Questions tagged [marginal]
The marginal tag has no usage guidance.
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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 ...
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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. ...
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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 ...
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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 = ...
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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 ...
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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 ...
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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 ...
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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 ...
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Why does marginal return decrease and marginal cost increase? [duplicate]
I somewhat understand why marginal returns decrease more so than I understand why marginal costs increases. If it costs you 5 dollars to make 1 unit of something, why would it cost you more to make ...
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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 ...
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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 ...
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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(...
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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 ...
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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 $\\...
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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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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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.
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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}$$
Wikipedia ...
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Mathematical explanation of transformations of Marginal Revenue
MR = d(Total revenue)/dQuantity = d (Price * Quantity)/dQuanitity
This is the same as this : MR = P(Q) + dP/dQ
I did it with an example and it amazed me how both are equal but I still dont get how. ...
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How does marginal utility and marginal product differ?
The marginal utility is, in plain English, the additional benefit (utility) that an individual gets by consuming an additional unit of a good or service. According to the Law of Diminishing Marginal ...
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Perfect substitutes mathematical definitions not equivalent
Statement: Consider goods $X$ and $Y$ (and we denote the quantities of by the same notation) such that they are perfect substitutes with the substitution ratio $1:n$.
Assume the basic axioms ...
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Utility Function Challenge
A utility function is given for two goods
Good 1 and Good 2
$$U=f({G_1},{G_2})=45{{G_1}^{0.7}}{{G_2}^{0.3}}$$
Did I get this right? the marginal utility functions with respect to G1 and G2 will be ...
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Relationship between capital and decreasing marginal prodcutivity
In Capital by Thomas Piketty ( chapter The capital - labor spit in the twenty first century - page 271) we have below quote
The evolution of the rate of return on capita, r, significantly reduces the ...
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Is addiction a case of increasing marginal utility?
I got to know that alcohol addiction is a case of increasing marginal utility. My professor refutes me bluntly stating that once a person starts consuming he no longer remains to be a 'rational ...
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Is it possible to absorb the cost of advertising into the production cost for information goods in situations where attention is scarce?
This is a question about the economics of information goods on the Web.
Let's say that there is an information good that is sold on the Web, that can be produced at some cost of production D, using ...
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I don't know why these two method yield different solutions for marginal product of labour
Given a homogeneous of degree one function
$$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{...
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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" ...
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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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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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, ...
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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 ...
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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 ...
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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{\...
user31331
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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 ...
user23102
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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 ...
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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. ...
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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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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 ...
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Returns to Scale Microeconomics
Are there any production function $f(x_1,\ldots,x_n)$ that is having decreasing returns to scale, given that the marginal product in every input $i$ in the function $f$ is constant?
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Explaining negative "cyclic" unemployment with a production function
First of all, here is a related post. Unfortunately, it does not answer my question.
I have heard that there is an understanding of negative unemployment in economic theory. Obviously, absolute ...
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Piketty's explanation of elasticity of substitution (from his book Capital in the 21st century)
I have some trouble following the explanation of the elasticity of substitution between capital and labor and its implications on p189.
Take this part:
The relevant question is whether the elasticity ...
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Is it considered acceptable or unacceptable to use currency as a measure of utility?
There will always exist at least one economist who condones measuring utility in US dollars and another who does not. However, I am wondering which way the majority of contemporary economists lean.
...
