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Managerial Economics

MGCR 293-005 (Fall 2016)

Instructor: Tariq Nizami
Email: tariq.nizami@mcgill.ca
Time: Monday & Wednesday 8:35 AM 9:55 AM
Location: BRONF 422
Office Hours: Monday & Wednesday 10:00 to 11:00 AM
Office: BRONF 236

Course Description
This is an introductory course in Managerial Economics. Managerial Economics is the application of
microeconomic theory and methodologies to managerial decision making problems within different
organizations such as a firm or a government agency. It covers the basic theory of individual
economic units the microeconomic level (individual markets, individual consumers, individual
firms) and some analysis tools of decision science to examine, the choices that individuals face, how
markets respond to these choices, and when/how government intervention may or may not be
The emphasis in this course will be on demand analysis, production theory, cost analysis and
decision-making under uncertainty in different market structures. Basic knowledge of calculus would
also be helpful. Managerial Economics is an applied quantitative course in which managerial
problems are studied and analyzed (and in many cases solved) in the context of microeconomic
models. The tools of analysis used in this course include graphs, diagrams, and mathematical
expressions and equations.

Course Objectives
1. Provide students with a basic understanding of the economic theory and analytical tools that can
be used in decision-making problems.
2. Introduce the fundamentals of micro economic theory and practice as they are applied to
business and non-business organizations in a managerial context.
3. Enhance the students basic concepts, analytical skills, insights and managerial decision-making
tools required for sound business decisions.
4. Provide intuitive guide to marginal analysis and basic economic relations.
5. Make students better decision-makers in a business or institutional setting.

Course Outline Managerial Economics (MGCR 293)

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Learning Outcomes
1. Basic knowledge of the external environment of the firm
Upon successful completion of this course, the student should be able to:
List the different goals and constraints that firms face and use the theory of the firm to model
business organizations
Understand the basic tools of supply and demand
Apply demand theory to establish the elasticity of demand
Apply production theory to manage production
Understand the vital relationship between productivity (efficiency) and unit cost
Understand how costs are determined and how to differentiate between fixed and variable
Understand cost theory to establish short and long run behavior
Describe market structures to establish market equilibrium
Make decisions in different market structures and evaluate the performance of the firm
Understand how prices are determined in the short-run and long-run
Understand game theory to decide on strategies
Understand the implications of government action on managerial behavior
2. Applying Managerial Decision Making Tools
Upon successful completion of this course students should be able to:
Use algebraic equations and graphs to determine the equilibrium price and quantity
Use marginal analysis, derivatives to maximize a function such as profit or minimize one such
as cost, and use constrained optimization
Estimate the price, income and cross elasticity of demand for a product and how to apply the
Determine the break/even point for a new product, store, market
Display data by creating tables, graphs and equations
Determine the optimal price to maximize short-run profit
Minimize your losses in the short-run and when is the time to shut-down operations
Evaluate the economic profitability of the firm using constrained optimization

Grading Scheme
The grading scheme is as follows:
1. Assignments & Topic Presentation
2. Mid-term
3. Final Exam


1. Assignments & Topic Presentation

Students are required to complete two (2) individual assignments and a group assignment designed
to cover all the material learned in each of the two parts of the course and provide opportunities for
formative assessment and learning.
Course Outline Managerial Economics (MGCR 293)

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Assignments are designed to provide the student with the opportunity to apply the concepts, insights,
techniques and tools in a problem solving context and to assess their understanding of the basic
body of knowledge and ability to think, problem solve and apply appropriately the tools acquired.
Several assignments & presentation topics will be distributed throughout the course.
Assignment 1
This assignment has to be handed in by Monday, October 31, 2016. No late assignments will
be accepted. Assignments must be hand written.
Chapter 1
Questions 5, 7, 8
Chapter 18
Questions 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12
Chapter 2
Questions 1, 2, 3, 4, 5
Chapter 3
Questions 5, 6, 8, 11
Chapter 5
Questions 1, 6
Assignment 2
This assignment has to be handed in on the last day of classes. No late assignments will be
accepted. Assignments must be hand written.
Chapter 5
Questions 1, 6
Chapter 6
Questions 3, 4, 5, 6, 9, 10, 11, 12
Chapter 7
Questions 1, 2, 3, 4, 5, 6
Chapter 8
Questions 1, 3, 11
Chapter 9
Questions 2, 3
Chapter 10
Questions 1, 2, 3
Chapter 11
Questions 1, 2, 4, 7
2. Mid-term exam (1 hour 30 minutes closed book)
There will be a one and a half hour (1.5) mid-term exam covering chapters 1, 18, 2, 3 & 5. The
midterm exam is multiple-choice questions designed to assess the students knowledge and
understanding of the material.
3. Final exam (3-hour closed book)
A three-hour final exam will be held during the final examination period.
The final exam is broken down into two parts: Multiple-choice questions designed to assess the
students knowledge and understanding of the material and a problem part designed to assess the
students ability to apply the tools. Each part is approximately 50%.
These are closed book examinations no texts or notes are allowed in the exams.

Teaching Methods:
Class sessions consists of a mixture of lectures, interactive discussions, case studies, case
presentations, and problem solving. Each session outlines the application of economic principles
and theories related to managerial issues, through lectures and interactive discussions, presenting
cases, discussing cases in addition to solving economic problems.
The primary method of instruction is class lectures due to the large body of knowledge that needs to
be transmitted to the student. The instructor develops all illustrations and derives all solutions on a
step-by-step, sequential, methodical and developmental way on the blackboard and overhead slides
to help the student see the logic and grasp the building blocks.
Nevertheless, some time is devoted to problem-solving exercises and applications, case studies and
interactive class discussions on current economic topics.
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Required Text
Managerial Economics: Theory, Applications, and Cases, 8th edition, by, Allen, Weigelt, Doherty
& Mansfield(Custom Edition Mcgill University) Publisher: W. W. Norton & Company, New York (ISBN:
Supplementary Textbooks:
1. Bade, Parkin, (2012) Microeconomics: Canada in the Global Environment, 8th edition, Prentice

Course Policies
Assignment deadlines:
Students will be advised of any changes made to the course. All efforts are made to manage the
course as stated. All students must submit their assignments on time. Failure to do so will result in a
Right to submit in English or French written work that is to be graded:
In accord with McGill Universitys Charter of Students Rights, students in this course have the right
to submit in English or in French any written work that is to be graded.
This right applies to all written work that is to be graded, from one-word answers to dissertations.
Academic Integrity statement:
McGill University values academic integrity. Therefore all students must understand the meaning and
consequences of cheating, plagiarism and other academic offences under the Code of Student
Conduct and Disciplinary Procedures (see www.mcgill.ca/students/srr/honest/ for more information).

Tutorial & TA
The tutorials are scheduled each week on Fridays. The time and room is to be announced.
The tutorials are very useful in providing further clarifications and understanding of the material

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Course Schedule Fall 2015

Week #
12 & 14
19 & 21
26 & 28
12 & 17
19 & 24
26 & 31
November 4

Lecture Topics

Text Chapter & Readings

Introduction to Managerial Economics

Firm and its Goals
Optimization Techniques
Review of Mathematical Concepts used in Managerial
(Omit Lagrangian Multipliers p 754-756)

Reading: Chapter1
Reading: Chapter 18

Demand Theory
(Omit Constant-Elasticity Demand Function
p 59-60)
Elasticity and Importance of Price Elasticity of

Reading Chapter 2

Consumer Behavior and Rational Choice

Reading: Chapter 3

Production Theory

Reading: Chapter 5

Production Theory

Reading: Chapter 5

The Analysis of Costs

Theory and Estimation of Costs

Perfect Competition
Pricing and Output Decision: Perfect Competition,
Monopoly & Monopolistic Competition
Pricing and Output Decision: Perfect Competition,
Monopoly, Monopolistic Competition
November 4, 2016. 3:00 pm to 5:00 pm

Reading Chapter 6
Reading: Chapter 7
Assignment 1 Due Date
October 31, 2016
Reading: Chapter 8

Midterm covers
Chapters 1,18, 2, 3 & 5

9 & 14

The Managerial Use of Price Discrimination

Special Pricing Practices

Reading: Chapter 9

16 & 21

Bundling & Intra firm Pricing

Special Pricing Practices:

Reading: Chapter 10

23 & 28

Pricing and Output Decision

Reading: Chapter 11

Game Theory
Strategic Decisions

Reading: Chapter 12

December 30 & 5

Course Outline Managerial Economics (MGCR 293)

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All changes to this outline will be notified in the class

Course Outline Managerial Economics (MGCR 293)

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