Questions tagged [marginal]

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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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3answers
178 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 ...
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20 views

Inverse demand with fixed and marginal costs [closed]

Fit&Proper is the unique fitness center in a small village. The inverse demand for these services is given by 𝑃 = 20 − 0.015𝑄 where 𝑃 is the price customers pay to use the facilities and 𝑄 is ...
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1answer
50 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 ...
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2answers
339 views

Does the Marginal Propensity to Import = negative Marginal Propensity to Tax?

the multiplier $= \frac{1}{(1-MPC)}$ and the multiplier $= \frac{1}{MPW} = \frac{1}{MPS+MPM+MPT}$. Now since $MPC + MPS = 1$ it follow that $1-MPC = MPS$, therefore the multiplier = $\frac{1}{(...
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1answer
52 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 ...
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1answer
60 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 ...
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2answers
75 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, ...
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1answer
187 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 ...
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0answers
16 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 ...
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47 views

Maximize marginal products

Say a firm is facing a budget line as stated below:($K$ stands for capital and $L$ stands for labor) $$200K + 100L = 1000$$ Under this circumstance, a rational firm will look for ways to maximize its ...
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1answer
111 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{\...
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8answers
5k 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 ...
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0answers
10 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 ...
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1answer
57 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. ...
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1answer
1k 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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7 views

Non Linear regression to obtain diminishing marginal effect / elasticity

I am working with some real estate data on housing units. For a given market, I have data on occupied units, rents, and control variables such as population, demographics, income levels etc. I'd like ...
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1answer
50 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 ...
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1answer
66 views

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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0answers
21 views

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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1answer
54 views

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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2answers
62 views

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. ...
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176 views

The shift of Marginal Cost Curve

In standard microeconomics textbooks they usually assume that the cost curve consists of just two variables which are Capital and Labor ( I'm talking about this equation: TC = rK + wL) So when we ...
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1answer
38 views

Profit maximization, when $MC = P$, in a simple supply table and curve

Our economics school book states that the profits of a company are maximized when MC = P. However, I am having some trouble wrapping my head around that. For example, I have the following exercise: ...
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1answer
688 views

Why is the marginal utility of money assumed to be constant in Marshallian Theory of Consumer Behaviour

While studying the Marshallian Theory of Consumer Behaviour, I came across the assumption that the marginal utility of money is assumed to be constant. Can someone please explain why is this so?
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1answer
45 views

Understanding Rabin's Diminishing Marginal Utility of Wealth Cannot Explain Risk Aversion

I am trying to understand Rabin's Diminishing Marginal Utility of Wealth Cannot Explain Risk Aversion. I am struggling to completely understand the following: Suppose you have initial wealth of $W$...
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1answer
22 views

Endogenous Growth in the case of externalities (Learning by doing)

so for the Learning by doing model productivity is defined as $$A_t=BK_t$$. Inserting this into the optimum conditions leads us to the following:$$r_t=\alpha BL^{1-\alpha}$$ and $$w_t=(1-\alpha)B^{1-\...
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0answers
15 views

Does a depreciation in the Dollar lead to a reduction in the US' marginal propensity to import?

Does a depreciation in the Dollar lead to a reduction in the US' marginal propensity to import? I thought it would because a weaker dollar makes imports more expensive, so consumers spend less of ...
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3answers
75 views

What would be the income tax rate be if it were 'flattened'?

In some recent conversations/speeches (It's voting season), I have noticed many people do not understand how a marginal income tax system works. Not understanding how they are only taxed at the ...
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2answers
58 views

Is marginal cost different from extra cost?

I have been reading this resource which talks about why derivatives can be used to find the marginal cost. https://www.dummies.com/education/math/calculus/how-to-determine-marginal-cost-marginal-...
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1answer
340 views

marginal utility of consuming vs marginal rate of substitution

good day all I am taking second year economics, but my textbook is not very clear on this topic A quoted from Intermediate Microeconomics and Its Application. Nicholson, Snyder. 11th Edition. ...
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1answer
75 views

Why can utility functions be continuous, and what does this imply for marginal utility?

I am studying microeconomics at the introductory undergraduate level and two related but distinct questions are puzzling me. First, my textbooks express utility functions as continuous functions by ...
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1answer
137 views

Why does marginal cost slope upwards after the minimum point?

My textbook writes this on marginal cost: "The law of diminishing returns refers to the idea that as more of a factor (input) is used, with at least one fixed factor, there is some point at which the ...
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1answer
2k views

Supply curve when the marginal cost is zero

The supply curve is built as the average marginal cost (MC), when the MC is equal or higher than the average cost (AC) The marginal cost increases, as a result of the opposite effect of marginal ...
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2answers
58 views

Why are marginal rates of substitution are identical at equilibrium consumption levels?

According to wikipedia, "At equilibrium consumption levels (assuming no externalities), marginal rates of substitution are identical". Why is it so? What does "equilibrium consumption levels" here ...
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1answer
157 views

A question about the property of quasi-linear preference

In case of quasi-linear preference, why would one unit more of the numeraire good (good 1) give the same additional utility as spending an additional amount of wealth equal to the cost of one unit of ...
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1answer
42 views

Production function involving profit maximisation

​Hi, I don't get how the answer of d is deduced in this question because I don't think I made any mistakes in my calculation and have also used all the information given. After knowing L is 800, I ...
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1answer
215 views

MRTS question involving production function [closed]

My work out shows constant MRTS and also increasing returns to scale. I thought the answer was C as I only found increasing marginal products of labour and capital. I really don't see how the answer ...
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1answer
171 views

Can marginal revenue be increasing?

As per my calculations, the derivative of the MR curve is given by: $MR'(q)=2p'(q)+qp''(q)$, where $p(q)$ is the inverse demand curve. Therefore,for a downward sloping demand curve, if the second ...
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1answer
55 views

Marginal Cost Calculation issue

I calculated the Marginal cost for the below question. But it seems the results are wrong After coming up with an innovative idea for a new product, you paid 4000 to an industrial designer to draw ...
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1answer
65 views

fixed an marginal cost calculation issue

I'm trying to solve a question that is quite difficult for me. I did part of the question but, bit difficult to decide the exact answer for the below question. After coming up with an innovative ...
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1answer
23 views

Calculating marginal tax rates when near a cliff

When using tax and transfer microsimulation models, a common approach for calculating marginal tax rates is to recalculate the tax liability when adding $1 to earnings. This will take into account ...
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1answer
729 views

Marginal rate of substitution(yx) question

For utility function U= ln(x)+Y How do I determine if MRS(yx) is diminishing or not for this question? I got Mu(x)=1/x and Mu(y)= 1 MRS(yx)=Mu(y)/Mu(x)= 1/1/x = x Does this mean that MRS(yx) is ...
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2answers
1k views

When can I say that a utility function has constant marginal utility?

Does this utility function have increasing/decreasing or constant marginal utility? $ U(x,y) = x^2 y^2 $ Now, $ f_x = 2xy^2 $, $ f_{xx} = 2y^2 $, $ f_y = 2yx^2 $, $f_{yy} = 2x^2 $ $ f_{xx} $ has no ...
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1answer
4k views

How to calculate marginal utility with two goods?

I'm just getting started as an amateur into microeconomics and I really can't understand this thing about marginal utility when more than one good is involved: Let's say I have the utility function U ...
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0answers
3k views

Derive the cost function and supply function from production function

I didn't study economics, but am quite interested in the topic. I came to the question whether I could derive the supply curve / marginal cost function from the production function and I actually ...
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0answers
138 views

Vertical Marginal Cost curves

When would a marginal cost curve be vertical? I understand this happens when the marginal cost jumps, from say 0 to 100, but in such a case, I think there should be a discontinuity rather than a ...
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0answers
100 views

How should I calculate bulk selling price for a small business?

Some friends of mine run a small business, in a small garage-like space, with a few employees, making and selling "plumbuses". The typical customer orders about 5 plumbuses at a time. When I heard ...
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1answer
564 views

How is marginal benefit measured?

In my economics class, we're learning about the production possibilities frontier, marginal benefits, and marginal costs. The book uses the example of a company that can choose between producing colas,...