25562 Economics of the Firm

Subject level: Undergraduate

Handbook description

This subject is designed to equip students to play an important role in managerial decision making by strengthening their understanding of the microeconomics of firms and industry. The subject combines a solid grounding in microeconomic principles with applications to various real-world business problems. Topics include: demand analysis and optimal pricing in various market structures; production and cost decisions; cost-benefit analysis; strategic behaviour in highly concentrated markets; and the problems of market failure.

Subject objectives/outcomes

On successful completion of this subject students should be able to:

1. understand the microeconomic principles which underlie economic decision making at the level of the firm
2. give advice on the pricing of goods and services in a range of market structures
3. understand the key aspects of market failure and how the policy responses to this phenomenon affect the business environment.

Contribution to graduate profile

This subject extends the study of microeconomics that students have undertaken in Economics for Business with particular application to the business firm. Students will enhance their ability to provide advice on the pricing of products and services in a range of industrial structures and to describe the impact that industrial developments and changes in competitive structure have on firm costs and revenue. Students will also study the problems that competitive market behaviour pose for both market participants and the wider society. This will enhance their ability to predict policy developments and to understand how these developments impact the business environment.

Teaching and learning strategies

The course will employ a traditional lecture/tutorial-based teaching strategy but with a strong emphasis on the application of principles to real world cases.

Content

• Consumer behaviour and patterns of consumer demand
• The economics of production and the determination of production costs
• Pricing methods within various market structures
• Competitive strategy and behaviour in oligopolistic markets
• Economic welfare and market failure including: asymmetric information and public goods.

Assessment

Assessment item 1: Class Tests (Individual)

Assessment item 2: Final Examination (Individual)

Required text(s)

Baye, Michael. R, 2007, Managerial Economics and Business Strategy, 6th Edition, McGraw Hill, Australia.