1. Define scarcity and opportunity cost. What role do these two concepts play in the making of management decisions?

2. Elaborate on the basic economic questions of what, how, and for whom. Provide specific examples of these questions with respect to the use of a country's scarce resources.

3. Following are examples of typical economic decisions made by the managers of a firm. Determine whether each is an example of what, how, or for whom.

a. Should the company make its own spare parts or buy them from an outside vendor?

b. Should the company continue to service the equipment that it sells or ask customers to use independent repair companies? c. Should a company expand its business to international markets or concentrate on the domestic market?

d. Should the company replaces its own communications network with a "virtual private network" that is owned and operated by another company? e. Should the company buy or lease the fleet of trucks that it uses to transport its products to market?

4. Compare and contrast microeconomics with macroeconomics. Although managerial economics is based primarily on microeconomics, explain why it is also important for managers to understand macroeconomics.

5. What do you think is the key to success in the soft drink industry? What chance do you think Global Foods has in succeeding in its new venture into the soft drink market? Ex- plain. (Answer these questions on the basis of the information provided in the chapter and any other knowledge you might have about the food and beverage business.)

6. You have a choice of opening your own business or being employed by someone else in a similar type of business. What are some of the considerations in terms of opportunity costs that you would have to include in arriving at your decision?

7. Discuss the difference between the calculation of shareholder wealth and the concept of Market Value Added. Which of the two would appear to be more meaningful from the viewpoint of a shareholder?

8. Why do you think it is important for managers to understand the mechanics of supply and demand both in the short run and in the long run? Give examples of companies whose business was either helped or hurt by changes in supply or demand in the markets in which they were competing.

9. Briefly list and elaborate on the factors that will be affecting the demand for the following products in the next several years. Do you think these factors will cause the demand to increase or decrease?

a. Convenience foods (sold in food shops and supermarkets)

b. Products purchased on the Internet

c. Fax machines

d. Digital cameras

e. DVDs rented from retail outlets

f. Pay-per-view television programing

g. Airline travel within the United States; airline travel within Europe

h. Gasoline

10. Briefly list and elaborate on the factors that will be affecting the supply of the following products in the next several years. Do you think these factors will cause the supply to increase or decrease?

a. Crudeoil

b. Beef

c. Computer memory chips

d. Hotel rooms

e. Fast food outlets in emerging markets

f. Credit cards issued by financial institutions

g. Laptop computers

h. PC servers