Managerial Economics : Microeconomics And Macroeconomics

838 Words Nov 9th, 2015 4 Pages
The purpose of the individual assignment is to read each chapter and then summarize the chapter. The first chapter summarized is chapter one. Managerial Economics uses microeconomics and macroeconomics principals to manage businesses. This analytical approach gives a logical aspect to management. Hopefully with a logical approach using economic theories this will enable managers to maximize managerial decision to increase profits. There are seven forces that can affect long-run profitability. Those forces are: few close substitutes, strong entry barriers, weak rivalry within markets, low market power of input suppliers, low market power of consumers, abundant complementary products, and limited harmful government intervention. All businesses use has a cost of operation. Since these cost requiring purchases this gives companies opportunities to reduce cost. A total economic cost is the sum of the opportunity costs of market-supplied resources (explicit costs) plus the opportunity costs of owner-supplied resources (implicit costs). The textbook regurgitates what we learned from other economics course by mentioning profit is calculating the difference between revenue and cost. There are different ways to calculate profits. Accounting profit for instance is different from economic profit. Accounting profit does not subtract the implicit cost of using resources from total revenue. The value of a business is the price which the firm can be sold. A company…
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