ECON 140 UCI Management & Economics Managerial Decision Cost Essay (Great English is a must!! No grammar errors!) (The topic is Managerial Decision: Cost)

ECON 140 UCI Management & Economics Managerial Decision Cost Essay (Great English is a must!! No grammar errors!)

(The topic is Managerial Decision: Cost)

(Make sure it is based on the class powerpoint)

(3-5 Pages, Double Spaced, APA Format)

——————————–

Subject of the paper: Economic Essay Managerial Decision Cost

Requirement: Choose any topic (topic was chosen and is Managerial Decision: Cost) discussed in the managerial economics class and write a 3 – 5 page essay

The paper should consist of the following:

A discussion on your selected topic covering the main points.
At least one news article related to the chosen topic, showing the application of the concept in the real world. You can easily find such news articles on google.
Write in your own words what you’ve understood from the article(s) and how this relates to what you have learned in the Econ 140 class.
Download (or scan) the articles and upload them along with your paper. The articles will not be included in the page count.

Please read our class notes ( the powerpoint) you need to make sure you cover the points presented in the class and the article is related to these elements.

Other information:

Typed – Double spaced
Font Size – 12
Margins – 1 inch (top, bottom, right and left)

Format:

APA Format
No plagiarism is accepted

*** The work will be checked for plagiarism through Turnitin by the professor. It is essential for everything to be free of plagiarism otherwise sanctions will be imposed***

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Thank you for your support Managerial Decisions – Costs*
*Based on Chapter 6
The Cost Function


Short-run costs

Fixed costs: (Remain constant as output increases)

Short-run variable costs: (varies as output varies).

Short-run total costs: = +
Long-run costs

All costs are variable

No fixed costs
Example: The manager should ignore sunk
costs in making decisions

Sunk cost is a cost that is forever lost after it has been paid. It cannot be
avoided and cannot be recovered. Example: If a firm buys a specialized
equipment which can be used to do only what it was designed for and has
no alternative use.

A coal company paid $5000 to lease a railcar from a railroad company. Under the
terms of lease, $1000 of this payment is refundable if the railcar is returned
within two days of signing the lease.

1. Upon signing the lease and paying $5000, how large are the coal company’s fixed
costs? Its sunk costs?

2) One day after signing the lease, the coal company realizes that it has no use for
the railcar. A farmer has a bumper crop of corn and has offered to sublease the
railcar from the company at a price of $4500. Should the coal company accept the
farmer’s offer?
Example: Economic Vs. Accounting Profit

Consider a small economics consultancy firm that is owner operated. In
2009, the firm earned revenue of $1,000,000 and incurred expenses on
supplies and hired labor of $850, 000. The owner’s best outside
employment opportunity (working as a consultant at Amazon) would earn
her a salary of $200,000. Find the accounting profits and economic profits.
Short-Run Costs in Action
Total costs
Variable costs
Fixed costs
= +

0
Output
Average and Marginal Costs

Average costs




Average fixed: =

Average variable costs: =
Average total cost: =

Marginal cost

The (incremental) cost of producing an additional unit of
output.

=
∆
∆
Cost Functions
The Relationship between Average
and Marginal Costs in Action
ATC, AVC, AFC
and MC ($)

A
Minimum of ATC
Minimum of AVC

0
Output
Long-Run Costs

In the long run, all costs are variable → a manager is free to
adjust levels of all inputs.

Long-run average cost curve

A curve that defines the minimum average cost of
producing alternative levels of output, allowing for
optimal selection of both the factors of production.
Long-Run Average Total Costs in Action
LRAC ($)
2

0
1
0
∗
Output
Multiproduct Cost Function
Economies of Scope
The Learning Curve

The Learning Curve and Learning by doing – Text, pgs. 179 – 181

Learning by doing can substantially reduce the cost of drilling
oil wells.

Kellogg (2011) found that the more wells the oil production firm
has drilled in the past, the less time it takes the firm to drill
another well.

His estimated learning curve shows that drilling time decreases
rapidly at first, falling at about 15% after the first 25 wells have
been drilled, but that drilling time does not fall much more
with additional experience.
Isocost and Changes in Isocost Lines

Isocost

Combination of inputs that yield cost the same cost.
+ =
or, re-arranging to the intercept-slope formulation:

= −

 Changes in isocosts

For given input prices, isocosts farther from the origin are
associated with higher costs.

Changes in input prices change the slopes of isocost lines.
Isocost Line
Capital Input (K)

= −

0

Labor Input (L)
Changes in the Isocost Line
Capital Input (K)
1

More expensive input
bundles
0

Less expensive input
bundles
0
0

1

Labor Input (L)
Changes in the Isocost Line
Capital Input (K)

Due to increase in wage rate
1 > 0
0

1

0
Labor Input (L)
Cost-Minimization Input Rule in Action
Capital Input (K)
1

2

,

=

=100 units
0
2

1

Labor Input (L)
Cost Minimization and the
Cost-Minimizing Input Rule

Cost minimization


Producing at the lowest possible cost.
Cost-minimizing input rule
Produce at a given level of output where the marginal
product per dollar spent is equal for all inputs:

=

 Equivalently, a firm should employ inputs such that the
marginal rate of technical substitution equals the ratio of
input prices:

=


Optimal Input Substitution in Action
Capital Input (K)
I
New cost-minimizing
point due to higher wage
F
B
Initial point of cost minimization
2
A
1
H
0
J
2
1
0
G Labor Input (L)
Managers must use the optimal mix of
inputs

*You are the manager of a large but privately held online retailer that
currently uses 17 unskilled workers and 6 semiskilled workers at its warehouse
to box and ship the products it sells online. Your company pays its unskilled
workers the minimum wage but pays the semiskilled workers $12.75 per hour.
Thanks to government legislation, the minimum wage in your state will
increase from $10.25 per hour to $10.75 per hour. Discuss the implications of
this legislation for your company’s operations, that is the implications for
your optimal mix of inputs.
*(Baye and Prince, 2014)
Econ 140 – Managerial Economics (REMOTE)
University of California, Irvine
Spring, 2020
Instructor: Dr. Neerja Aggarwal
Email: neerja.agg@uci.edu
Course web page: https://canvas.eee.uci.edu/courses/25737
Textbook: Managerial Economics and Strategy by Jeffrey Perloff and James Brander,
Student Value Edition Plus Mylab Economics with Pearson eText – Access Card
Package, 3rd Edition. ISBN – 9780135640982.
Prerequisites: ECON 100B (see the university website for further details.)
Course Objectives: Managerial Economics is a course about making sound managerial
decisions. An effective manager must identify goals, understand incentives, understand
markets, use marginal analysis and understand the time value of money. Keeping these
objectives of a manager in mind, this course shows you how economics can help a
manager effectively manage the resources of a business. You’ll learn how the
economics-tools from intermediate microeconomics, game theory, and industrial
organization are used in making managerial decisions, thus running an effective
management.
Course Grade Criteria: The final grade is based on Assignments (10%), Excel Projects
(10%), Midterm (35%), and Final (45%).
Scale: A+ : 96% ; A : 93% ; A- : 90% ; B+ : 87% ; B : 83% ; B- : 80% ; C+ : 77% ; C : 73% ; C- :
70% ; D+ : 67% ; D : 63% ; D- : 60% ; F : Below 60%
Assignments: Assignments will be assigned for each chapter/topic on Pearson MyLab,
and you are required to submit these assignments by the due dates. Late submissions
are allowed, these are however subject to a penalty of 25% for every late day. The
lowest score on these assignments will be dropped.
Excel Projects: There will be two excel projects assigned on Pearson MyLab, and you
are required to submit these projects by the due dates. (The lowest score on these projects
will not be dropped).
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Each project will have multiple algorithm based excel questions, with separate
downloadable instructions provided for each question. You are required to follow these
instructions and steps carefully before plugging in your answers. More specifically, first
you need to download the instructions for each question. This folder consists of an excel
file having two sheets – Problem and Instructions. You’ll need to work on the problem
in this excel file only, and then submit your answers. If you work in a different excel file
than this, your answers won’t get auto-graded by the software.
These assignments require Office 2013/2016 or newer version installed in your laptop.
Teaching Videos: As this class will be held remotely, there is no face-to-face interaction.
This course will be taught asynchronously through recorded videos. These videos will
be posted on Canvas on weekly basis. Be sure to learn the topics by watching these
videos and stay updated with the course.
Discussion Forums: The discussion forums for the course will be activated on Canvas.
Please post your course related non-personal questions in these forums and help the
fellow students with their queries.
Email: For any other course related queries, please email and ask your TA first; due to a
large volume of emails I may not be able to reply promptly to your email.
Exams: There are two exams for this course: midterm and non-cumulative final. These
exams will be held online on Pearson Mylab on the scheduled days. There will be no
makeup exams. In case you are unable to take a scheduled exam due to some
documented sickness/emergency, you should contact me or the TAs so that an
alternative arrangement/option can be considered.
Additional information: Keep yourself updated with the announcements and course
materials posted on the course website.
Students with Disabilities: If you anticipate needing any type of an academic
accommodation in this course or have questions about physical access, please discuss
this with me during the first week of class AND please register with the Disability
Services Center.
Academic Dishonesty: The minimum academic penalty for cheating on a homework
assignment or exam is a zero grade for the assignment or exam in question and the
maximum academic penalty will be a failing grade for the course. Additional
administrative penalties may be imposed by the university. I will not hesitate to report
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suspected cheaters to the Office of Academic Integrity & Student Conduct. Review the
University’s policies at: https://aisc.uci.edu/index.
Copyright: All course content created by the course instructor including but not
limited to this document, lecture slides, homework assignments, exams, and answer
keys are copy- righted by the course instructor. Unauthorized distribution or sale of
copyrighted course materials, for example by uploading content to sites like Course
Hero, violates the UCI student code of conduct. Students found to be in violation will
be reported to the university administration.
Effective in Spring Quarter 2020 ONLY, students may enroll in this course P/NP
(Pass/Not Pass). Enrolled students will be able to change from the letter-grade option to
P/NP until 4:59 PM on Friday of the 10th week. A “P” (Pass) will count toward
satisfaction of a major requirement that normally must be satisfied with a letter
grade. If you enroll in this course P/NP, you will need to earn the equivalent to a C
grade or higher. If you enroll in this course P/NP and earn the equivalent to a C- grade
or lower, you will receive an NP on your transcript (no credit). P/NP does not factor
into your GPA.
Outline (subject to change)
1. Introduction
2. The Basics of Managerial Economics (Ch. 1)
3. Managerial Decisions – Production (Ch. 5)
4. Managerial Decisions – Costs (Ch. 6)
5. Firm Organization and Market Structure (Ch. 7)
6. Pricing with Market Power, Part I (Ch. 10, until pg. 334)
7. Pricing with Market Power, Part II (Ch. 10, pg. 334 – 344)
8. Oligopoly Models (Ch. 11, until pg. 370)
9. Managerial Decisions Using Game Theory (Chs. 12 and 13)
10. TBA
Exam Dates: Here are the strict dates and windows for the two exams.
•
•
Midterm:
o Will be for one hour and fifteen minutes and available on Pearson MyLab
from Friday, May 1st, 8:00 am – Saturday, May 2nd, 8:00 am
Final:
o Will be for two hours and available on Pearson MyLab from Wednesday,
June 10th, 8:00 am – Thursday, June 11th, 8:00 am
Holidays (see the UCI academic calendar for details): Monday, May 25th (Memorial Day)
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