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Equi Marginal Utility [closed]

The law of equi-marginal utility states that if there are two goods X and Y in the consumption basket, then, in equilibrium, MUx/Px = MUm = MUy/Py, where MUm is the marginal utility of money. Ceteris ...
FranzWagner's user avatar
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question about production optimization

the question is, if Q = AK^a(HL)^b and the parameters are: (A =100) (K = 10000$) (H = 1) (L = 100 person) (a = 0.5) (b = 0.5) P = 5 per unit, R = interest rate of 3 percent per year , W = 3 per ...
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Why should electricity network capacity costs according to long run marginal cost pricing be paid by peak consumers only?

Electricity is distributed in a network with a max capacity $K$. Let $Y_i(t)$ be demand of person $i$ at time $t$. Then at no time $t \in [0,T]$ can $\sum_i Y_i(t) > K$ or networks breaks down. ...
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Increasing marginal costs and non-universal diminishing returns

I'm an econ student and there's this question from a past exam that I don't understand: A company produces the output quantity y > 0 with fixed costs F ≥ 0 and positive marginal costs. For F > 0 ...
Lex's user avatar
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Ordered Logit Model: Marginal Effects Signs Opposite

I'm deeply stuck in an issue in my research paper's methodology. I'm getting the following disparate results for my marginal effects. In my Ordered Logit model, I have Y = Trust in banks (4-Max trust,...
Fasih's user avatar
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1 vote
1 answer
70 views

MR Diagrams touching y axis

The following is from an exam question: To my mind this is plain nonsense. If Q is zero, AR and MR are zero, not some point above P1. My question: is there any significance in drawing this diagram ...
havlock's user avatar
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Where does the optimal point of production occur in the graph of short-run cost curves?

When MC, ATC, AVC, and AFC are in the same diagram, where does the optimal point of production occur? I know production is optimal when MR=MC but the question doesn't give you the price of the good. ...
Luke Lee's user avatar
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116 views

why is the MRS same for everyone?

If the consumers are optimizing and at interior solutions and facing the same prices, then the MRS=p1/p2 will be the same for everyone no matter the preferences and income. but why? I don't understand ...
tessa's user avatar
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Basics of MRS. Interpretation and constant utility

I am sure this question has been asked before but I didn't know what to search for since its a quite long question. Say, I have a utility function U = sqrt(x)*sqrt(y) and the MRS = y/x. Say I have y = ...
tony13s's user avatar
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1 answer
84 views

Finding Quantity when Profit = 0

I'm struggling to find the correct answer which is (B). So far what I've done is say that P=MC as we're in a perfectly competitive market. So profit = PQ - TC which gives 0 = (2Q)Q -(VC+4) ? But we ...
Inès's user avatar
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1 answer
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Relationship between average cost and marginal cost

I cannot seem to reason why option B is a correct statement. From what I understood when AC = MC we're at a competitive equilibrium or break-even point and after that the more we move to the right the ...
Inès's user avatar
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2 answers
160 views

What are the real world consequences of diminishing marginal utility?

I've just started a microeconomics course and the instructor has talked about diminishing marginal utility. I understand what it is, but I'm struggling to understand why it matters. What are the real ...
troy beckett's user avatar
4 votes
1 answer
1k views

What is meant by "marginal disutility of labor" in Keynes General Theory

Sorry for the newby question, started reading Keynes general theory (1936) and am confused by this paragraph in Chapter 2: The traditional theory maintains, in short, that the wage bargains between ...
psychomantis01's user avatar
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1 answer
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Is there a name for relative diminishing returns, or relative increasing opportunity cost?

Consider the following hypothetical situation: You are producing something where the total amount produced, $A$, is equal to the product of two factors, $X$ and $Y$. Hence $A=X*Y$. $X$ and $Y$ both ...
Sepehr Nazari's user avatar
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1 answer
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What happens to marginal revenue when quantity does not change?

The marginal revenue is defined (at least in my Econ 101 course) as $\Delta TR/\Delta Q$. However, say I am examining a town with $10,000$ people, and at a nonzero certain price, $10,000$ people ...
Chris's user avatar
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1 answer
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Find Lerner Index from Cobb Douglas regression

I'm currently following a Master's in Finance, and we have to calculate the Lerner Index. To do that, we are given the following Cobb- Douglas regression, where the alphas have to sum up to 1: $$\ln(...
Lars's user avatar
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1 answer
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What economic theories describe the phenomenon of zero marginal utility when a resources is given at zero cost?

(I am not looking for the law of diminishing marginal utility, even though it is related) Which economic theory or theories describe the following problem? When a resource is made available at 0 ...
Brian Bien's user avatar
2 votes
2 answers
71 views

Why does $\frac{MU_x}{P_x}=\frac{MU_y}{P_y}$?

I just started learning economics and the textbook says $\frac{MU_X}{P_X}=\frac{MU_Y}{P_Y}$ for a buyer with a fixed budget to spend on two goods, $X$ and $Y$. Let's say goods $X$ and $Y$ both cost $\\...
TFR's user avatar
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Mathematical expression for long run costs curves

I struggle to find formal mathematical expressions for long run average costs and long run marginal costs. All ressources I see take a finite number of short run average costs and draw the envelop ...
Kilkik's user avatar
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What does the second differential of the marginal rate of capital mean in the 'real world'? What's the explanation?

$\frac{\partial^2f}{\partial k^2}$ Marginal Rate of Capital means the extra production from adding a unit of capital. Assume f(x) here means production. What does the second differential mean, if ...
DonkeyBoy19's user avatar
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1 answer
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Is there a standard term for the elasticity of an isoquant?

Isoquants - the level sets of a production function $f$ - are very useful in microeconomics. For example, if we hold all but two inputs fixed, then the isoquant is a plane curve that quantifies the ...
tparker's user avatar
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1 answer
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Why does marginal benefit diminish?

Why does marginal benefit diminish? Intuitively, marginal benefit would be proportional to the input, so for example, if you had 1 worker that could produce 10 units, then 2 workers could produce 20 ...
Anthony Fallone's user avatar
1 vote
1 answer
3k views

Why does marginal cost increase?

In my economics class, we are learning about the Law of Increasing Marginal Cost, but searching for that online doesn’t generate any results. I’m confused about why marginal cost increases rather than ...
Anthony Fallone's user avatar
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0 answers
115 views

Understanding Marginal Rate of Substitutions given potential most utility

I have a homework question that says a consumer has utility function over two goods, apples (A) and bananas (B) given by: U(A, B) = 3A + 5B. It asks, "A consumer currently has 10 apples and 10 ...
Yippee_123's user avatar
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2 answers
120 views

Marginal Utility Problem

The local mall has a make-your-own sundae shop. They charge customers 35 cents for each fresh fruit topping and 25 cents for each processed topping. Barbara is going to make herself a sundae. The ...
IWantToLearn's user avatar
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For the cost function question (equation in image), I have found TVC as AVC*P. However the MC curve derived is giving imaginary number solution

For the cost function question (equation in image), I have found TVC as AVC*P. However MC curve is showing an imaginary number as solution.
VAISHAKH NAIR's user avatar
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3 answers
114 views

Does marginal revenue actually refer to marginal revenue per time unit?

When I was learning about why marginal revenue is lower than demand, I referred to this derivation: $$\frac{d(TR)}{dQ} = \frac{d(PQ)}{dQ} = \frac{PdQ + QdP}{dQ} = P + Q\frac{dP}{dQ}$$ Wikipedia ...
Joe Z's user avatar
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1 vote
1 answer
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Mathematical explanation of transformations of Marginal Revenue

MR = d(Total revenue)/dQuantity = d (Price * Quantity)/dQuanitity This is the same as this : MR = P(Q) + dP/dQ I did it with an example and it amazed me how both are equal but I still dont get how. ...
Teko JR's user avatar
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1 answer
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How does marginal utility and marginal product differ?

The marginal utility is, in plain English, the additional benefit (utility) that an individual gets by consuming an additional unit of a good or service. According to the Law of Diminishing Marginal ...
Humberto Fioravante Ferro's user avatar
1 vote
0 answers
67 views

Perfect substitutes mathematical definitions not equivalent

Statement: Consider goods $X$ and $Y$ (and we denote the quantities of by the same notation) such that they are perfect substitutes with the substitution ratio $1:n$. Assume the basic axioms ...
not tdm's twin's user avatar
-1 votes
1 answer
68 views

Utility Function Challenge

A utility function is given for two goods Good 1 and Good 2 $$U=f({G_1},{G_2})=45{{G_1}^{0.7}}{{G_2}^{0.3}}$$ Did I get this right? the marginal utility functions with respect to G1 and G2 will be ...
user38716's user avatar
0 votes
1 answer
54 views

Relationship between capital and decreasing marginal prodcutivity

In Capital by Thomas Piketty ( chapter The capital - labor spit in the twenty first century - page 271) we have below quote The evolution of the rate of return on capita, r, significantly reduces the ...
sakeesh's user avatar
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2 votes
2 answers
666 views

Is addiction a case of increasing marginal utility?

I got to know that alcohol addiction is a case of increasing marginal utility. My professor refutes me bluntly stating that once a person starts consuming he no longer remains to be a 'rational ...
Dharshan Sagar's user avatar
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2 answers
69 views

Is it possible to absorb the cost of advertising into the production cost for information goods in situations where attention is scarce?

This is a question about the economics of information goods on the Web. Let's say that there is an information good that is sold on the Web, that can be produced at some cost of production D, using ...
Joebevo's user avatar
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1 vote
1 answer
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I don't know why these two method yield different solutions for marginal product of labour

Given a homogeneous of degree one function $$Y=F(K,N) \\ y=\frac{Y}{N} =F(\frac{K}{N},1):=f(k)$$ I am looking for the partial derivative for $N$ Method 1 $$F_N=\frac{\partial F(K,N)}{\partial N}=\frac{...
LJNG's user avatar
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1 vote
2 answers
390 views

Fundamental question on marginal utility

I was just thinking back to some introductory economics courses, but now I'm extremely confused on a fundamental concept. How is marginal utility interpreted as the additional "happiness" ...
matt_'s user avatar
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1 vote
0 answers
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Unsolveable Demand/Utility Problem?

A consume has a preference relation on $\mathbb{R}^4_+$ with a utility function defined as $$ U(x_1,x_2,x_3)=(\ln(3x_1+2x_2+x_3))^3$$ Find the demand at prices $p=(1,1,1)$ and wage $4$. Attempt I ...
user879295's user avatar
4 votes
3 answers
2k views

Demand curve is same as Marginal Benefit curve?

Demand curve is same as Marginal Benefit curve [Source: Microeconomics by Pindyck & Rubinfeld, Chapter 10, Section 5 - Monopsony]. I have only seen intuitive explanations for this statement. Can ...
reasonStore's user avatar
1 vote
1 answer
92 views

Equivalence of producer surplus areas

I really can't understand how the sum of the rectangles leads to the sum of the triangle. My book's(Chapter 12, page 430) explanation is: Equivalence of these areas can be shown by recognizing that ...
reasonStore's user avatar
-2 votes
1 answer
2k views

Determine marginal revenue given demand curve and marginal cost

a)Determine marginal revenue curve if firm can only charge 1 price,List demand curve,marginal revenue curve,,marginal cost,average total cost equations. b)What is optimal price and quantity? c)If firm ...
JanusP's user avatar
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0 votes
1 answer
157 views

Relation between marginal cost and output elasticities

Does anyone know of any results that show the link between marginal cost and the output elasticities analytically? I am looking at production and cost theory books but can't find any results that ...
hrrrrrr5602's user avatar
-1 votes
2 answers
90 views

Competitive wages under imperfect information

Do competitive wages always have to be defined by marginal productivity? Can we have competitive wages which are not based on productivity, when the information is not perfect? To put it in context, ...
Elina Gilbert's user avatar
0 votes
1 answer
406 views

Why marginal benefit is decreasing as more and more pizzas are being produced?

I'm taking one of my initial courses in Economics on my own and currently reading Economics by McConnel, Brue and Flynn. On the page 13, the book is trying to explain about Optimal Allocation. They ...
ConGovDeIn's user avatar
1 vote
1 answer
73 views

About marginal cost setting on Jordi Gali's work

I'm studying Gali's work with the paper(or book?) which is "Jordi Gali, Monetary policy inflation and the business cycle_An introduction to the new keynesian framework(2015)" and wonder one ...
Jongho Choi's user avatar
0 votes
1 answer
1k views

Marginal cost given (Cobb-Douglas) production

My function is $y=x_1^\alpha x_2^\beta$ with $\beta={1-\alpha}$. I found: the minimization problem for demand to be $x_1^{*}(w_1,w_2,y)=\left ( \frac{w_2}{w_1}\frac{\alpha}{\beta} \right )^{\frac{\...
user avatar
27 votes
9 answers
8k views

What's wrong with the "airline marginal cost pricing" argument?

This is a very common argument found in introductory classes and texts. Here's Mankiw's version: Thinking at the margin works for business decisions as well. Consider an airline deciding how much to ...
user avatar
2 votes
0 answers
22 views

How to calculate and interpret a marginal treatment effect (local instrumental variable)? (Intuition through simple example.)

I am working on the intuition behind local instrumental variables (LIV), also known as the marginal treatment effect (MTE). I have worked some time on this and would benefit from solving a simple. I ...
Wissenschaft's user avatar
2 votes
1 answer
409 views

Monopoly: Demand Curve and Marginal Revenue Curve Intercepts

I'm doing an introductory economics course, having never done economics before. In our topics, we covered monopoly and the principle that the marginal revenue slope is twice that of the demand slope. ...
E P's user avatar
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5 votes
1 answer
5k 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 ...
Will 's user avatar
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2 votes
1 answer
138 views

Question about an interpretation of the MRS

Given the marginal rate of substitution of $x$ for $y$ : $\frac{u'(x)}{u'(y)} $ I know one can interpret this as the amount of $y$ one is willing to give up for an additional unit of $x$, or the ...
Steve's user avatar
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