Managerial Economics For Dummies

Chapter 20

Ten Managerial Mistakes and How to Avoid Them

In This Chapter

Recognizing common mistakes

Identifying a better alternative

Perhaps the Irish writer Oscar Wilde says it best, “Experience is the name everyone gives to their mistakes.” Or as American humorist Franklin P. Jones notes, “Experience is that marvelous thing that enables you to recognize a mistake when you make it again.” But despite these humorous, if not somewhat positive spins on mistakes, the bottom line is that if you make too many mistakes as a manager, you’re going to get fired. Therefore, this chapter helps you avoid some common mistakes by showing a better alternative. As a result, you’ll keep your job and hopefully use some of your income to buy other For Dummies books.

Minimizing Cost per Unit

Business’s goal in a market economy is to maximize profit — the difference between revenue and cost. By its very definition, profit has two components — cost, which emphasizes what the firm must spend in order to acquire the resources necessary to produce the good, and revenue, what the firm receives when it sells the good.

Focusing solely on cost per unit ignores the revenue side of profit maximization. If minimum cost per unit occurs at 1,000 units of output, but the firm sells only 800 of them, the surplus ...