Options menu discussion
The second chapter, which begins with examples, has offered a lot to remember. The most interesting lesson from the readings is decision making and why it is essential. From the readings, decisions by leaders and nations that create inefficiencies in the systems allow some businesses to create more wealth using the loopholes, thus creating an imbalance in wealth distribution across the nations. To some extent, this contributes to continued poverty in some nations. from the third chapter, the exciting part is the decision making by business leaders. Although it seems an extension of the second chapter, the third chapter offers a concrete explanation of why decision making is difficult and challenging (Froeb, McCann, & Ward, 2018). The first reason why decision making becomes problematic is the existence of hidden costs that make products take too long to yield profits. When making investment decisions, some managers only look at the fixed and variable costs, which sometimes does not reveal hidden costs. These costs do not only affect the investment area but matter during the hiring and firing of employees. Sometimes a manager may assume an individual employee does not give many benefits to the company, and thus firing him will not affect the company. However, upon firing the employee, the manager realizes that though the employee did not give the firm financial benefits, they positively influenced others, which encouraged them to work better. The last aspect worth noting is the EVA (Froeb, McCann, & Ward, 2018). As much as investments have hidden costs, they also have hidden profits. Therefore, for a company to correctly understand the number of profits made, there is a need to consider factors such as costs of equity, and all other capital costs. This enables the company to know its economic value-added, thus very beneficial for investors.
Graduate-level answer
The quote from Interlandi (2009) can be argued in two perspectives. The first one is as a leader, manager or rule of a country. When making decisions as a leader or a rule, one person’s decision affects everybody under the leadership. It is through the decision that the other perspective evolves. The business perspective evolves by utilizing the inefficiencies within the decision made to create value. A business is always looking for ways to ensure profit maximization is booming, which is mostly done by leveraging nations’ shortcomings to create more profits. This is an excellent example of why some nations remain poor.
References
Froeb, L. M., McCann, B. T., & Ward, M. R. (2018). Managerial economics. Cengage learning.
Interlandi, J. (2009). Not just urban legend