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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4answers
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Does returns to scale always lead to economies of scale?

I can tell the difference between returns to scale and economies of scale, but then I still don't know if returns to scale ALWAYS leads to economies of scale? Please could you help me?
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When do prices not exist?

Often we employ the use of the separating hyperplane theorem to prove existence of price vectors, when discussing infinite economies this proof is substituted for proving existence of linear ...
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Convexity/Uniqueness Marshallian demand Cobb Douglas case

Hi guys I have been asked to prove the 3 properties od the Walrasian/Marshallian demand function in the case of a Cobb-Douglas utility function.However, I am not sure how to prove that if the ...
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Diminishing MRTS Range, Follow Up Question

I have a directly related question to this thread (Diminishing MRTS range). The production function in the example is defined as $f(K,L) = 600K^2l^2-K^3L^3$ and it is easy to show that MRTS = $-MPL \...
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Derivative of definite integrals - how did MWG arrived at this result? Microeconomics

For a wage as a function of profit: $w(\pi)$ and profit $\pi \in [\pi_{min},\pi_{max}]$, the owner of a company sets the minimum wage to satisfy the following condition: obs $e = \{e_l, e_h\}$ but in ...
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1answer
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Is whatever they calculated a valid “demand elasticity”?

https://medium.com/@kwrdarisipudi/demand-elasticity-of-iphones-1e3a7bbb9eac They are saying iPhone demand is less responsive to price over time, but I disagree. Income shifts the demand curve. Higher ...
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0answers
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Additively Separable Utility Function - Normal Good

Considering the additively separable utility function, U(x1,...,xn)=U(x1)+...+U(xn), I have to show the following: a) At most one good can exhibit increasing marginal utility and in that case (i) that ...
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1answer
24 views

Neutral good and quasi linear

if my good y is neutral and x is essential. My indifference curves look like vertical, but I want to ask that How does my utility function look like and can I say that this is quasi linear because mrs ...
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2answers
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What does it mean if the controls in my IV model are correlated with my instrument?

I am seeking to understand what it means for my 2SLS IV model if my controls are correlated with my instrument (such that when I add additional controls to my model that are positively correlated with ...
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1answer
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Could price floors improve worker safety in the meat cutting industry?

Could price floors improve worker safety in the meat cutting industry? My question is inspired by the Future Perfect podcast https://www.vox.com/future-perfect/21502225/chicken-meatpacking-plant-...
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1answer
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What happened to the Zimbabwe cash dollar after the introduction of Dollarization?

Let's say, before dollarization, I owned 1 million Zimbabwean dollars in cash and the next day dollarization went into effect. So in dollarization, the current Zimbabwean dollars will be invalid and ...
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1answer
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Numbers of right and left gloves Question?

I assumed that numbers of right gloves at the horizontal axis and numbers of left gloves at the vertical axis. Therefore, two goods are essential and indifference curves are L-shaped. However, I want ...
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1answer
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HARA preferences details

I am searching for some exntensive details about HARA preferences. Where could I find some extensive details for HARA preferences? Something like a textbook or notes
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How is equilibrium reached in CAPM such that the tangency portfolio = market portfolio?

From my research online, when learning CAPM with $n$ risky assets and a risk free asset with return $r_f$, I always see the conclusion that in equilibrium, the market portfolio = tangency portfolio ...
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Question about Static Game with 3 firms

I need an answer to the following question. I can't quite get the approach to answer it using a cournot competition model. Consider a static price competition game of three firms; each owns a product. ...
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2answers
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What is the point of considering only pure strategies in a game? How could you restrict people from thinking about mixed strategy?

Let's consider a one-period game where the first player choose $H$ or $T$. 1) The equilibrium is unique at $\frac{2}{3} H+\frac 1 3 T$. 2) If the player is restricted from choosing mixed strategy, $T$ ...
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1answer
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Could lexicographic preferences on N^2 be represented by a utility function u: $N^2$ to $Z$?

I got this question on a homework: Could lexicographic preferences on $N^2$ be represented by a utility function u: $N^2$ to $Z$? I've heard countless times that lexicographic preferences can't be ...
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1answer
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What does increase or decrease in marginal utility mean in terms of quantity demanded?

According to the definition of marginal utility " it is the utility or satisfaction derived from the consumption of an additional unit of any commodity." So, the question is what does ...
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What is the observable definition of “preference” by Frisch?

To make things weird, although Frisch was fully aware of the importance of random distribution in economics relations, he never mention the randomness in binary preference relations! How to define ...
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2answers
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Are prices part of total factor productivity?

I am trying to understand how production is related to income/profit and where do prices enter. Suppose there is a single firm with a Cobb-Douglas production technology: $$Y=AK^{\alpha}L^{\beta}$$ ...
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Mixed Nash Equilibrium with missing info

So I've come across this problem in Watson's book: Suppose you know the following about a particular two-player game: S1 = {A, B, C}, S2 = {X, Y, Z}, u1(A, X) = 6, u1(A, Y) = 0, and u1(A, Z) = 0. In ...
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1answer
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Can Quasi-Linear functions be monotonic?

I want to ask that Can Quasi-Linear utility functions satisfy the more is better (monotonicity) assumption?
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What are the mathematical prerequisites to understand Whinston and Green's “Microeconomic Thoery”?

I've completed my under graduation in economics where I used micro books like Nicholson and Snyder's Microeconomic Theory and Hal Varian's Intermediate Microeconomics. I am comfortable with topics ...
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1answer
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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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1answer
166 views

Can the Certainty Equivalent be negative?

I am questioning if the CE of a lottery can be negative? For me it doesn't make much sense by definition. I encountered this problem on the following exercise: Imagine a case where we have a lottery(...
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3answers
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If I shred a $20 bill, is society poorer? What is the effect on the real economy?

If the answer is yes, society is poorer, then the converse must hold true: that the government could make us all wealthier by simply printing money. However, a collapse in the money supply must have ...
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1answer
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why does income of executives level out in the long term after tax increases?

Marginal Revolution University has the following question in its Elasticity unit: In 1993, then President Clinton passed a law raising income taxes. This tax hike was fully expected: He campaigned on ...
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0answers
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Show mathematically that in a competitive market, a price-taking firm has a zero profit. Also, justify the assumption that there is only one firm

Consider a firm that has a production function given by $F(x)$, where $x \in \mathbb{R}^n_+$. Assume that the function $F$ is strictly increasing in each argument, concave, twice continuously ...
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1answer
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How was the Cobb Douglas function derived?

In economics and econometrics, the Cobb–Douglas production function is a particular functional form of the production function, widely used to represent the technological relationship between the ...
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Why do two-sided marketplaces often charge both sides of the transaction?

Why do marketplace apps often charge both sides of the transaction, when charging one side could raise as much (or more) revenue and be simpler? i.e. if the marketplace knows which side of the market ...
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1answer
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Measuring income effect before knowing substitution effect

Suppose on the x axis we have shelter and on the y axis we have composite goods. Now, if the price of shelter increases, the optimal bundle changes from point A to point D. Standard textbook tells me ...
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2answers
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In a game with alternating moves and complete information, the Nash equilibrium cannot be a non-trivial mixed equilibrium?

Where I can find a simple proof for this fact? For example, a trivial bimatrix game with alternating move has the following payoff matrix: \begin{array}{|c|c|c|} \hline & 1 & 2 \\ \hline U &...
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1answer
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Does people dying boost gdp?

When someone dies of coronavirus, all their property must be resold, and this generates an enormous amount of secondary retail activity. Does people dying boost GDP in the short run?
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Which mathematics are required for fully understanding the theories of the firm?

When I say "theories of the firm", I'm referring, in particular, to the theories exposed in the next works: 1) Transaction Cost Economics exposed in "Transaction Cost Economics" by ...
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2answers
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indifference curve

Suppose my preferences are such that I like more of both goods, but only up to a point. After I have 5 units of both goods, that’s as good as it gets, and I’m indifferent if I get more. how do u draw ...
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1answer
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Comparing utility functions [closed]

I'm doing an econ course after not having any math or micro for a few years, now I'm totally missing the basics again. I'm wondering how to show that utility functions are an equivalent to each other: ...
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1answer
54 views

Utility representation of single peaked preferences

Is it true that a single-peaked preference (with the peak at some finite point) over the set of real numbers, always has a utility representation ?? If yes, can you please hint towards the proof or ...
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0answers
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Violation of the transitivity axiom [duplicate]

I'm struggling to think of a way to violate the transitivity axiom. I was thinking about the following scenario: Let's say that you're voting on three different choices, A, B and C. If you pit A vs. B,...
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1answer
25 views

Strictly increasing but not convex preferences

Is it possible to have preferences that is strictly increasing but not convex? Will perfect substitutes indifference curves show strictly increasing but not convex preferences? I am confused, as won't ...
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0answers
44 views

Binary relation on the set $X = \{v, w, x, y , z\}$ that is asymmetric and transitive but not negatively transitive

So I am trying to find a binary relation on the set $X = \{v, w, x, y, z\}$ that is asymmetric and transitive but not negatively transitive, and is quite tricky. Will $R = (v, w)$ be asymmetric and ...
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1answer
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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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1answer
29 views

Raise/Lower Seller Fees on Platform - Expected Seller Behaviour?

Say there is a marketplace company that facilitates buy/sell of digital content (i.e. marginal cost = 0). And that content is somewhat substitutable but not completely so. As an example, for a ...
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1answer
55 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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1answer
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If $x \succsim_i x_i^*$ then $p \cdot x_i\ge w_i.$ (MWG 16.C.2)

(MWG 16.C.2) Suppose that the preference relation $\succsim_i$ is locally nonsatiated and that $x_i^*$ is maximal for $\succsim_i$ in set $\{x_i \in X_i: p \cdot x_i \le w_i\}$. Prove that the ...
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2answers
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Geometric intuition behind the point where the indifference curve meets the budget line

So, this isn't to solve any kind of problem, but rather about the intuition behind the concept. I was wondering if at the optimal point where the indifference curve is tangent to the budget line and ...
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0answers
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What is the term for requiring taxes/regulatory changes to be above a certain threshold to overcome organisational communication barriers

Help remembering the specific term for the following would be very much appreciated! The following: When a government implements a tax/regulation that is too low in stringency, the new policy may not ...
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1answer
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Where can I find research on the impact of informal/unregulated suppliers on prices and externalities?

I am looking for research and papers on the impact of informal/unregulated suppliers on market prices and negative externalities. I am particularly interested in the manufacturing sector.
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1answer
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What additional axiom to GARP do we need to generate a differentiable or smooth utility function

After researching for a while, I find this: https://www.jstor.org/stable/1913607?seq=2#metadata_info_tab_contents They come up with an axiom called SSARP that generates a preference with smooth demand ...
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Calculating cross price elasticity of demand

$Q=0.3L^{-1}M^{\frac{1}{3}}R^\frac{2}{3}Y^{\frac{1}{2}}$ I'm asked to find both the cross-price elasticity of demand for $R$ wrt $Q$ ($1$) at current prices and cross-price elasticity of demand for $L$...
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1answer
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Proving that Marshallian demand is of the form: $x_i^*(p,I) = \hat{x}_i^*(p)I$ with certain conditions

Can I please have some feedback/help proving the following. My proof is below but I am quite uncertain as to whether my solution is efficient. Thank you. If $u(x)$ is a homothetic utility, then show ...

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