II
DDeecciissiioonnss wwiitthhiinn FFiirrmmss
T
he main goal of a firm’s managers is to maximize the enterprise’s profit
either for its private owners or for its shareholders. The first section of this
book, comprising Chapters 2 through 6, focuses squarely on this objective.
Chapter 2 begins the analysis by presenting a simple economic
model of the firm and showing how managers identify optimal decisions.
Chapters 3 and 4 extend the discussion of optimal decisions by analyzing
the market’s demand for the firm’s products. Chapter 3 considers optimal
pricing, multiple markets, and price discrimination. Chapter 4 take a closer
look at how managers can estimate market demand (based on past data)
and how they can use forecasting techniques to predict future demand.
The business of firms is to produce goods and services that peo-
ple want, efficiently and at low cost. Chapter 5 focuses on the firm’s pro-
duction decisions: how production managers determine the means to
produce the firm’s goods and services. Efficient production requires set-
ting up appropriate facilities and estimating materials and input needs.
Chapter 6 examines closely related issues concerning the firm’s costs.
Managers are continually seeking less costly ways to produce and sell the
firm’s goods and services.SECTION II
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