Stack Exchange Network

Stack Exchange network consists of 175 Q&A communities including Stack Overflow, the largest, most trusted online community for developers to learn, share their knowledge, and build their careers.

Visit Stack Exchange

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).

0
votes
0answers
15 views

Preference: Convexity and Monotonicity

I need an example of a Convex, non-monotonic preference Non-convex, monotonic preference I figured that an example of non-convex, monotonic utility preference could be $U(x,y)=x^2+y^2$. For convex, ...
-1
votes
0answers
12 views

Market entry limit pricing question

In a certain market where entry is free but only 1 firm is there, market demand is $Q=(1850-100P)/3$ Total cost is $C(q)= 0.01q^2 + 2q + 400$ - this is for firms that want to enter this market, the ...
0
votes
0answers
15 views

Minimum observations for an econometric SEM

Good day for all: I have an econometric SEM with three equations similar to: $$ A = \beta_0 + \beta_1 B + \beta_2 G + \beta_3 H + u_1 \\ B = \beta_4 + \beta_5 C_{-1} + \beta_6 D_{-1} + \beta_7 E_{-1}...
-1
votes
0answers
31 views

If both supply and demand are inelastic, who bears the burden of tax?

In particular, I have a hard time thinking about what this would scenario would look like in a graph. For the sake of simplicity, I guess linear demand and supply would suffice for this question. But ...
1
vote
1answer
31 views

discount factor, function, and rate

Consider an exponential discount factor $\delta\in(0,1)$. Similarly, consider an exponential discount $\textit{function}$: $g(t)=\delta^t$. Then, is defining the discount $\textit{rate}$ as below a ...
-1
votes
0answers
38 views

What should be the elasticity of substitution in a competitive exam in order to give the students incentives to work to exhaustion and choose wisely? [on hold]

A power mean https://en.wikipedia.org/wiki/Generalized_mean Has an elasticity of substitution always equal to $\dfrac{1}{1 - p}$ Leontief averaging of grades seems too punishing and counter ...
0
votes
1answer
37 views

Everyone has the same marginal rate of substitution

I'm currently reading Varian's Intermediate Microeconomics and what struck me, is this statement on page 89 of the 8th edition. If everyone faces the same prices for the two goods, then everyone ...
-2
votes
0answers
22 views

What quantities of capital and labor should the firm use if it wants to produce at minimum cost?

A firm's production function is given by $Q=F(K,L)=\sqrt{K}\sqrt{L}$. The price of capital is 40 and the price of labor is 10. What quantities of capital and labor should the firm use if it wants to ...
0
votes
0answers
24 views

Why should houses have the same price for a given supply

So I'm reading Varian intermediate microeconomics and in chapter one it's about housing. Suppose we have a inner ring and a outer ring in a city where there is a university. In the inner ring supply ...
2
votes
1answer
21 views

A weaker definition of local non-satiation can also imply indifference “curve”

Let $u$ be a continuous utility function on $\mathbb R^2_+\setminus\{0\}$. Consider the following three conditions: Local non satiation says that for any $x \in X$ and $\epsilon > 0$, there exists ...
0
votes
1answer
116 views

Stocks and shares [on hold]

Do LARGE temple donations help an investor, a company or both, if the investor is associated with a/the company? Are LARGE temple donations helpful for companies for better performance? ...
-3
votes
0answers
9 views

Time-weighted return

I can't seem to work out the answer to this question: Suppose you purchase one share of the stock of Volatile Engineering Corporation at the beginning of year 1 for $36. At the end of year 1, ...
1
vote
1answer
25 views

What is the iff condition for a preference with linear Engel curves (all Engal curves are linear)?

If we restrict the consumption at $\mathbb R_+^n$, then it seems like we are implicitly assuming that the Engel curve pass through the origin, so the iff condition would be homothetic preference. ...
0
votes
0answers
21 views

optimization problem for two individuals

Two flat mates 1 and 2, rent a flat and play their own music on the only CD player owned by flat-owner. They both like their own music, but dislike the music played by the other. Given the timing ...
0
votes
0answers
33 views

two period consumption problem

Ms. A earns 25,000 dollars in period 1 and 15,000 dollars in period 2. Mr. B earns 15,000 dollars in period 1 and 30,000 dollars in period 2. they can borrow money at an interest rate of 200% and can ...
1
vote
1answer
61 views

Show that this income tax is effectively a lump sum tax

This is a standard income, leisure tradeoff model. $$ \max_{c,l} \min\{c; l\} $$ $$s.t. \space c = w(1-t)(1-l)$$ $l$ is leisure (where total time is 1), $w$ is wage, $c$ is consumption, and $t$ is ...
0
votes
0answers
13 views

Affordable reservation prices

An important theoretical construct in microeconomics seem to be reservation prices, i.e. the maximum price a person is willing to pay for something. Consider a typical market basket of goods a person ...
-2
votes
0answers
15 views

Pareto Efficiency [on hold]

Consider each of the two statements below whether they are true or false. Please give the proof for each. A. All Pareto-efficient allocations are envy-free. B. All envy-free allocations are Pareto-...
2
votes
0answers
24 views

I have a dataset. How do I convert this data into Indifference Curves?

This is all hypothetical. I understand indifference curves. However, I don't understand how they are produced. I read this question, and the survey answer made sense to me... Research Design: ...
1
vote
0answers
36 views

Independence Axiom for Linear Utility - Who proved this first?

Who first proposed the following axiomatization of linear utility using Independence? I remembered that it was Debreu but I am not so sure. What was the first paper proving this? Consider a ...
0
votes
0answers
29 views

The law of supply and demand - How does it work?

I've learned what the principle of supply and demand says, and would paraphrase it like this: The price of a good is at equilibrium when supply and demand are equal. Or with other words: The ...
0
votes
1answer
24 views

Fehr & Schmidt, ultimatum game, inequaltiy aversion, perfect subgame Nash equilibrium

I am preparing for an exam. I have found an old exam but I have no solutions for it, so I tried to solve it, but I dont know if I did it correctly and need therefore your help. The problem looks as ...
0
votes
0answers
24 views

Finding the optimal consumption bundle given the strictly concave utility function $v(x,y) = U(x) +y$?

I am also finding it difficult to understand what are the fundamental differences between analysing optimal bundles between concave and convex functions ? Does it also happen that the optimal bundle ...
1
vote
0answers
24 views

Rotation of Quasilinear Utility

Let $u(x,y)=f(x)+y$ be a quasilinear utility. Now we rotate it by 45 degrees, (such that the $x-$axis becomes the direction of $(1,1)$) $v(x,y)=f(x-y)+x+y$. Is $v$ also a quasilinear utility? What is ...
-1
votes
0answers
13 views

What is the price of this perfectly competitive market in long run equilibrium?

question is as follows: the average cost of a firm in a perfectly competitive industry is given by 5q2-2q for all values of q greater than zero. In long run equilibrium, the price will be a) 100 or ...
2
votes
1answer
73 views

Remittance: Migrant workers sending money to their families

I wonder about the role of migrant workers in a general economic context. Migrant working appears all over the world and on many time and space scales: around cities (e.g. commuters) inside ...
0
votes
1answer
14 views

Can a monopoly supply negative units to one of it's two markets?

A question I have seen in my microeconomics textbook is as follows: Consider a monopoly supply to both a domestic and foreign market, where the market demands are: Yd(pd) = 20 - 2pd, hence pd(yd) = ...
-3
votes
1answer
36 views

NASH equilibrium [closed]

How to approach questions like these: In a two player static game with a discrete strategic space that permits each player to chose one of the four possible strategies what is the maximum number of ...
3
votes
0answers
64 views

Linear Homothetic Utility

A Homothetic Utility is where $$ \forall x,y, \forall a \in \mathbb{R}_+: \ u(ax,ay)=au(x,y) $$ (or its monotonic transformation). A linear Homothetic utility is defined as $$ \forall x,y, \forall ...
1
vote
1answer
38 views

Demand correspondence is both upper and lower hemi-continuous; is the preference continuous?

$\succsim$ is a weak order over $\mathbb R^L$. For a closed budget set $B\subset\mathbb R^L$, define demand correspondence: $$D(B)=\{x\in B|x\succsim y\forall y\in B\}$$. We know that $D$ is always ...
1
vote
2answers
22 views

Can marketing efforts be considered to be a factor of production?

This is a sightly unconventional question, but I want to know whether marketing efforts can be considered as a factor of production. After all, if no one knows about your product, you can't make a ...
1
vote
1answer
34 views

Independence and Reduction Axioms

I have read that the Independence of Irrelevant Alternatives axiom in expected utility theory implies the fact that compound lotteries are equally preferred to their reduced form simple lotteries. ...
-1
votes
1answer
38 views

Maximization when parameters are unknown

I would like to know if my understanding about how to find a maximum of the function when some parameters are unknown is correct. Consider the following maximization problem. $\max_{x}V=\int_0^{a(x)}...
0
votes
1answer
36 views

First Order Stochastic Domination and lottery preferences

Let $L$,$L'$ be two lotteries over the real numbers. Let $u$ be an increasing Bernoulli utility function. Let $F_L$, $F_{L'}$ be the CDFs of the two lotteries. We wish to show that $$L \succ_{FOSD} L'...
0
votes
1answer
66 views

Stackelberg Oligopoly 3 firms [closed]

Imagine that there are 3 firms in a monopolistic market, F1, F2 and F3. Firms 1 and 2 are incumbent firms and act simultaneously whereas Firm 3 observes the actions of both firms before deciding ...
-3
votes
0answers
16 views

Monopoly profit maximisation strategy [on hold]

In this question, I used the inverse pricing formula to solve it: P-MC/P =1/-PED. If MC is 0, then P/P gives one and on the right hand side 1/--1.8 will just give 5/9. How does this information help ...
6
votes
1answer
43 views

Meaning of $dF(z)$ in expected utility framework

Background: from a Microeconomics course, $F$ is a cdf. In other words, if $F$ has a density function $f$, then $$F(z)={\int_{-\infty}^z f(x) dx} $$ Write the Bernoulli utility function $u:...
0
votes
1answer
23 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 ...
-1
votes
1answer
19 views

Price discrimination question

For this question the answer is b which is the TR of group 2. If price is the same, my question is why isn't the demand function of group 1 considered? Why is the TR of group 1 omitted?
-1
votes
1answer
22 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 ...
0
votes
1answer
24 views

Sequential game equilibrium strategy question

The question asks for player B's equilibrium strategy, hence shouldn't player B choose the strategy that gives the highest payoff after player A's move? Why does player B choose 4 over 5 and 6 over 8 ...
1
vote
0answers
28 views

I can not answer f) Pareto efficiency [closed]

Consider a society of individuals who receive an income of \$10, 000 pesos if they are healthy and \$100 pesos if they are sick. There are two types of individuals: some who get sick with a ...
-1
votes
0answers
13 views

Monopoly profit calculation involving demand function

Hi, I am stuck on this question for a while since the exact answer is not provided and I am not sure if my method is correct. I found that q=12 under the law requirement. However without the law, ...
0
votes
0answers
26 views

Optimal pareto in two-person game

For what values $x$, $y$ the profile $(D,L)$ is Pareto optimal? \begin{array}{c|ccc} & L & R \\ \hline U & x,5 & x+2,y \\ D& 1,-1 & x,0 \\ \end{array} Is correct $x<1$ ? ...
0
votes
0answers
12 views

Compound lottery preference implies simple lottery preference

Suppose $\alpha>\beta$ and for two lotteries $L, L'$ $\alpha L + (1 - \alpha)L' \succ \beta L + (1- \beta) L'$ where $\succ$ implies preference. If the independence theorem holds, how do you ...
0
votes
0answers
24 views

Condition for a Nash equilibrium

Consider two people have a mutually advantageous relationship. That is, if both dedicate more effort to the relationship both improve. Specifically, each individual chooses a level of effort $x_{i}\...
-1
votes
3answers
70 views

Why is demand curve always going down?

In many economic charts with demand and supply curve, people often say the demand curve goes down with more quantity. But I will give you a really practical example, why I think they are wrong. ...
-1
votes
2answers
52 views

SMD and Lucas critique

One of the consequences of Lucas' critique is that models must be microfounded. On the other side, Sonnenschein-Mantel-Debreu (SMD) theorem claims that microfoundation doesn't have any repercussion on ...
2
votes
2answers
32 views

Market baskets: cross-border comparisons

The concept of a market or consumer basket is quite intuitive. I assume a market basket for a given country tells for which goods an average person spends how much of her money. To be able to compare ...
3
votes
0answers
32 views

Asymmetric Nash Bargaining

The Nash bargaining solution selects the unique solution to the maximization problem $\max_{s_1, s_2 } (s_1 - d_1) (s_2 - d_2)$ such that the solution satisfy the following axioms : Invariance ...