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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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What are the difference and relation between the concepts of business process and business strategy? [on hold]

What are the difference and relation between the concepts of business process and business strategy? For example, the process of strategy planning consists of the following steps: formulate missions ...
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1answer
32 views

Economic interpretation of the concavity of the expenditure function

What is the interpretation of the expenditure function's being concave?
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Optimization of budget constraint and utility [on hold]

Alice cares about two things: how much leisure time she has ($x_1$) and what mark she gets on tomorrow’s Micro exam ($x_2$). Her preferences between these goods can be represented by the utility ...
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23 views

Prove mathematically [on hold]

True or False? A firm’s production technology can exhibit globally (i.e., for all levels of input) increasing returns to scale (IRS) even though it exhibits diminishing marginal product (MP) for ...
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1answer
26 views

Do the three ways of measuring producer’s surplus give the same result?

In the Firm supply chapter of the microeconomics Varian's book, they show "three equivalent ways to measure producer’s surplus" using marginal cost, average cost and the average variable cost curves. ...
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1answer
22 views

Effect on revenue of changing price of unitary demand elastic product

In my introductory microeconomics class, a problem set had the following question: If the price elasticity of demand for Snickers bars is 1, what will a 1% increase in its price do to the total ...
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1answer
25 views

Would this hypothetical firm exit in the long run?

I'm trying to work out the following problem for my microeconomics course, using the standard method we have been taught. Problem: Output is a function of inputs $x_1$ and $x_2$, $y=x_1^{1/2}x_2$. ...
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0answers
18 views

What will be effects of normal inferior and giffen goods on consumer equilibrium? [on hold]

What will be effects of normal inferior and giffen goods on consumer equilibriums? Tell me in detail.
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1answer
23 views

why indifference curve is a negative slope? [on hold]

I asked about indiference curve always from down slope.why indifference curve is a negative slope? Tell me in detail.
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1answer
40 views

Advance Microeconomics [on hold]

Show that u=a+bM-yM^2 represents a risk averter's utility function who is interested only in the mean and the variance of the state distribution of Income M. Can anybody send me the full solution. ...
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1answer
19 views

What data/factors/attributes do the professionals monitor in a top-down analysis on the macroeconomics?

I am learning to do top-down analysis on a number of sectors in the US equity markets. I have never done it before and I would appreciate it if some professionals can share their experiences with me. ...
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How do I find long run competitive price and total quantity supplied (in economics)

I was just wondering how to solve a for a firms long run price and quantity supplied in economics! Thank you.
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19 views

Determining firm equilibrium output and price in a competitive market

I was given an economics question that seems extremely basic but I can't figure it out for some reason. It is as follows: Consider a market which is a competitive market, and suppose that a common ...
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1answer
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What is value in the context of microeconomic analys for case of monopoly profit maximization

I'm trying to refresh my microeconomics knowledge. And I have some "blind spots" I just can't fix. Let's say we have a monopoly on the market. It's usual goal is to maximize it's profits. The point ...
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0answers
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What is the elasticity of the replacement between factors of production?

Following the work of Lu (1967) (Full text available here!) I got stuck trying to derive the elasticity of substitution between factors. He use the formula developed by Allen, that when the production ...
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0answers
76 views

Finding demand functions and applying them [closed]

There are competitive firms that produce yogurt according to the supply function y=K+L.The prices of K and L are r and w respectively. There are 100 identical consumers who each have an income of 1000,...
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Calculating Market Concentration without sales data

I want to calculate market concentration (HHI and C4) but I don't have sales data. Is it accurate to use the share of establishments of each firm as a proxy for market power? Could you list some ...
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1answer
39 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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1answer
17 views

How does social cost and social benefit work?

I am really lost right now. I have a test tomorrow and I am stressing out. Whatever I look at for externalities, which could be my textbook, a website, notes from class, they all contradict each other....
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1answer
18 views

Imperfect Price Discrimination profit per group

During imperfect price discrimination is it possible to determine profit per group. For example: Aggregated Cost function: C(Q) = 18*Q + 5; where Q = q1 + q2 Aggregated Demand (AD) for group 1: q1(...
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1answer
19 views

General Equilibrium Involving Production

I need a little conceptual clarification. For a standard $N*K*M$ general equilibrium model, would an allocation, say, $y^k$ be Pareto Optimal if it does not solve $max(py^k)$? I understand that the ...
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1answer
14 views

Determining Another Possibility For a Microeconomics Question

If new, more advanced equipment reduces the amount of labor needed to produce an increased level of output, then The AVC curve will shift upward The MC curve will shift upward The ATC curve will ...
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1answer
28 views

Majority Rule and Single Peakedness

Majority Rule will induce non empty choice set if individual preferences are single peaked Is this statement true? I have some trouble in understanding the meaning of 'single peakedness' in context ...
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0answers
28 views

FOCs for Lagrangian with Production Externalities

I'm currently reading through Frank Cowell's textbook on microeconomics and have trouble deriving the FOCs from the Lagrangian when there is a production externality. We set up the Lagrangian to ...
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2answers
75 views

Understanding Classical Rationality at a Basic Level

I am a high school student in an intro Microeconomics class (note that we have not covered utility functions) and I'm utterly confused about the classical concept of rationality. I certainly ...
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1answer
34 views

Second order partial derivative and cross second-order partial derivative

I'm following a paper (Full text available here!) where at some point (pag.17 and 20) the author get the following derivative: $$\frac{\partial V}{\partial L}=Y-X\frac{dY}{dX}=\alpha X^{-\frac{c}{b}}...
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0answers
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Find all nash equilibria. 2 Pure and some mixed? [closed]

So I attached a photo of the problem since it would probably take for ever to type. I have a 2 player game and I need to find all Nash Equilibria. I found the Pure Strategy Nash Equilibria fairly ...
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0answers
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We claim that firms minimize costs, but how do we prove it? [closed]

If this statement is true, does it mean that they must invariably deliver low-quality products? and why? Thanks!
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1answer
34 views

Nash equilibrium two players in a joint effortful project

I have a problem where there are two agents in a joint project, Each agent $i$ puts in effort $x_i$ $(0 \leq x_i \leq 1)$ which cost each $c(x_i)= x_i^2$. The outcome of the project is $$ f(x_1, x_2)...
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1answer
74 views

Proof of Expected utility theorem with three outcomes

I am trying to prove the expected utility theorem with three outcomes. The expected utility with $n$ outcomes is rather cumbersome and long in the economics textbook Mas-Colell. But I was hoping that ...
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0answers
29 views

proof verification in George J. Mailath and Andrew Postlewaite (2001b)

I am reading George J. Mailath and Andrew Postlewaite (2001), and this is the lemma 1 in this paper. I don't understand the induction process in this proof. I think that we should use the fact that $...
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1answer
19 views

Am i correct here? #greenTaxes #priceMechanism #inefficientTax #DeadweightLoss [closed]

Now accoring to this article: https://www.telegraph.co.uk/news/2016/07/30/britain-banishes-plastic-bags-as-5p-tax-sees-usage-plummet-by-6/?fbclid=...
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2answers
26 views

If the consumer is not a price taker, does she still set marginal rate of substitution equal to the price ratio?

Consider some consumer who consumes good $x$ and $y$. The price of $x$ is fixed to be $k$. The price of $y$ is $c(y)$. The consumer's marginal rate of substitution is given by $\frac{-x}{y}$. If the ...
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0answers
31 views

Exercise on analysis on costs and benefits

Good evening to everybody. I beg pardon for my English and I hope you will understand what I'm going to write though it's not perfect. I ask your help to solve an exercise that you can find in the ...
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1answer
32 views

Calculating the elasticity of substitution between factors of production

Following the work of Lu (1967) (Full text available here!) I got stuck trying to derive the elasticity of substitution between factors. He use the formula developed by Allen, that when the production ...
2
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1answer
28 views

Proof for homogeneity of elasticities

Throughout microeconomic literature i see the following restiriction placed on the nature of elasticities in demand system estimation. This being for some arbitarary good $x$ we require price ...
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0answers
9 views

Implications of CES on changes in demand

I have a CES utility function, in my class notes I have remark that when the CES is constant and less than one the demand in absolute terms remains unchanged when price of second commodity changes. ...
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1answer
44 views

Perfect Bayesian Equilibria

What are the perfect Bayesian equilibria in the following game? The part that is confusing me is the right-hand side, where player 2 is of type N. Thanks! EDIT: My workings out so far are given ...
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1answer
30 views

Why is the price of books set by the manufacturer rather than the distributor?

For almost all manufactured goods which the manufacturer doesn't sell directly to the end consumer, the manufacturer sells to a distributor, and the distributor is then free to resell the good to the ...
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0answers
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What is Application of Vector Algebra in Economics?

I through one tutors heard that vector is used in economics . But on searching about it on internet could not find anything Recently I studied about Vectors in Mathematics So I was wondering how ...
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1answer
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Can the endowment point be the competitive equilibrium?

Quoting from MWG p.519, Chapter 10: Pure Exchange, The Edgeworth Box ..., any intersection of the consumers' offer curves at an allocation different from the endowment point $\omega$ corresponds to ...
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4answers
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Do consumers also invest?

Definition of Investment that I have found: Investment is the expenditure incurred on the procurement of such capital assets that would help in further production . According to this, it means that ...
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2answers
37 views

How can I show whether the following function is Increasing, Decreasing, or Constant returns to scale? [closed]

I need to show whether or not the following function is increasing, decreasing, or constant returns to scale, but I can't figure out how to extract the t from it when it is put in the form $y(tX_1, ...
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0answers
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Sketching Walrasian Equilibrium

I need to: Sketch a situation where preferences are neither convex nor strictly montonic and there is no Walrasian Equilibrium Sketch a situation where preferences are neither convex nor strictly ...
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0answers
14 views

Pareto Efficient Envy Free Allocation

For an exchange economy $u_1=x_1y_1$ $u_2=2x_2y_2$ $e_1=(1,0)$ and $e_2=(0,1)$. Find an Allocation which is both Pareto Optimal and Fair: I found the Pareto Optimal allocations (on equating $MRS$) ...
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0answers
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Is the definition of Investment variable in Economics?

I studied that Investment is the expenditure incurred on the procurement of such goods that would help us in production of goods and services. And mainly consists of Fixed and Inventory Investment ...
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1answer
29 views

Finding individual utility

There are N agents living in an economy with two goods, $X$ and $Y$. Their preferences are described by the following utility function $u(X,Y) = 2 \sqrt{XY}$. Each agent is endowed with 1 unit of $X$ ...
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2answers
28 views

Pareto Optimality of Endowments

Consider a $2*2$ exchange economy where individual $1$ has an endowment $(4,5)$ and individual 2 has an endowment $(6,5)$. The utility functions of individuals are represented by $U({x}_i{y}_i)$=${x}...
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1answer
28 views

Blocking Coalitions

For $n$ individuals, can a blocking coalition only be formed by at least $n/2$ individuals? For example, if there are 6 individuals, can less than 3 individuals form blocking coalitions?
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First Order Condition - Farm Household Model

Does anyone can help me solve this simple farm household model from the Paper "Delinking land rights from land use: Certification and migration in Mexico" De Janvry 2015. When I do $\frac{dU}{dhe}$ ...