Managerial Economics Questions

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1.a. Optimization theory is concerned with the determination of the optimal values of input values to achieve a desired outcome. Marginal analysis is concerned with the determination of the point where one additional value of an input variable no longer produces an increase in the value of a desired output. Used in combination, optimization theory and marginal analysis can determine the optimal values for a group of input variables or for a single variable for the most efficient production of a desired output. The statement that "the optimal number of traffic deaths in the United States is zero," as an example, should not be inferred to mean that an optimum model for the reduction of traffic deaths would attempt to eliminate all traffic deaths from the United States. Rather, speed limits, the cost of enforcing those speed limits (including effects on productivity in the economy), and other related factors would be assessed as input variables to determine the point at which additional inputs of the variables failed to further reduce the level of traffic deaths. By way of illustration, a policy considering only speed limits as an input variable could reduce traffic deaths to zero by reducing the speed limit to zero. The cost to the economy and even the cost in lives for persons unable to obtain health assistance when required, however, would outweigh the value of reducing traffic deaths to absolute zero.

1.b. By contrast, the statement that "any pollution is too much p

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th care is the immediate availability of care. Consumers might be willing to pay more for health care to assure that they would not be required to be put on a waiting list for needed, but not life-threatening, surgery, as an example. A second aspect of health care quality is the access to physician specialists. Many consumers are willing to pay more for specialty care, as opposed to general practice care. A third aspect of quality in health care is a high success rate for a particular health care provider in relation to a specific type of health care problem. Consumers likely would be willing to pay more for a record of high levels of success. Consumer search theory also may be used to explain some of the failure of consumers to shop for the lowest price in health care services. The application of consumer search theory would hold that the cost of finding the lowest price is not a marginally productive exercise. Consumer search theory, however, really is applicable only in those instances where consumers pay out-of-pocket costs for their own health care. 3.a. Diminishing marginal productivity more typically is referred to as the law of diminishing returns. The hypothesis underlying the law of diminishing returns is that
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Some common words found in the essay are:
, CEO CF&D, health care, Ekelund Hebert, Pappas Brigham, Krutilla Fisher, traffic deaths, law diminishing returns, diminishing returns, law diminishing, marginal analysis, company invest, input variables, marginal productivity, consumers willing pay, consumer search theory, consumers willing, internal rate, internal rate return, health care costs, Dryden Press,
Approximate Word count = 1528
Approximate Pages = 6 (250 words per page)

Managerial Economics Questions

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