Questions tagged [microeconomics]

Microeconomics is a branch of economics that studies the market behavior of individual actors (usually firms and consumers) and the aggregation of their actions in different institutional frameworks (usually the market).

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8 views

Certainty equivalent and risk premium

I'd like some guidance on the below practice question on uncertainty in consumer theory. I think I am confused on the certainty equivalent & risk premium or I'm not understanding the question. ...
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1answer
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Does the term 'marginal' refer to the last consumer?

I was reading this answer on this website which talked about how MB = P at allocative efficiency. "Why does allocative efficiency occur when P=MC rather than MB=MC" In this answer, it is stated that ...
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Who is the first one to equate “rational” with “complete and transitive”?

MWG taught that, suppose that the menu is finite, "rational" is the same as "complete and transitive". But it seems that it does not cite any sources. Who said this first? vNM said in 1944 that their ...
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Who is the first person/paper to introduce “mixed strategy”?

Who is the first person/paper to introduce "mixed strategy"? The PNAS by Nash used this notion without citing anyone. Does the earlier book: Von Neumann, J., and Morgenstern, O., The Theory of Games ...
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Is there some definition about risk sharing?

I was searching for a definition of risk sharing and I have found the following: $\underline{Definition:}$ Risk Sharing — also known as "risk distribution," risk sharing means that the premiums and ...
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New equilibrium when ad-valorem tax is imposed on supplier [closed]

In a question in a past final from my intro Microeconomics courses we're given the following demand and supply equations: $P_s=50-\frac Q2$ $P_d=\frac Q2$ Which give an initial equilibrium quantity ...
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1answer
36 views

Intertemporal budget constraint notion

Let $W$ denote the investor's wealth $B$ is the the investment in the risk free asset (suppose that the risk free rate is taken to be zero) and $X$ is the investment on the risky security which has ...
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1answer
38 views

Interpretation of $\frac{\partial }{\partial p_1}Q_1(p_1, p_2)/\frac{\partial}{\partial p_2} Q_1(p_1, p_2)$

I am interested in an economic interpretation for the ratio of partial derivatives of a demand function $Q_1(p_1, p_2)$, which is \begin{equation} t=\frac{\frac{\partial}{\partial p_1}Q_1(p_1, p_2)}{\...
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Deadweight loss from a linear demand function [closed]

If I have a linear demand function: x = a - bp How do the values of a and b affect the deadweight loss of a commodity tax?
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1answer
23 views

How to calculate the degree of risk aversion of a consumer in a lottery?

To give an example, say we start with 100 dollars and we enter a lottery. With probability $\pi$, this 100 dollars is reduced by 2 dollars. Otherwise our endowed 100 dollars does not change. Let's say ...
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1answer
155 views

Why is the risk premium always positive for risk averse individuals?

I think this has to do with the definition of concavity and the fact that a risk averse person has a concave utility function, but I'm not sure how that helps.
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u(x1, x2) = √ x1 + x2. m = £100 and that p2 = £10, p1 = £1 find the optimal bundle for the consumer [closed]

u(x1, x2) = √ x1 + x2. Suppose that m = £100 and that p2 = £10. Find the optimal bundle for the consumer. In other words, find the combination of x1 and x2 that maximizes the consumer’s utility when ...
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Quasi linear function how to rule out corner solution

I'm dealing with a quasi-linear utility function which is $u(x,y)=x+2\sqrt{y}$ There is not income effect so the Walrasian demand obtained by the procedure: $MRS=Px/Py=\left(2\sqrt{y}\right)'$ and ...
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Intertemporal choice with possibility of death

Here is the setup: Suppose that there is an individual who lives up to two periods. He lives with absolute certainty during period $1$, and during this period his sub-utility function is given by: $$...
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consumer preference [closed]

let $u(x_1,x_2)=x_2 + a\ln x_1$ subject to $m=p_1x_1+ p_2x_2$ when I try to derive the Marshallian demand for $x_1$ and $x_2$ I cannot find the Marshallian demand for $x_1$ since the marginal utility ...
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1answer
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Calculate standard deviation with the help of the following data [closed]

Please help me with the answer to the question
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1answer
20 views

How to calculate CRRA bounds from Holt and Laury (2002) type lottery?

Lottery is between: Option A: a certain choice of £5 Option B: £10 with probability 0.1 and £1 with probability 0.9 The probability of receiving £10 increases in each subsequent choice. How do I ...
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1answer
53 views

Can we have a Non-Reflexive Preference Relation?

I've been thinking about preferences alot recently and have been specifically thinking about the reflexivity requirement. That is: $$x \succsim x$$ Though this is apparent and obvious, I have been ...
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Help for Optimization problem [closed]

Please help me for this problems.
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1answer
374 views

What is the economic interpretation of this utility function?

I have a utility function $U(c,l)={{C^\alpha-1}\over {\alpha}}+{{l^\alpha-1}\over {\alpha}}$ where C denotes consumption, l denotes leisure. What is the economic interpretation of the term $\alpha$ ($\...
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1answer
27 views

Is a resource allocation problem in mechanism design a direct or indirect mechanism?

From L. Hurwicz's work and book "Designing Economic Mechanisms," I cannot figure out whether a resource allocation problem in mechanism design is a direct or indirect mechanism. I think the answer is ...
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1answer
25 views

Comparative Advantage Question

The theory of Comparative Advantage in production and trade specifies that countries should engage in the production of goods and services for which they have a comparative advantage or lower ...
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1answer
50 views

Pareto distribution and Lorenz curve

I am currently studying Pareto distributions and their relation to Lorenz curves but I am having a hard time understanding the concept. If I am understanding correctly, Lorenz curve describes the ...
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2answers
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How can I prove $U(x) = [𝛼_1𝑥_1^𝜌+𝛼_2𝑥_2^𝜌]^{(1/𝜌)}$ is equal to Cobb-douglas Utility function when $𝜌\rightarrow0$ [closed]

This is the question, I have problem with part b, I don't know what function should I use to reach the result thanks in forward
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Is it correct to say opportunity cost is cost of giving up quantity of what you are selling?

In this video (https://m.youtube.com/watch?v=KEYYN-a_x6E), the instructor talks about the marginal opportunity cost and supply curve. (Begins talking about it at after 1:50). He states that the ...
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1answer
28 views

Difference between Opportunity cost and marginal cost

I understand that the marginal cost is the cost of producing one additional unit of a good or service. Is it correct to say that the opportunity cost is part of the marginal cost (I'm trying to ...
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1answer
28 views

which is an example of demand curve that is always inelastic/elastic?

Which class of functions have the property of being always elastic?and instead always inelastic?
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1answer
59 views

Competitive vs complete and non-competitive vs incomplete marekts

The very insightful questions that arise, when someone studies micro foundation are the following: What is the difference between competitive and complete marekts? When we refer to the first is it ...
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1answer
85 views

Quasi concavity of utility function

I am looking for a method to prove that the following function is quasi-concave in $\alpha$ (or find conditions under which it is true): $ \pi=F(-k)(f(0)^2-f(h(1-\alpha))^2)+ \frac{1}{2}-\frac{1}{2}...
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3answers
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Model of economic cycles consistent with efficient market hypothesis

I do not have background in economics, so my question may be naive or I might have taken incorrect assumptions somewhere. As far as I understand, efficient market hypothesis applies, saying that the ...
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32 views

Short Run Total Cost function Question

I am confused about the Short Run Total Cost function of this problem. If the firm's production function is $F(K,L) = K+\ln(L)$ derive the short run total cost function. I was able to solve the ...
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1answer
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Does utility in economics also refer to producer's surplus ? How to balance the consumer surplus and producer surplus?

I am confused about the use of utility in economics and how it relates to allocative efficiency. At 4:35 and 5:07 in this video (https://www.youtube.com/watch?v=9a3wXj1o91k) he talks about how at the ...
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1answer
57 views

Prove this indirect utility function is quasi-convex

The indirect utility function is as follows: $$ v(m,p) = \frac{m}{p_{1}^{1/2} p_{2}^{1/4} p_{3}^{1/4}} $$ I need to prove that it is quasi-convex. I tried both definition of a quasiconvex function ...
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how to gratify employees if there is increase in production or economy in spending [closed]

the boss of my company(a petroleum company) is giving a standard bonus for employees each year. But this year, he wants a new method to give this bonus, so ,I proposed that for each increase in ...
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1answer
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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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Example of a SCR which violates Independence of irrelevant alternatives [closed]

Can you give an example of a Social choice rule which violates Independence of irrelevant alternatives?
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1answer
33 views

How to show that the estimator is consistent?

$Y_i=\beta_0+\beta_1X_i+U_i$ is my regression model for an I.I.D. sample with N=1000 observations. Suppose $U_i\sim I.I.D.(0,\sigma^2)$ and Xi are also I.I.D for i=1,2,3......1000. Xi is independent ...
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1answer
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Example which violates weak pareto and non dictatorship

Can you give an example of a social choice rule and a social welfare function that violates the conditions of Weak Pareto criterian and non dictatorship simultaneously?
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Why do some phones depreciate faster than other?

Based on evidence from reselling sites (eBay, Amazon etc.) we can observe a trend that iPhones on average depreciate far less and slower than for example Samsungs (or other phones that lose their ...
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Total factor productivity persistence [closed]

Would it make a difference whether a decrease in total factor productivity z on the labor, goods, and money market is persistent? (That is, whether decreased productivity today also is predictive of ...
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Order of Marginal Effects in Ordered Regression Model

I'm looking to validate my understanding of marginal effects on the probability of an ordered probit model. I don't understand how ME is calculated in respect to some alternatives. For example if I ...
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1answer
78 views

Linear Utility?

Consider a preference relation $\succeq$ on $X\subseteq\mathbb R^2$. If $\succeq$ satisifies: $$ \begin{align} &1.\mbox{ }(a_1,a_2)\succeq (b_1,b_2)\implies(a_1+t,a_2+s)\succeq (b_1+t,b_2+s),\...
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How do you calculate the cost of down time in production?

We are looking at a process that will significantly reduce down time in production for (at least) one of our products. In addition to the saved labor and material costs, is there a way to calculate ...
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1answer
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Why is the labour supply independent of the wage in this case?

Consider the model $\max U = \ln c + \ln l$ subject to $c=Lw$ and $1=l+L$, where $c$ denotes consumption, $l$ leisure, $L$ the labour and $w$ the wage rate. The optimal choices of $L$ and $l$ can be ...
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Questions about the Edgeworth box

I have some doubts about the Edgeworth box, it's a newbie one so thanks in advance for the patience. In case, I'm confused if we can count the root of the contract curve (point M) as one of the ...
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How to integrate technology lifetime in NPV

I want to calculate and compare the NPV for different ways of producing a good X. The NPV should be calculated for 30 years. The following technologies can be used for production: Technology A, which ...
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Production for multiplant firm?

A multi-plant firm will never produce at a plant with an increasing marginal cost when they own another plant with a decreasing marginal cost. Is this true? My reasoning behind this is that firms ...
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1answer
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Question about the relationship between Weak Axiom and Slutsky Matrix

We know that if a differentiable Walrasian demand function $x(p,w)$ satisfies Walras' law ($p^Tx=w$), homogeneity of degree zero ($x(\alpha p,\alpha w)=x(p,w)$), and the weak axiom of revealed ...
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1answer
27 views

First-price symmetric auction with discrete value

I've been trying to work the following problem out but I can't quite seem to understand it, or the whole concept of first-place auctions. I don't understand how we get to the equilibrium. The problem ...
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Is the supply of a price-taking firm increasing in price?

Is the supply of a price-taking firm increasing in price? When the price goes up, this means that firms can make more profit. Therefore, they would want to increase their supply. Is there a way to ...