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Production and Costs

Course Description
This course provides a solid foundation of economic principles to support managerial decision making. Topics include cost-benefit analysis, demand estimation and forecasting, decision making under risk and uncertainty, production and cost analysis, and market structure analysis.
Case Background:
All businesses need to make decisions about how much to spend on equipment, how many people to hire, etc. as well as decide how much to produce. In making these decisions, managers must take into account some fundamental principles of economics. For example, when deciding whether or not to produce one more unit, it is not necessarily the total production cost that you need to consider. Instead, the concept of marginal analysis is employed. This entails looking at how much it costs to produce one more unit – or the marginal cost. Other important concepts of this module include fixed costs, variable costs, and the law of diminishing marginal returns.

Significance of the Course within the Program
This course will either implicitly or explicitly address the following program outcomes:
• Identify and apply appropriate quantitative and qualitative business models to evaluate business performance and solve complex organizational problems.
• Generate business plans at the corporate, business unit, and functional levels.
• Conduct business research by finding, collecting, analyzing, and evaluating business data.
• Evaluate information consisting of multiple perspectives, conflicting evidence, competing interests and priorities, and risk, to determine an optimal course of action.
• Generate oral/written presentations in various business formats (e.g., memos, reports, PowerPoint, spreadsheets, charts/graphs).
• Apply a system’s perspective to improve, integrate, and align business functions with organizational strategy.
• Demonstrate ethical and reasoned decision making and action in all facets of organizational management.
Course Overview
BUS530 is designed to expose students to the main issues in managerial economics. Managers in the business world need to make vital decisions, such as what price to charge, how much to produce, how many employees to hire, etc., that can make or break the company. Optimizing these decisions is complex, because this may depend not only on the internal nature of the firm, but also the nature of the market and competitors. We will learn specific decision-making tools such as marginal analysis and game theory, and also cover in detail the different types of industrial structures and their implications for firm strategy.
This course begins explaining the classical demand and supply model of price determination and the associated concept of price elasticity of demand, which plays an important role in the decision-making process of firms (Module 2: Production and Costs)
Modular Learning Outcomes
• Understand and apply the distinction between fixed and variable costs.
• Understand and apply marginal analysis to production decisions.
• Graph economic data using Microsoft Excel.
Required Material