# 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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### Choice function and IIA

I'm new to microeconomics and struggle to understand choice function in practice. E.g. lets say I have a set X=(a,b,c). How many possible choice functions I could in theory have? Then other concept ...
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### What is wrong with this tax revenue formula?

The authors state that the tax revenue is $$T = tq^{*}c(q^{*})$$ , where $t$ being the tax percentage, $c$ being the total cost function based on the quantity supplied $q^{*}$. This is not quite right ...
1 vote
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### Understanding Second-Order Approximations in Translog Production Functions

Consider a model with the following production technology: Q_i=F(\Omega_i,K_i,S_i,N_i) = \Omega_i\Big(\nu N_i^\sigma+(1-\nu)(\tau K_i^\rho+(1-\tau)S_i^\rho)^{\frac\sigma\rho}\Big)^{\...
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1 vote
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### Take intermed or advanced series for phd application

I am an undergrad majoring in Math and want to apply for a PhD in Economics (maybe in theory and Econometrics). I have taken the intro series (intro micro and macro) already. Since I am about to ...
1 vote
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### Convexity of indirect utility in probabilities

I am interested in the concavity in $p$ of the indirect utility function $$V(p,W)=max_{x,y,z} pf_1(x,y)+(1-p)f_2(x,z)$$ under the constraint $$x+py+(1-p)z=W$$ where $0<p<1$ and where $f_1,f_2$ ...
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### Given Q=80-4P where MC=0, Q=Q_1+Q_2+Q_3+...+Q_n, find the reaction curve for firm A,B, and C

Does the condtion Q=Q_1+Q_2+Q_3+...+Q_n affect the process of finding the reaction curves and cournot equilibrium or do we treat it as if were given the condition of Q=Q_1+Q_2+Q_3??
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### How to explain the claim mathematically: The effect considered local, and locally, the elasticity is approximately constant if the demand is "smooth"?

My book has considered the effects of supply and demand changes on price (specifically the equilibrium price and quantity themselves) when the supply and demand themselves have constant elasticity and ...
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### Obtain profit-maximizing supply curve (an exercise)

Exercise 2.2.3 from Introduction to economic analysis by McAfee: An entrepreneur has a factory that produces $L\alpha$ widgets, where $\alpha<1$, when $L$ hours of labor is used. The cost of labor ...
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### Breakeven analysis for computer upgrade decision making

I need to perform a break-even analysis of moving from one system design to another. Definitions $M_0, M_1$ = one-time initial manufacturing cost of currently deployed system design and new system ...
53 views

### Characterization of profit functions arising from Cournot competitions

I would like to know what exactly are the functions of the form $$\pi(x, y) = P(x+y)x - C(x),$$ i.e., the profit functions arising from symmetric Cournot duopolies with inverse demand functions $P$ ...
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### Why do Unobservable Licensing Contracts Exist?

In many vertical markets, licensing agreements are common. One instance of these contracts is between manufacturers and distributors, whereby the manufacturer permits the distributor access to its ...
1 vote
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### Convexity and Strict Preferences

I was looking into convexity while reading Varian's intermediate micro textbook, and an article by Richter and Rubinstein said, "The canonical definition of convex preferences requires that if a ...
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### Economics Textbooks

What are some good textbooks for learning Microeconomic Theory Macroeconomics Econometrics Are there any textbooks that are particularly popular for post-grad courses?
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1 vote
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### "Cournot competition" with different prices for different firms

This operations research paper considers a "Cournot" competition modeled as follows. [E]ach [firm] $i$ incurs a cost $w$ in obtaining one unit of the product, sells $q_i$ units of the ...
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### Marginal value curve is the inverse of demand function

From Introduction to Economic Analysis by McAfee and Lewis. They write that: the marginal value curve is the inverse of the demand function, where the demand function gives the quantity purchased at ...
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### How to find marshallian demand for Leontief Utility with 3 goods. u(x 1 ​ ,x 2 ​ ,x 3 ​)=min{2x1 + x3, x2/2}

I have a utility function $$u(x_1, x_2, x_3) = \min \{2x_1 + x_3, x_2/2\}$$ I would have assumed that the relationship established is $2x_1 + x_3 = x_2/2$ but my solution manual has it as x_1 + ...
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### Aggregation and Labor Shares in a Static Model

I'm studying a recent article published by Autor et al. (QJE, 2024). The model is presented in Appendix, Section J. I'm working on solving the model, but I'm stuck at the final step, particularly with ...
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33 views

### Do negative-cashflow properties imply greater appreciation?

Some areas, such as the Bay Area in California and Cambridge, England have housing that, not accounting for appreciation, have a poor ROI compared to housing in the rest of the country due to ...
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### Calculate CPI of multiple price indexes

I need to calculate the composite CPI of a basket of products. Each product is measured as its own standalone price index. Note how 2016 = 100 ...
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### Comparative Statics in Acemoglu's Article

I'm struggling to derive equation 8 from the paper by Acemoglu and Restrepo (AEA Papers and Proceedings, 2018). Consider an economy where aggregate output is produced in perfect competition according ...
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### Definitional ambiguity for weakly dominated strategy with beliefs

I have been reading some game theory and I have come across the following belief-based definitions. As is recommended, it is instructive to prove the equivalence between definition 3 and the usual '...
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### How to formally define the preference profile in which the top alternative of one player becomes the bottom alternative of the next player?

I need to generically define a strict preference profile with Condorcet cicles when the number of players and alternatives coincide. To illustrate my problem, consider the following four-player & ...
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### Comparative Statics - Capital Augmenting Technological Change

I am reading the article by Acemoglu and Restrepo (AEA Papers and Proceedings, 2018) and have encountered some difficulties deriving equation (1). I hope you can help me work through it. The aggregate ...
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### Is the Constrained Pareto Frontier Linear in Bilateral Trade?

Suppose we have a Myerson-Satterthwaite model of bilateral trade between a buyer and seller. The buyer has private information about their valuation, $v$, and the seller has private information about ...
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### How come Intel and AMD do not bankrupt each other?

Their R&D costs a lot of money (fixed cost). And Intel's and AMD's main products are largely interchangeable (no moat)(1). One could expect that they'd compete on price, until their prices are ...
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### Question on neutral and stochastic voting rules of variable size

I have a question regarding neutral and stochastic voting rules with domain of variable size. THE SETUP Let $N=\{1,2\}$ be a two player set, let $A_\tau=\{a_1,\dots,a_\tau\}$ be a finite alternative ...
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### Are individuals under-incentivized to make investments as they aren't able to net all the social surplus they generate?

Since a portion of the social surplus generated by investments goes to consumers and not producers individuals in a free market are always under-incentivized to make investments and therefore a degree ...
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### Reduction of compound lotteries seem to be incorrect?

Wikipedia reads: I feel that this axiom is much stronger than the usual "axiom of reduction of compound lottery" that we talk about because the Axiom 4' sufficiently imply EU (with weak ...
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### - Economics 101

Is it possible to learn economics while studying math? If possible what books do you recommend? I'm looking for books that teach the fundamentals and explain them without any use of mathematics.
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1 vote
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### Spence's signalling problem

My professor uploaded job market signalling question with the solution, but on the solution, I could not get some part, so I would like to get your help to understand it. First, I could not understand ...
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### Is increasing Average Product(AP) always implying increasing Marginal Product(MP) in microeconomics?

I'm studying microeconomics and came across a statement that I'm not sure is correct: "If average product ($AP = F(X)/X$) always increases from $X=0$, then marginal product ($MP = F'(X)$) also ...
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### If both goods are considered economic goods in the economy, then how can their demand be negatively sloped when in a state of satiation or bliss?

if both goods are economic bad, then we can say that they have a negatively sloped demand curve. But how can we say the same for economic goods in a state of satiation or bliss?
1 vote
59 views

### how to reach Continuous Expected Utility (EU)?

Consider EU on monetary outcomes. Say we have a utility function $u:\mathbb R\to\mathbb R$ The common axioms of EU are continuity, independence and weak order. These axioms do not imply that the ...
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### Collections of axioms that imply monotonicity?

I am currently searching for collections of axioms that imply monotonicity. Let $N$ be a finite set of players, let $A$ be a finite set of alternatives, let $\mathcal{P}$ be the set of all linear ...
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### Are all subcorrespondences of the weak Pareto correspondence monotonic at the unrestricted domain of linear orders?

I have a doubt regarding the well-known concepts of weak Pareto optimality and monotonicity. Let $N$ be a finite set of players, let $A$ be a finite set of alternatives, let $\mathcal{P}$ be the set ...
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### What is the point of Slutsky and Hicksian Compensation. And What to they have to to with WARP?

I am currently working through a Advanced Microeconomics textbook by Muñoz-Garcia for a upcoming class. I am very confused about the idea of compensation in which we take away wealth in price ...
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### Moral hazard, prosecution and fines

I wonder whether there are theoretical or empirical papers on the pros and cons of giving back part of the fines paid by someone to cover a part of the costs endured by the prosecuting body. I have in ...
34 views

### Calculating Production Functions using Input Prices

I am trying to estimate production functions and want to correct the endogeneity problem from direct estimation. I found from these notes that it is possible to estimate production functions using ...
1 vote
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### Questions about output, quantity, level of output and quantity of output, investment level

Hope your week went well. These may be basic facts known to many but I am afraid that I have misunderstood the terms. Does quantity of a good mean the amount demanded or supplied? Does output refer ...
538 views

### Pareto Optimal vs Pareto Efficient

Pareto Optimal and Pareto Efficient seem similar but I don't understand the difference. What is the difference between these two concepts?
1 vote
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### Help with Deriving Hicksian Demand in the Monocentric City Model?

I have a fairly standard Alonso-Muth-Mills model, but struggling to derive the Hicksian demand. Starting with the basic utility function: And this Budget Constraint: Housing Floor-space is ...
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