Micro economic POSSIBILITIES, PREFERENCES AND CHOICES参考.ppt

* * * * * * Why do professional golfers/tennis players, etc get paid in prize money? Get your students to think about this question and to think about the idea of a rank tournament inside a firm. * * * * * * * * * * * * * * * * * * Notes and teaching tips: 8, 20, 31, 48, and 51. To view a full-screen figure during a class, click the red “expand” button. To return to the previous slide, click the red “shrink” button. To advance to the next slide, click anywhere on the full screen figure. * * * * * Another day; another dollar profit—or 15 cents, after implicit costs. Emphasize the difference between accounting profit and economic profit when a firm owner is using cost information to make business decisions. Point out that only economic profit reflects the full opportunity cost of making a business decision and it is vital for assessing the true financial health of a firm. Stress that accountants are limited in their ability to interpret and report the costs of production: All accounting costs must either be documented with a receipt or estimated according to strict, generally accepted accounting procedures. Point out the principal-agent problem that arises when firm managers can exploit the limitations of accounting profit calculations to under-report costs and over-report revenues to paint an artificially rosy financial picture for the firm—to the detriment of the firm owners. Enron and Arthur Andersen: When is a cost really a cost? The Enron fiasco brought the subject of accuracy and completeness in cost assessment to the attention of investors everywhere. Suddenly, the validity of financial information on any financial statement issued by any publicly held company was under scrutiny. The implicit cost shuffle: Some subversive tools of the accounting trade. A very useful news article, written by financial reporter Ken Brown, appeared in the Wall Street Journal on Feb. 2, 2002. He summarized many popular ways to use accounting costs to understate opportunity cost