Size MattersSummary: The Bottom Line173174Key Terms and Concepts 174Questions and Problems175MyLab Economics Auto-Graded Excel Projects178APPENDIX The Calculus of Cost 179A. Marginal Product 179B. Cost Minimization 180C.   Marginal Cost and the Marginal/Average RelationshipCalculus Questions and ProblemsA01 BLAI8235 01 SE FM ppi-xxxiv.indd 1118318415/09/17 11:33 AM

xii   Contents5Perfect Competition186Burger King Managers Decide to Let Chickens Have It Their WayIntroduction5.1186186Characteristics of Competitive Markets187Defining Characteristics of Perfect CompetitionPerfectly Competitive Markets 189188SOLVED PROBLEM The Markets for Fencing and Cell Phones5.2190Short-Run Profit Maximization in Competitive MarketsMarginal Analysis 191Using Marginal Analysis to Maximize Profit191194DECISION SNAPSHOT Marginal Analysis at the American Cancer Society196Changes in Costs 196Amount of Profit 197Shutting Down 201DECISION SNAPSHOT Lundberg Family Farms Responds to a Fall inthe Price of Rice 203The Firm’s Short-Run Supply Curve204DECISION SNAPSHOT A Particleboard Firm Responds to a Fallin the Price of an Input 205The Short-Run Market Supply Curve206SOLVED PROBLEM Amount of Profit and Shutting Down at a PlywoodProducer5.3207Long-Run Profit Maximization in Competitive MarketsLong-Run Effects of an Increase in Market DemandChange in Technology 212SOLVED PROBLEM The Long Run at a Plywood ProducerMANAGERIALAPPLICATION5.4Perfect Competition208208214215Applying Marginal Analysis 215Optimal Long-Run Adjustments 215Revisiting How Burger King Managers Decided to Let Chickens HaveIt Their Way 217Summary: The Bottom Line218Key Terms and Concepts 218Questions and Problems219MyLab Economics Auto-Graded Excel Projects222APPENDIX The Calculus of Profit Maximization for PerfectlyCompetitive Firms 224A. Marginal Revenue 224B. Maximizing Profit 224C. Maximizing Profit: Example 224Calculus Questions and ProblemsA01 BLAI8235 01 SE FM ppi-xxxiv.indd 1222615/09/17 11:33 AM

Contents   xiii6Monopoly and Monopolistic Competition227Premature Rejoicing by the Managers at KV PharmaceuticalIntroduction6.1227228A Monopoly Market228Defining Characteristics of a Monopoly Market 228Demand and Marginal Revenue for a Monopoly 229DECISION SNAPSHOT Is Delta Airlines a Monopoly?229SOLVED PROBLEM The Relationship Among the Price Elasticity of Demand,Marginal Revenue, and Price 2336.2Monopoly Profit MaximizationProfit Maximization for a Monopoly234234DECISION SNAPSHOT Profit-Maximizing Range of Prices for TiresComparing Perfect Competition and MonopolyBarriers to Entry 241237239SOLVED PROBLEM Merck’s Profit-Maximizing Price, Quantity, andEconomic Profit6.3247Dominant Firm247Dominant Firm’s Profit Maximization248DECISION SNAPSHOT How a Technology Firm Responds to Changesin the Competitive Fringe251SOLVED PROBLEM The Demand for Shoes at a Dominant Firm6.4Monopolistic Competition252252Defining Characteristics of Monopolistic Competition 253Short-Run Profit Maximization for a Monopolistically Competitive FirmLong-Run Equilibrium for a Monopolistically Competitive Firm 255SOLVED PROBLEM J-Phone’s Camera PhoneMANAGERIALAPPLICATION6.5253256The Monopoly, Dominant Firm, and Monopolistic CompetitionModels 257Using the Models in Managerial Decision Making 257Applying the Monopolistic Competition Model 259Revisiting Premature Rejoicing by the Managers at KV PharmaceuticalSummary: The Bottom Line261261Key Terms and Concepts 262Questions and Problems262MyLab Economics Auto-Graded Excel Projects268APPENDIX The Calculus of Profit Maximization for Firms withMarket Power 269A. Marginal Revenue Curve 269B. Elasticity, Price, and Marginal Revenue 269C. Maximizing Profit 270D. Maximizing Profit: Example 271Calculus Questions and ProblemsA01 BLAI8235 01 SE FM ppi-xxxiv.indd 1327215/09/17 11:33 AM

xiv   Contents7Cartels and Oligopoly 274Managers at Major Publishers Read the e-Writing on the e-WallIntroduction2747.1275Cartels274Cartel Profit Maximization 276Instability of a Cartel 277SOLVED PROBLEM Potential Profit from a Cellular Telephone Cartel7.2Tacit CollusionPrice Visibility280280281DECISION SNAPSHOT A Contract in the Market for Propane282Preannouncements 283Precommitments 283Price Leadership 284SOLVED PROBLEM Price Leadership in the Market for Insulin7.3Four Types of Oligopolies284285Cournot Oligopoly 285DECISION SNAPSHOT South Africa’s Impala Platinum as a CournotOligopolist293Chamberlin Oligopoly 294Stackelberg Oligopoly 296Bertrand Oligopoly 297Comparing Oligopoly Models298SOLVED PROBLEM Coca-Cola Reacts to PepsiCoMANAGERIALAPPLICATION7.4Cartels and Oligopoly299300Using Cartel Theory and Tacit Collusion for ManagerialDecision Making 301Using Types of Oligopolies for Managerial Decision Making301Revisiting How Managers at Major Publishers Read the e-Writing onthe e-Wall 302Summary: The Bottom Line303Key Terms and Concepts 303Questions and Problems304MyLab Economics Auto-Graded Excel Projects307APPENDIX The Calculus of Oligopoly 309A. Cournot Oligopoly 309B. Stackelberg Oligopoly 315Calculus Questions and ProblemsA01 BLAI8235 01 SE FM ppi-xxxiv.indd 1431615/09/17 11:33 AM

Contents   xv8Game Theory and Oligopoly318Managers at Pfizer Welcome a Competitor in the Market for LipitorIntroduction8.1318318Basic Game Theory and Games319Elements of a Game 320A Sample Game 320Nash Equilibrium 322A Dilemma 323DECISION SNAPSHOT An Advertising Game324Repeated Games 325DECISION SNAPSHOT TragoCo and Boca-Cola Play aRepeated Game 327Dominated Strategies 330SOLVED PROBLEM Games Between Two SmartphoneProducers8.2332Advanced Games334Multiple Nash Equilibria 334Mixed-Strategy Nash Equilibrium337SOLVED PROBLEM Custom’s Flower of the Day8.3Sequential Games343344An Entry Game 344DECISION SNAPSHOT Game Tree Between Disney andWarner Brothers347Commitment and Credibility348SOLVED PROBLEM A Pharmaceutical Company Uses Game Theory to Makean OfferMANAGERIALAPPLICATION8.4352Game Theory354Using Basic Games for Managerial Decision Making 354Using Advanced Games for Managerial Decision Making 356Using Sequential Games for Managerial Decision Making 357SOLVED PROBLEM Is a Threat Credible?359Revisiting How Managers at Pfizer Welcomed a Competitor in the Market forLipitor 360Summary: The Bottom Line361Key Terms and Concepts 362Questions and Problems362MyLab Economics Auto-Graded Excel ProjectsA01 BLAI8235 01 SE FM ppi-xxxiv.indd 1536815/09/17 11:33 AM

xvi   Contents9A Manager’s Guide to Antitrust Policy371The Managers of Sea Star Line Walk the PlankIntroduction9.1371372Overview of U.S. Antitrust PolicyThe Monopoly Problem 372The Sherman Act, 1890 374The Clayton Act, 1914 374The Federal Trade Commission Act, 1914Sanctions for Antitrust Violations 375Recent Antitrust Cases 377372375SOLVED PROBLEM A Perfectly Competitive Market Versus a MonopolyMarket9.2378The Sherman Act379Sherman Act Section 1: Restraint of Trade 379Sherman Act Section 2: Monopolization and Attempt to Monopolize383SOLVED PROBLEM Going, Going, Gone: Price Fixing in the Marketfor Fine Art9.3387The Clayton Act388Clayton Act Section 2: Price Discrimination 388Clayton Act Section 3: Conditional Sales 388Clayton Act Section 7: Mergers 391SOLVED PROBLEM The Business Practices Covered in the Clayton Act9.4U.S. Merger Policy392Economic Effects of Horizontal MergersAntitrust Merger Policy 394393DECISION SNAPSHOT The XM/Sirius Satellite Radio MergerSOLVED PROBLEM Mergers in the Office-Supply Market9.5392International Competition LawsEuropean Union Laws 398Chinese Laws 400Worldwide Competition Laws396397398401SOLVED PROBLEM Gazprom Gas Prices Create Indigestionin the European Union 402MANAGERIALAPPLICATION9.6Antitrust Policy402Using the Sherman Act and the Clayton Act 402Using International Competition Laws 403Antitrust Advice for Managers 403Revisiting How the Managers of Sea Star Line Walked the PlankSummary: The Bottom Line404405Key Terms and Concepts 405Questions and Problems406MyLab Economics Auto-Graded Excel ProjectsCASE STUDY Student Athletes and the NCAAA01 BLAI8235 01 SE FM ppi-xxxiv.indd 1641041215/09/17 11:33 AM

Contents   xviiPART 3MANAGERIAL DECISIONS10Advanced Pricing Decisions 414Managers at the Turtle Bay Resort Think Kama’aina Pricing Is Par forthe Course 414Introduction41410.1 Price Discrimination416First-Degree Price Discrimination 416Second-Degree Price Discrimination 418Third-Degree Price Discrimination 419DECISION SNAPSHOT American Airlines Identifies a Customer Type425SOLVED PROBLEM Price Discrimination at Warner Brothers: That’s All,Folks!42610.2 Peak-Load Pricing427Long-Run Capacity Decision 428Short-Run Pricing and Quantity Decisions429DECISION SNAPSHOT Peak-Load Pricing by the Minneapolis–St. PaulMetropolitan Airport432SOLVED PROBLEM Peak-Load Pricing10.3 Nonlinear Pricing433434Two-Part Pricing 434All-or-Nothing Offers 440DECISION SNAPSHOT Nonlinear Pricing at the 55 BarCommodity Bundling443SOLVED PROBLEM Movie MagicMANAGERIALAPPLICATION44344610.4 Using Advanced Pricing Decisions447Managerial Use of Price Discrimination 447Managerial Use of Peak-Load Pricing 448Managerial Use of Nonlinear Pricing 449Revisiting How the Managers at Turtle Bay Resort Came to Think Kama’aina Pricing IsPar for the Course 450Summary: The Bottom Line451Key Terms and Concepts 451Questions and Problems451MyLab Economics Auto-Graded Excel Projects456APPENDIX The Calculus of Advanced Pricing DecisionsA. Third-Degree Price Discrimination 458B. Two-Part Pricing 459Calculus Questions and ProblemsA01 BLAI8235 01 SE FM ppi-xxxiv.indd 1745846315/09/17 11:33 AM

xviii   Contents11Decisions About Vertical Integration and Distribution465Why Would Walgreens Boots Alliance Purchase Wholesaler AmerisourceBergen? 465Introduction46511.1 The Basics of Vertical IntegrationMarkets Versus Vertical IntegrationTypes of Vertical Integration 468Transfer Prices and Taxes 469467467SOLVED PROBLEM Vertical Integration47011.2 The Economics of Vertical Integration471Synergies 471Costs of Using a Market: Transaction Costs, the Holdup Problem,and Technological Interdependencies 471DECISION SNAPSHOT PepsiCo Reduces Transaction CostsCosts of Using Vertical Integration473476DECISION SNAPSHOT Pilgrim’s Pride and the Limits of Vertical IntegrationSOLVED PROBLEM IBM Avoids a Holdup Problem47747811.3 Vertical Integration and Market Structure478Vertical Integration with Competitive Distributors 479Vertical Integration with a Monopoly Distributor 483SOLVED PROBLEM Price and Quantity with Competitive Distributorsand a Monopoly Distributor 488MANAGERIALAPPLICATION11.4 Vertical Integration and Distribution489Using the Economics of Vertical Integration for Managerial Decision MakingUsing Vertical Integration and Market Structure for ManagerialDecision Making Within a Firm 490489Revisiting Why Walgreens Boots Alliance Would Purchase WholesalerAmerisourceBergen 490Summary: The Bottom Line491Key Terms and Concepts 492Questions and Problems492MyLab Economics Auto-Graded Excel Projects12Decisions About Production, Products, and Location496499Managers at Freeport-McMoRan Dig Deep to Make a DecisionIntroduction49950012.1 Joint Production500Fixed Proportions 501Variable Proportions 502SOLVED PROBLEM A Refinery Responds to an Increase in the Profitfrom GasolineA01 BLAI8235 01 SE FM ppi-xxxiv.indd 1850615/09/17 11:33 AM

Contents   xix12.2 The Multi-Plant Firm506Marginal Cost for a Multi-Plant Firm 507Profit Maximization for a Multi-Plant Firm 508SOLVED PROBLEM Can Producing Too Many Cookies Hurt Your Firm’sProfit?51012.3 Location Decisions511Changes in Costs from Adding Plants 511The Effect of Transportation Costs on Location DecisionsDECISION SNAPSHOT Quaker Oats’ Location Decision513514DECISION SNAPSHOT Walgreens and CVS Compete for Your DrugPrescription515The Effect of Geographic Variation in Input Prices on Location DecisionsSOLVED PROBLEM A Department Store Pays for Transportation12.4 Decisions About Product QualitySOLVED PROBLEM Flower Quality12.5 Optimal Inventories516518518520521Economic Order Quantity Model 521General Optimal Inventory Decisions 523SOLVED PROBLEM How a Decrease in Demand Affects the Economic OrderQuantityMANAGERIALAPPLICATION52412.6 Production, Products, and Location525Joint Production of an Input 525Transportation Costs, Plant Size, and Location526Revisiting How Managers at Freeport-McMoRan Had to Dig Deep to Makea Decision 528Summary: The Bottom Line528Key Terms and Concepts 529Questions and Problems529MyLab Economics Auto-Graded Excel Projects534APPENDIX The Calculus of Multi-Plant Profit-Maximization and InventoryDecisions 536A. Production Decisions at a Multi-Plant Firm 536B. Economic Order Quantity Inventory Model 537Calculus Questions and Problems13539Marketing Decisions: Advertising and Promotion541Heads Up for Advertising Decisions at RiddellIntroduction54154113.1 Profit-Maximizing Advertising by a FirmAdvertising and Profit MaximizationChoosing Advertising Media 547A01 BLAI8235 01 SE FM ppi-xxxiv.indd 1954254315/09/17 11:33 AM

xx   ContentsDECISION SNAPSHOT PepsiCo Allocates Its Advertising Dollars548SOLVED PROBLEM Marginal Benefit from AutomobileAdvertising54913.2 Optimal Advertising by an Industry550Industry-Wide Advertising as a Public Good 550Challenges of Industry-Wide Advertising 551SOLVED PROBLEM The National Football League’s AdvertisingProblem55413.3 False Advertising 554When Can False Advertising Be Successful? 555What Are the Penalties for False Advertising? 557SOLVED PROBLEM Advertising for Skechers Shape-Ups Getsthe Boot55813.4 Resale Price Maintenance and Product Promotion558The Effect of Resale Price Maintenance 559Profit Maximization with Resale Price Maintenance 560Resale Price Maintenance and Antitrust Policy 561DECISION SNAPSHOT Amazon.com Markets Its Kindle562SOLVED PROBLEM Profit-Maximizing Resale Price Maintenance for DesignerShoes56313.5 International Marketing: Entry and Corruption LawsEntering a Foreign Market 564U.S. Anticorruption Law: The Foreign Corrupt Practices Act564566DECISION SNAPSHOT JPMorgan “Sons and Daughters” Program569U.K. Bribery Act 569SOLVED PROBLEM Legal or Illegal?MANAGERIALAPPLICATION57013.6 Marketing and Promotional Decisions571Industry-Wide Advertisi

Managerial Economics Klein Mathematical Methods for Economics Krugman/Obstfeld/Melitz International Economics: Theory & Policy* Laidler The Demand for Money Lynn Economic Development: Theory and Practice for a Divided World Miller Economics Today* Miller/Benjamin The Economics of Macro Issues Miller/Benjamin/North The Economics of Public Issues .

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Chính Văn.- Còn đức Thế tôn thì tuệ giác cực kỳ trong sạch 8: hiện hành bất nhị 9, đạt đến vô tướng 10, đứng vào chỗ đứng của các đức Thế tôn 11, thể hiện tính bình đẳng của các Ngài, đến chỗ không còn chướng ngại 12, giáo pháp không thể khuynh đảo, tâm thức không bị cản trở, cái được