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Other Titles of Interest D U B R I N , A. J. The Practice of Managerial P s y c h o l o g y D U B R I N , A. J. Fundamentals of Organizational Behavior E I L O N S. et ai Applied Productivity for Industry F R E D E R I K S E N , N . et ai Prediction of Organizational Behavior G O L D , B. Technological Change: E c o n o m i c s , Management and Environment H U S S E Y , D. E. Introducing Corporate Planning H U S S E Y , D . E. Corporate Planning: Theory and Practice K I N G , J. R. Production Planning and Control: An Introduction to Quantitative Methods L E T H B R I D G E , D. G. Government and Industry Relationships M E L N Y K , M. Principles of Applied Statistics M A X W E L L T O W E R S J. Role-playing for Managers T O W N S E N D , H. Scale, Innovation, Merger and Monopoly The terms of our inspection c o p y service apply to all the a b o v e b o o k s . Full details of all b o o k s listed will gladly be sent upon request. Readings in Managerial Economics Edited by I. B. IBRAHIM, K. K. SEO, and P. G. V L A C H O S College of Business Administration, University of Hawaii PERGAMON PRESS OXFORD · NEW YORK · TORONTO SYDNEY · PARIS · FRANKFURT U.K. Pergamon Press Ltd., Headington Hill Hall, Oxford 0 X 3 OBW, England U.S.A. Pergamon Press Inc., Maxwell H o u s e , Fairview Park, Elmsford, N e w York 10523, U . S . A . CANADA Pergamon of Canada Ltd., P.O. B o x 9600, D o n Mills M3C 2T9, Ontario, Canada AUSTRALIA Pergamon Press (Aust.) Pty. Ltd., 19a Boundary Street, Rushcutters Bay, N . S . W . 2011, Australia FRANCE Pergamon Press S A R L , 24 rue des E c o l e s , 75240 Paris, Cedex 05, France W E S T G E R M A N Y Pergamon Press G m b H , 6242 Kronberg/Taunus, Pferdstrasse Frankfurt-am-Main, West Germany Copyright © 1976 Pergamon Press Ltd. All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means: electronic, electrostatic, magnetic tape, mechanical, photocopying, recording or otherwise, without permission in writing from the publishers First edition 1976 Library of Congress Cataloging in Publication Data Ibrahim, Ibrahim Β comp. Readings in managerial e c o n o m i c s . 1. Managerial e c o n o m i c s - - A d d r e s s e s , e s s a y s , lectures. I. S e o , Κ. K., joint c o m p . II. Vlachos, P. G., joint comp. III. Title. HD58.5.I27 1975 658.Γ5Ό8 75-4618 I S B N 0-08-019605-5 I S B N 0-08-019604-7 pbk. Printed in Great Britain by A. Wheaton & Co., Exeter 1, Preface T H E past decade has been marked by the establishment of higherlevel university courses in quantitative methods of business analysis, in the information sciences, and in systems approaches to management theory. In the same period we have also witnessed increased sophistication of business management, increased application of scientific methods to business planning, and impressive growth in the complexity of business organizations and activities. Managerial economics is a field of study that has been developed to bridge the gap between economic theory as taught in universities and economic practice as applied in the day-to-day activities of the business world. Managerial economics employs a multidisciplinary approach, utilizing analytical and decision-making tools derived from accounting, finance, marketing, and administrative theory, as well as from economic theory and quantitative analysis. This book of readings in managerial economics combines a number of diverse articles, selected from recent issues of over fifty leading professional publications, that show to both students and executives the application of theoretical concepts to business decision making. The articles are grouped into five part