Notes, summaries, assignments, exams, and problems for Economics

Addressing Externalities to Achieve Social Optimum

Negative Production Externality: Adjusting Equilibrium

The social cost of production exceeds the private cost reflected in the supply curve. The socially optimal quantity is where the value to consumers (demand curve) equals the social cost curve. A tax imposed on producers, reflecting the social cost, shifts the supply curve to coincide with the social-cost curve, thus achieving the social optimum.

Positive Production Externality: Adjusting Equilibrium

The social cost of production is less than the private cost reflected in the supply curve. The ideal outcome is to produce more than the private market dictates. Governments can internalize this by issuing subsidies, which shift the supply curve...

Price Ceilings: Market Intervention

A price ceiling is a legal maximum on the price at which a good or service can be sold. It is imposed by the government to prevent prices from rising above a certain level.

Not Binding Price Ceiling

When the government imposes a price ceiling of 4€ per cornet, but the market equilibrium price is 3€, the ceiling has no effect on the market price or the quantity sold. The market naturally operates below the imposed maximum.

Binding Price Ceiling

When the government imposes a price ceiling of 2€ per cornet, and the equilibrium price is 3€, the price ceiling becomes a binding constraint on the market. Supply and demand naturally push the market price towards the equilibrium, but when the price hits the ceiling,...

Types of Advertising Agencies

There are many ways to classify advertising agencies. They can be classified according to:

• Scope: National and International
• Type of service they offer:
  • Advertising agencies proper.
  • Full-Service Agencies, Creative Boutiques.
  • Media Agencies
  • Specialized agencies (Promotions, Direct Marketing, Viral Marketing, Public Relations, Press Office, etc.).
  • Exclusive Agencies

Services Offered by Agencies

Agencies can offer all or some of the following services:

• Creativity: This is the core of their service, their reason for being.
• Marketing consultancy.
• Complementary services: promotional communication, direct marketing, merchandising, events, etc.
• Management of audiovisual, graphic, and event production.
• Planning and buying media.
• International

Strategic Management: Analyses, Decisions, and Actions

Strategic management involves the analyses, decisions, and actions an organization undertakes to create and maintain competitive advantages.

Strategic Management Process

• Strategy analysis
• Strategy formulation
• Strategy implementation

Strategic Levels

• Corporate level
• Business level (Cost leadership, differentiation, specialization)
• Operational level

Mission and Vision

• Mission: Current picture of the company.
• Vision: Goal of the company in the long term.

Criteria for Selecting Meaningful Objectives

• Timely: Defined time frame.
• Realistic: Achievable goals.
• Appropriate: Consistent with the mission and vision.
• Measurable: Includes key performance indicators (KPIs).
• Specific: Clear and concise message.

Organizational

Compensation is considered a most important factor in workers' decisions to change companies.

1. Compensation Concepts and Components

Compensation is often the most direct motivational factor, encompassing:

1.1. Maslow's Hierarchy of Needs and Motivations (1943)

• Salary
• Social Benefits
• Status
• Recognition
• Promotion

1.2. McClelland's Theory of Three Employee Needs (1962)

• Achievement
• Affiliation
• Power

1.3. Herzberg's Dual-Factor Theory (1968)

• Hygiene Factors: (neutral or demotivating)
• Motivating Factors: (motivational)

1.4. Motivation Factors (Juan A. Pérez López, 1993)

• Salary
• Social Benefits
• Status
• Recognition
• Promotion
• Service

Other Compensation Elements:

• Vacation Days
• Company Expenses
• Health Coverage
• Company Pension Fund
• Company Car
• Flexible Timetable

2. Determining Factors

Marketing Strategy

Deals with pricing, selling, and distributing a product.

Market Development

A company or business unit can:

• Capture a larger share of an existing market for current products through market saturation and market penetration.
• Develop new uses and/or markets for current products.

Operations and Financial Strategy

Financial strategy examines the financial implications of corporate and business-level strategic options and identifies the best financial course of action. The management of dividends and stock price is an important part of a corporation’s financial strategy.

Purchasing Strategy

Deals with obtaining raw materials, parts, and supplies needed to perform the operations function, including:

• Multiple sourcing
• Sole sourcing
• Parallel

Understanding Terms of Trade (TOT)

TOT Definition and Calculation

The Terms of Trade (TOT) is an economic indicator that measures the relative prices of a country's exports in relation to its imports. It quantifies the amount of imports a country can obtain per unit of its exports.

The formula for calculating TOT is:

TOT = (Average Price Index of Exports / Average Price Index of Imports) x 100

Interpreting Changes in Terms of Trade

Changes in the TOT indicate shifts in a country's purchasing power in international trade:

• TOT Improves / More Favorable: This occurs when export prices rise relatively to import prices. The country is then able to exchange the same amount of exports for a greater quantity of imports. This generally signifies an increase

Strategic Management Midterm Exam Study Guide (Chapters 1-6)

1. Competitive advantage
2. Innovation
3. Sustainability
4. Emphasis of strategic management - Long term
5. Strategic management within a small organization - informal and irregular
6. Response(s) to performance gap - objective, strategy, policies
7. Corporate mission - description of competitive advantage
8. Basic elements of the strategic management process - environmental scanning, evaluation, and disseminating information to external and internal
9. SWOT
10. Types of Board of Directors members - phantom, rubber stamp, minimal, nominal, active, catalyst
11. Lead director - (Catalyst) Assign by the CEO and makes decision of operation of the company
12. Sarbanes-Oxley Act - Protect shareholder, whistle blowers, financial statement
13. When

Consequences of Eliminating Export Tax on Cashew Nuts

By eliminating the export tax on raw cashew nuts, it was believed that removing trade barriers would alleviate poverty by increasing the price farmers would receive. Several industrialists who purchased factories opposed the elimination of the export taxes on cashew nuts. The advice failed because the World Bank did not completely analyze the consequences of lifting the export tax barrier. They applied economic theory without considering if the theory would be pertinent in light of the development history of Mozambique. Some consequences were that workers and farmers lost their jobs.

Capital According to De Soto

1. Describe the definition of capital according to De Soto. Why in the non-Western

MONEY

First of all, having money can show your status in our society: having a good car, wealthy possessions, living in an upper-class neighborhood and so on...can be representative of real happiness. Nevertheless, in our society we can see how families can't make ends meet due to their mortgage and the cost of living in general because we are having endless mortgages, and the standard of living has risen a lot over the last years.

In relation to what I would do if I become a millionaire, I think I would buy a house or a powerful car but not a sports car because it is a little uncomfortable since only two people can fit in it and you are with the roof on your head. So weighing up the pros and cons, I think the best option would be to buy a house...