Microeconomics for Managers
MBAs, Fall Quarter 2010
PMSB 204A
Course Syllabus
Richard McKenzie
Office: Merage 430
Phone (work/cell/home): (949) 463-2604
Fax: (949) 725-2819
Email: mckenzie@uci.edu
Homepage: http://www.gsm.uci.edu/~mckenzie
Teaching Assistants for the FEMBA-A and B classes:
Niraj Jha
Colin Paul
INTRODUCTION
This course is designed to introduce MBA students to basic microeconomic theory at a
relatively rapid pace. The focus will be on fundamental economic principles that can be used by
managers to think about business problems, including those inside the firm (relating to the
problem of administering the firm’s resources in the most cost-effective way) and those outside
the firm (relating to broader market and government forces that can affect the behavior of firms.)
The course will not deal directly with standard “managerial economics,” which tends to
emphasize the mathematics and statistical techniques used in optimizing firm decisions.
However, every effort will be made to apply basic principles to management problems, mainly
those relating to getting incentives right for customers, suppliers, workers, managers, and
owners. Accordingly, this course will focus on an emerging subdiscipline within economics,
organizational economics. It will stress methods of thinking, and MBA students will be
evaluated on their ability to recall, use, and extend the methods of thinking that are covered
during the quarter.
2
COURSE RESOURCES AND ASSIGNED READINGS
The reading assignments are made as a form of guidance through important topics in
modern microeconomics. The student should focus on learning the underlying theory and on
being able to apply the theory to managerial and social problems, not on who said what in given
chapters and articles.
Textbooks
Richard McKenzie and Dwight Lee, Microeconomics for MBAs: The Economic Way of
Thinking for Managers (Cambridge University Press, 2006). This book was developed
explicitly for MBA students, with the feedback from Merage students.
A number of assigned readings are included in two spiral-bound volumes included in your course
packets. These readings are also available on the publisher’s web pages identified below.

Microeconomics for MBAs: Perspectives
(http://cambridge.org/uk/catalogue/catalogue.asp?isbn=9780521191470&resISBN13=97
80521191470&parent=9556&ss=res#resource)

Microeconomics for MBAs: Additional Readings
(http://cambridge.org/uk/catalogue/catalogue.asp?isbn=9780521191470&resISBN13=97
80521191470&parent=9571&ss=res#resource)
Publisher Website for Textbook Resources
The reading assignments are available in printed form and on the publisher’s web page for the
textbook: www.cambridge.org/microeconomics4mbas. On this site you can download printable
versions of the Perspectives and Additional Readings (individually or all together as a collection.
You will also find on this site printable versions of the graphs in the textbook and short multiplechoice self-test for each chapter. The video modules (see below) can also be accessed from the
website.
Additional Recommended (Not Required) Books
Richard McKenzie and Gordon Tullock, The New World of Economics, 5th edition
(McGraw-Hill, 1994). This book has been provided because I will occasionally draw lecture
topics from it. When I do, I will alert students to the appropriate chapters. I have also included
it in your course materials package because, in some regards, it is a predecessor to
Freakonomics, given that it was first published in 1974 and has been used in over five hundred
colleges and universities around the country and world and that it demonstrated early on how
economic methods of thinking could be applied to topics far removed from theretofore strict
boundaries of “business” and “markets.”
3
David H. Friedman, Wrong: Why experts* keep failing us--and how to know when not to trust
them *Scientists, finance wizards, doctors, relationship gurus, celebrity CEOs, ... consultants,
health officials and more (Little, Brown, and Company 2010. This book will not be a part of the
course. I have included in your course packet to give you something to read after you leave the
class (if you do not start it before the course begins). I think the book contains an important
contrarian perspective on scientific research that you should keep in mind as you take up
scientific research in your MBA program.
Video Course Modules
Sixty-five (five-to-fifteen-minute) video modules are provided on the textbook publisher’s web
page:
http://cambridge.org/uk/catalogue/catalogue.asp?isbn=9780521191470&resISBN13=978052119
1470&parent=9047&ss=res#resource. These modules deal with basic economic concepts and
with difficult-to-grasp lines of argument, all covered in the textbook. The numbers on the
modules indicate the chapters in the textbook with which they are associated. For example,
Module 5.1 applies to Chapter 5. These video modules can also be view on YouTube
(http://www.youtube.com/user/richardmckenzie ), although the numbering system used on
YouTube applies to the first edition of the textbook..
The video modules are designed to be a supplement to assigned readings and class lectures, not a
replacement for them. That is, the modules are not designed to make a complete course. The
modules are not a part of the course requirements. However, if past student experience is any
guide, you will likely view them frequently. See the attached instructions.
Office Hours
I have no regularly scheduled office hours, mainly because all of my students work and
cannot make set hours on campus. However, I will be available virtually every day, all day,
during the term. I will be happy to schedule meetings with students at any time.
Also, I generally go to Starbucks (the one in the University Research Park, at the corner of
Bison and California, tucked inside a parking lot) every morning early and can meet with
students there before work. I am generally there by 7:00 AM and stay until I finish reading my
morning papers, which means I am there until about 8:00 AM. You can just drop by any
morning unannounced. However, to make sure I am there when you come by, you can give me a
call or send me an email about your plans. My office phone number is my cell number, which
means I can be reached most times of the day. You can also call me after 7:L00 in the morning
to see if I am at Starbucks.
I try to respond as quickly as I can to student emails and phone calls. If you have not
received a reply from me within, say, four hours of your contacting me, something could have
gone wrong (and I do get a lot of emails, some of which may get lost in the volume). Try again.
4
COURSE REQUIREMENTS AND
METHOD OF EVALUATION
The final grade will be determined by the student’s performance on five course
requirements:

One midterm test during the quarter,

One final examination, and

Four team papers on assigned “puzzles.”
The grade on each of the six components will be given equal weight in assigning the final grade.
I will assign separate numerical scales for letter grades on each component. To determine your
grade, I will simply total your points on the seven components. I will then total the break-off
points for each letter grade on all components. Your letter grade for the course will be
determined by fitting you total points into course scale determined by summing the break-off
points for each letter grade on all three tests. (Confused? I will explain in detail during the first
class.)
As noted, I have developed short self-tests for each chapter that will eventually be up on
the publisher’s website (http://cambridge.org/features/mckenzie/ ). Taking these tests will not be
a course requirement.
As indicated, I will be assigning papers organized around “puzzles,” each of which will
require team discussion for developing an “answer.” Your team will be required to provide a
written solution of no more than set word limit for each paper (you can use as many graphs as
you like). The actually writing assignment must be spread evenly among team members. The
written assignments will be individually graded. At the start of the class when the puzzles are
due, I will randomly call on students to provide an answer to the assigned puzzle.
COURSE SCHEDULE

For the first class, you should review the following materials: McKenzie and Lee,
chapters 1 and 2 and the associated Perspectives and Additional Readings in the spiral
bound volumes that are in your course packet.

During each class, I will announce the chapters in the textbook that will be covered in
the following class. You should read all Perspectives and Additional Readings in the
spiral bound volumes that go with the assigned textbook chapters. I have tried in the
past to schedule the reading assignments class by class for all classes before the
course starts. However, given that my lectures often move with the flow of current
economic events and policy controversies, my preset schedules have almost always
had to be adjusted week by week.
5

Since I wrote the textbook, I designed its structure and content to fit the needs of my
course. I need not provide a set of detailed assignments because we will go straight
through the textbook from chapter 1 through chapter 12.

The midterm test will be given the first half of the fifth class and will cover the first
five chapters of the textbook and related lectures.

The final examination will be held during the scheduled last class (or exam date).
Because of the severe time constraint for grading the final exam and for submitting
grades, the final exam will have to be largely objective. The test given during the
quarter will be largely essays.
6
Writing the Papers for Microeconomics for Managers
Richard B. McKenzie
I'm now reading the last two sections of your sod papers (one section has already been
graded). Perhaps it will be useful for me to make comments regarding the structure/form of your
next paper, hopefully enabling you to improve it’s clarity.
There is an old saying in writing papers that plays out in the structure adopted in most
economic journal articles: 1) Tell 'em what you are going to tell 'em up front. 2) Tell 'em in the
body of the paper, and then 3) Tell 'em what you've told 'em in the last part of the paper.
By repeating this quip, I am suggesting that a good way to keep the attention and focus of
the reader is to have an opening paragraph (or two) that describes very briefly the problem you
intend to address and then, with equal brevity, tells the reader what your central thesis(es)
[conclusion(s) or prediction(s)] will be. To do this you will need to have worked out your basic
argument, including the structure of any graphs you intend to use, BEFORE you start writing.
(However, I should note that I find it amazing how interesting/subtle/missed points emerge as I
write out my arguments noted in the opening paragraph. That is, writing is often as much a
discovery process as is the analysis phase.)
The second part of the paper will simply involve setting up the problem that can involve
laying out the basic supply-and-demand (or whatever) model that you intend to use, assuming an
absence of any market change. This model will give you an equilibrium and a reference point.
You can (will) then be in a position to introduce a change (or changes) in market conditions and
appraise the consequences of the various policy reactions to the change (changes) in market
conditions. From such manipulation of the graphics, you can draw your basic
conclusions/predictions (relating to the issues itemized), stressed at the start. (Once you have
drawn your basic conclusions, I encourage you to stop and ask if there are not other points that
are "hidden" in the graphs or arguments that you have overlooked. Look with some intensity for
those buried insights, those "ah-has." They are what catapult papers into the A category.)
The third part of the paper can be a section that, in my papers, I've always titled
"Concluding comments" (but call the section what you will). In this final paragraph (or two),
you can summarize the most important/salient points and focus the reader's attention on how the
foregoing analysis addresses the problem as developed at the start of the paper. You might then
note the limitations, including weaknesses, of the analysis and indicate lines of potentially
fruitful future analysis/research.
As in all papers, you are limited to 500 words. You add as many graphs as you like.
I know many of you would like an opportunity to rewrite your papers after they have
been graded. I can't do that partially because I want to grade you on your original thinking (not
on your thinking after you have had access to the thinking of others, including my comments on
your paper) and because I don't want the chance to rewrite the paper to soften the effort on the
first draft that is turned in.
7
Others of you have emailed me and laid out your arguments and have asked if you are
on the right track. I have tried to respond to every email, giving some guidance, but I have often
had to draw up short in saying that your arguments are "on the money." This is because I don't
want to give some people an advantage not afforded to all. I also am trying hard in this course to
get YOU to develop confidence in YOUR ability (not mine!) to think through issues with the
help of economic models (and ways of thinking) and without my direct involvement. As
opposed to allowing for rewrites, I have substituted multiple paper assignments. Hopefully, your
will learn something about developing sound and insightful economic arguments with each
writing assignment and improve (just as you might be able to improve on rewrites).
I understand that many of you have found the topics daunting, difficult. Such has been
my intention. If I conclude that a topic can be settled in group discussions in a snap, then I
always search for another topic (and coming up with topics is one of my biggest difficulties in
developing my courses; good topics that fit my requirements are very scarce). I hope the topics
do inspire lively debates within the teams, and if the topics cause you to search anxiously for the
right way to address the topic, in my book that is all to the good. Anxiety in the pursuit of
understanding is virtually inevitable. My ultimate goal is to challenge you with deceptively
simple problems. At the same time, I hope that in the end, these paper assignments enable you to
feel the considerable satisfaction than can come from actually thinking through a problem and
coming to conclusions on your own that are, at least at times, at odds with so much that you read
and hear on a daily basis. In my way of thinking, the learning that comes from the paper
assignments is far more important than the learning that comes with the tests.
Hope this helps.
rbm