# Questions tagged [firm]

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### Companies mutually owning each other

There is no logical flaw in having two companies A and B mutually owning each other. Company A may hold X% of the shares of company B, and company B may hold Y% of the shares of company A. I assume ...
1 vote
42 views

### Companies database with strange negative values, are they reasonable from an economic point of view?

I have a dataset of US firms (around 6500 in total) containing time series of: Sales (191 negative observations corresponding to 0.0351% of total observations) Liabilities (70 negative observations ...
• 11
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### Is there a general term for when two firms reduce their costs by sharing a resource?

I'm writing a paper about pipeline investments. Two firms that both want to send oil from point A to point B should obviously collaborate and build a single pipeline so they can benefit from economies ...
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### Arellano and Bond (1991) GMM estimation in R by using plm package

I am a last-year student at university, currently working on my Bachelor's (so still learning R), and I really hope that you would suggest a potential solution (even if to use Python). So, the main ...
• 129
1 vote
27 views

### Educating workers (micro model)

Would someone be able to check my solutions to this basic problem? This is a practice test with no solutions provided, and I have no idea if I am going in the right direction. Problem: https://ibb.co/...
1 vote
86 views

### Unbalanced panel data in prodest package in R

I have a question regarding the usage of unbalanced panel data for TFP estimation by using the prodest package. The dataset could be found here: https://drive.google.com/file/d/...
• 129
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### Arellano and Bond (1991) or Blundell and Bond (1998) in R estimation

I have the following problem with the Arellano and Bond (1991) or Blundell and Bond (1998) estimators in R using the plm package. I receive the following problem when trying to run the needed ...
• 129
2k views

### Is it true that if marginal cost is constant, then average variable cost is also constant and equals marginal cost?

I'm inclined to think yes because marginal cost only depends on variable cost (fixed costs don't matter), but I'm not 100% certain. Basically, my thought process is that marginal cost of producing one ...
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1 vote
146 views

### Where does investment originate from in the circular flow model?

The above image is from my macroeconomics textbook. I’m struggling to understand the “financial markets” corner. If financial markets refers to banking and perhaps the stock market, is it true that ...
1 vote
29 views

### Measurement for the downstream use of a commodity

I am looking to find a measurement that would tell me the size of the market of the downstream use of some particular commodity. For example, salt or wheat would be used by many companies downstream. ...
• 13
27 views

### Reason for SMEs in the European Union employing the bulk of people?

Is there any specific reason why SMEs in the European Union employ the vast majority of people in general as well as in certain industries? Are they exempt from certain regulatory burdens such as ...
1 vote
75 views

### Measuring productivity with the Törnqvist index

I have a sample of companies, of which I want to calculate the productivity of each individual firm relative to a hypothetical firm in the industry. Choosing the measurement method was not easy, but ...
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1 vote
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### What does the elasticity say about the fraction of total cost used on input 1?

A firm have the following production function $$y=x_{1}^{\alpha} x_{2}^{1-\alpha}, \quad 0< \alpha < 1$$ $w_1>0$ is the cost of input 1 and $w_2 > 0$ is the cost of input 2. (1.1) ...
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### Question regarding couple economic terms and concepts

I am trying to read some economic articles for future use. However, as a statistics major student, I am quite unfamiliar with couple of economic vocabs and concepts. Followings are the very vocabs. -...
67 views

### Perfect Substitution with a Continuum of goods?

Imagine I have a continuum of different goods indexed by $\omega \in [0,1]$. I have a household which consumes a quantity $C(\omega)$ of good $\omega$, and pays a price $P(\omega)$. The household has ...
• 203
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### Measure of New Firms Born in Each Period

In an economy with stochastic overlapping generations of firms, how do we easily understand the measure of new firms born? The set-up states: "In each period, measure $\rho\in(0,1)$ of new firms are ...
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### Stackelberg with 3 firms

I'm currently trying to solve the following problem: Stackelberg with 3 firms Imagine there are three firms on a monopolistically competitive market. The marginal cost of produc- tion in each ...
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### Why do some perfectly competitive, loss-making firms shutdown and others don't?

Question: Why do perfectly competitive, loss-making firms that have (AC>AVC>AR) shutdown but Firms that have (AC>AR>AVC) not shutdown? -Both of these types of firms are making a loss. How is it ...
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### Changing Constant Factor Demands

I’ve been given this true false question: Consider the minimization of wL + rK given F(K, L) $\geq$ Q with F(K, L) strictly increasing in K and L. The conditional factor demands K*(Q, w, r) and L*(Q, ...
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### Profit Maximization and Returns to Scale

Assume a labor-intensive production function: $Q(L)=L^\beta$ Find demand of labor that maximizes profits (unconditional demand $L(p,w,r)$), the demand of labor that minimizes costs (unconditional ...
495 views

### Best Response Functions for Cournot

For a Cournot Duopoly game with Linear Demand functions, we need to find the optimal quantity of each firm such that profit is maximised. Given the linearity of the Demand curves, we will obtain a ...
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### Do the three ways of measuring producer’s surplus give the same result?

In the Firm supply chapter of the microeconomics Varian's book, they show "three equivalent ways to measure producer’s surplus" using marginal cost, average cost and the average variable cost curves. ...
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1 vote
21 views

### To the following data, what kind of econometric analysis can be conducted/ or what type of relationship can be established? [closed]

I have data for sale in petroleum products across different states in India of both public sector and private sector companies for past 10 years. No. of years - 2008 to 2018 monthly data for 10 years ...
254 views

### Why do firms losing money almost always reduce labor costs via layoffs instead of pay cuts?

At least in the United States, firms seem to almost always reduce labor costs via layoffs rather than pay cuts. Pay cuts are so rare that they're literally headline news. From an economic standpoint, ...
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### Using metrics provided by FRED to identify the business cycle

I am interested to see how the "business cycle" is associated with our firms sales. The hope is that if we can show that our sales line up with the business cycle then we can make decisions ...
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### I'm studying the effect of a law on a sector: how do I select the control group?

I'm planning on using a regression discontinuity design (RDD) to estimate the impact of a sector-specific law on the firms in that sector. I need to create a control group and I have read somewhere in ...
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### Graduate level texts/notes that cover the Short Run and Long Run Costs of firms' production

In undergrad econ we learned that it would cost a firm more money to increase its production in short term than in long term. MWG does not seem to cover this topic. I need a Graduate level texts/...
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1 vote
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### Why is ATC tangent to Demand in a Monopolistic or Mopolistically Competitive Firm Making Zero Profit?

I understand that the Average Total Cost is equivalent to demand in a zero profiting monopoly or monopolistically competitive firm in order for there to be zero profits (when ATC = P at a given ...
1 vote
1k views

### Optimal production level for a typical firm in long-run

Assuming all firms have identical cost functions. Now suppose there is an increasing shift in the demand curve. As we all know that for increasing costs case, both average costs (AC) and marginal ...
1 vote
31 views

### How are assets distributed by types of organisations? [closed]

How wealth, assets or capital (measured in terms of revenues, assets, equity, etc.) is distributed among the various types of organizations (e.g. State, public companies, private conpanies, ...
1 vote
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### Microeconomics and management science of professional open source companies?

Are there research (and stories more broadly) about professional open source companies? To what types of products their are appropriate, what licensing schemes to choose? How to managed patents and IP?...
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### How to model cooperatives

My understanding is that standard models in economics assume the firm is a capitalistic firm, in the sense that it pay workers a wage but no profits. (is that right?) I am interested in modeling ...
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### Is the marginal cost the same for every firm in a perfectly competitive market?

Spin-off from: market equilibrium quantity $\ne$ firm profit maximising quantity? Consider a perfectly competitive market with equilibrium price $P_{eq}$ and quantity $Q_{eq}$ and firm with profit ...
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1 vote
651 views

### market equilibrium quantity $\ne$ firm profit maximising quantity?

Consider a perfectly competitive market with equilibrium price $P_{eq}$ and quantity $Q_{eq}$ and firm with profit maximising quantity $Q_f$ as illustrated below: I guess any firm in the market would ...
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1 vote
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### What is the difference between knowledge-based and R&D?

So far, I always thought that knowledge-based companies and R&D companies were the same. But recently our TA mentioned that they are different, I've searched a lot to find the differences between ...
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1 vote
801 views

### University course references for Market Structure/Industrial Organization

Are there any books that are used in University-level courses that contain a detailed analysis of market structure ( Perfect competition , Monopoly and so on)?
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### How to determine the marginal product for the following question? [closed]

Suppose that a firm has a Fixed cost of 10,000 dollars and Total Cost of 10,500 dollars for one unit and 11,100 dollars for two units of output. Which of the following is true for the Marginal Cost (...
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1 vote
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### Causes of interlocking directorship connections between firms

I need to interpret some empirical results telling me that firms (intended as profit-maximising entities) prefer to be controlled (e.g. through interlocking directorships) by smaller and less ...
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### Academic paper which justifies why companies are run better privately

A few years ago I was reading The Economist and I remember it stated a particular academic paper that underpinned the rationale for the existence of private equity firms. I have tried to find this ...
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1 vote
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### Duality of cost minimization and profit maximization

The firm tries to maximize profits $\Pi$ \begin{align} \max_{K,L}\{\Pi(K,L) = F(K,L) - RK - wL\} \end{align} where $F$ is the linear homogeneous production function, $R$ the rental rate of capital $K$...
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### Examples of how economists come up with a production function for a firm?

I am a young man studying economics on his own. In every microeconomics text I find, they teach you what a production function is, but they never show examples (or practice problems) on how one comes ...
1 vote
15 views

### Ranking Sectors Based on "Inclusiveness", greater variance among sectors with less firms

I am trying to rank sectors in Serbia based on how "inclusive" they are in their development, i.e. I have some indicators such as "share of profitable firms within sector", "share of exporting firms ...
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### Literature / Evidence on Cash Hoarding of Firms

I have received anecdotal evidence (heard stories) about many firms hoarding cash (liquid assets) post 2008 and not spending it despite availability of many projects with positive NPV. However, when I ...
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### Distribution of firm sizes and firm age

What are public sources for US firm/plant sizes, in order to characterize the firm size distribution? And what are stylized facts about the firm size distribution: What does it approximate to? ...
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