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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questions
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Bayesian Nash Equilibria: Strong and Weak Types
I need a little help with the question. I understand that since both players have two types each, there will be 4 different payoff matrices to be considered, $(S,S)$,$(S,W)$,$(W,S)$,$(W,W)$, each type ...
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1answer
239 views
eBay economics - total revenue impact from expanding ecosystem by 1 seller
While I think my question is straight forward, I'm guessing the answer to it is anything but. Thanks in advance for any insight you may be able to offer, even if it's just a directional assist. Here'...
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0answers
26 views
What changes do I, as an individual, experience during a recession?
There is a lot of talk about how we're approaching an economic recession. There is plenty of talk about how that would affect the world at large, but I haven't really found much on the level of ...
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0answers
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Difficulty Understanding CPI (Consumer Price Index)
Here's a question about CPI in my microeconomics text (Pindyck), which I don't seem to understand:
The price of computers has fallen substantially over the past two decades. Use this drop in price ...
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1answer
39 views
Trembling hand perfection and weakly dominated strategies
It is well known that players cannot use weakly dominated strategies in a trembling hand perfect equilibrium. My question, however, is a little different: does iterated deletion of weakly dominated ...
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15 views
Is expensive private school a rational investment?
In Australia, successive conservative Federal governments have increased the share of public funding for non-government schools, and for the top schools the amounts of annual funding are many millions ...
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1answer
81 views
Monopsony diagram curves
Why is the marginal cost curve not the same as the supply curve?
My personal explanation is that since the marginal cost curve is cost of producing each new product, the supply curve just represents ...
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2answers
139 views
Why would minimum rent under franchise arrangements for McDonald's decrease year by year?
I am working on a project regarding the refranchising strategy of McDonald's and came across this piece of data in their 2014 annual report. My understanding of minimum rent is that its a fixed amount ...
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1answer
36 views
Opportunity Cost effect on benefits
My question is the following:
Let's say a person has two career choices. He would be succesful in both, but in one of them he is slightly better and thus he will do better. So let's say career A will ...
3
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1answer
271 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 ...
4
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0answers
54 views
utility maximization with nested Cobb–Douglas–CES preferences
I'm trying to understand the following paper: Hsieh & Ossa: A global view of productivity growth in China (2016). The pdf can be found here: https://faculty.chicagobooth.edu/chang-tai.hsieh/...
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32 views
Moral hazard, bubbles, and economies of scale in limited companies and organizations
http://eprints.lse.ac.uk/100058/1/Goodhart_CEPR_DP13494.pdf
What would be the disadvantage of limiting the liability to the product of the proportion of the company and the debt(a person with 2% of a ...
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21 views
Is a proft tax not distorting unless we know the opportunity cost?
A Profit tax where we actually know the Entire Cost Function Including the Opportunity cost(Time, Incommodation, best alternative for the easily monetized resources etc) is not distorting.
But the ...
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1answer
289 views
intertemporal utility maximisation
Adam's consumption period 1 and 2 are denoted by $c_1$ and $c_2$ respectively. His utility function is $U(c_1,c_2)=4c_1^{0.5} + c_2$
Ben earns an income of \$3 in period 1 and \$3 in period 2, ...
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1answer
24 views
The notation cl co (A)
I stumbled upon this notation, (cl co(A+C), while reading "Set Optimization—A Rather Short Introduction" by Andreas H. Hamel, Frank Heyde, Andreas Löhne, Birgit Rudloff and Carola Schrage.
Is it ...
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2answers
277 views
Cobb-Douglas production function with expenditures rather than units
I want to estimate a standard Cobb-Douglas production function of the form
$ Y=AK^{\alpha}L^{\beta}$. However, I only have data on labour expenditures, not units of labour. I don't have data on the ...
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1answer
65 views
What is the difference between solving for utility maximization separately or aggregately?
I derived the Walrasian equilibrium for an economy of two consumers with their respective utility functions (u1, u2) and initial endowments but later on I am asked to maximize (u1+u2).
Does anyone ...
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1answer
136 views
Do you get economies of scope from horizontal or vertical integration?
Economies of scope: make it cheaper to produce a range of products together than produce each one on its own as company can share inputs (e.g marketing and finance) removing cost redundancy
Would ...
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1answer
247 views
How to calculate income and substitution effect when equal marginal principle is violated
I am trying to calculate substitution and income effect for 2 goods, x and y.
Given that marginal utility x = 1, marginal utility y = -a (unknown number), price of x = 16, price of y = 20, how ...
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1answer
19 views
finding optimal values of quantities through utility function when MRS is 1 and price ratio is 1:2 [closed]
so this is a somewhat simple question but im stumped, here's why:
given the utility U=2$X_1$+2$X_2$ where $P_1$$X_1$+$P_2$$X_2$=20 and $P_1$=0.5$P_2$
the question asks to find optimal values of $...
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3answers
2k views
Total cost function and (dis)economies of scale
I'm really confused about how I'd tackle this.
I have an equation, $TC(Q) = 100Q + 20Q^2 + 3Q^3$.
And I'm trying to find where the economies of scale, diseconomies of scale and constant return to ...
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0answers
10 views
If the government introduces import quota will prices change for imported goods
I am currently going through an introductory course to microeconomics. We are discussing how government interventions result in inefficiencies and dead-weight losses.
One of the questions in concern ...
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2answers
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Cobb Douglas, Budget Line, Demand function question
use the general form of the Cobb Douglas utility function $U(x,y)= (x^a)(y^b)$ and the budget constraint in the form $B=p_{x}X + p_{y}Y$ to find the demand functions for good x and good y.
Is this ...
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1answer
36 views
Can a monopoly supply negative units to one of its 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) = ...
5
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1answer
34 views
Perfect Substitution with a Continuum of goods?
Imagine I have a continuum of different goods indexed by $\omega \in [0,1]$. I have a household which consumes a quantity $C(\omega)$ of good $\omega$, and pays a price $P(\omega)$. The household has ...
3
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1answer
44 views
Representing preference orderings over a finite set of outcomes by two payoffs
I have read the following statement and I am having difficulty understanding the second part:
Any set of preference orderings over a finite set of outcomes can be represented either by ...
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0answers
34 views
Calculating equilibrium in a cobb-douglas long run, perfect competition scenario
Supposed there are a fixed number of 1000 identical firms in a PC industry, with each producing the same fraction with the same production function
$$q_{i} = \sqrt{K \cdot L}$$
And market demand is ...
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1answer
23 views
Production technology of $y=2x$
I have a given product $y$ that is produced by the input $x$ in the following relation: $2x=y$. In our example, we are given the unit price of $x$ is $16$. Find the unit cost of $y$. The answer is $8$....
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1answer
60 views
Contribution by each factor
Must admit it has been many years since I have done advanced calculations or anything remotely like it, so please bear with me.
I have problem that I hope to get some help with. Say I have below ...
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2answers
42 views
How to deal with misspecification of models in Macroeconomics?
I'm wondering what methods are used in economics, specially in macro, to deal with model misspecification.
I've already searched the web, but I may be missing some methods. Therefore, I ask you for ...
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1answer
22 views
Market Clearing with Dividend and Investment
In pure exchange GE models, a typical goods market clearing condition for good $n$ looks like:
$$\sum\limits_{i=1}^Ic_n^i=\sum\limits_{i=1}^Ie_n^i.$$
Consider a model with production where firms can ...
3
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1answer
57 views
Direct revelation mechanism's sets of strategies and types
Mas-Colell, Whinston and Green in Microeconomic Theory describe the direct revelation mechanism as it follows:
The employed notation is the following:
$θ_i$: Player i's type
$Θ_i$: Set of types for ...
5
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2answers
237 views
If the (direct) utility is concave in all goods, is the indirect utility necessarily concave in wealth?
Suppose that the direct utility $u(x_1,...,x_n)$ is concave in each of its arguments. Does this imply that the indirect utility $U(w,p)$ is concave with respect to $w$? If all goods are normal than ...
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0answers
32 views
Are marginal utilities or utilities compared?
Consider decision making in an economic model. Suppose that there is some utility and it is a function of consumption and leisure where leisure is full-time work, part-time work, or full-time ...
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1answer
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Difference between social choice function and mechanism outcome function
Mas-Colell, Whinston and Green's Microeconomic Theory (3rd edition) defines the social choice function as the following:
Later, the mechanism outcome function is also defined:
The relationship ...
4
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1answer
51 views
How does expected utility theory treat losses?
I've been reading about prospect theory lately and have read often that prospect theory predicts people will be risk averse in gains and risk seeking in losses. This statement is typically ...
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0answers
29 views
Index of an Excess Demand Vector
Mas-Colell, Whinston and Green, in Microeconomic Theory (third edition), postulate the concept of an index for an excess demand vector, which is later used in the Index Theorem:
A regular equilibrium ...
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38 views
What is the trade-off between? Consumption and Leisure or Income and Leisure?
When first presenting the utility function and its arguments, textbooks typically start by stating that utility is a function of consumption and leisure. See for example https://sites.hks.harvard.edu/...
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1answer
51 views
Conditions for Radner Equilibrium
This is definition of Radner Equilibrium from Microeconomic Theory (Mas-Collel, Whinston and Green - Third Edition).
I'm confused about two conditions:
$\sum_k q_k \cdot z_{ki} \le 0$ (in yellow)
...
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1answer
58 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 ...
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0answers
31 views
Equilibrium price determination in a 2 commodity framework
Following are the set of equations describing the demand and supply of two goods X and Y:
Demand functions:
$$X_d = a_1 - b_1P_x + c_1P_y$$
$$Y_d = a_2 - b_2P_y +c_2P_x$$
$a_1,~ a_2,~ b_1,~ b_2,~ ...
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1answer
41 views
Have I found the correct Emission Price
Let's say that there is a hotel owner $(H)$ and a woodworker $(W)$ working in close proximity to one another.
The woodworker produces $x$ units to sell at market at $p_{x}=6,5$. From the woodworking ...
3
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1answer
41 views
Transforming an indirect utility function into an expenditure function
in preparation for our upcoming exam, our tutor has uploaded sample questions. One of them is the following:
This is my solution:
Which differs from the solution, which gives the ordinary square ...
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0answers
61 views
Signalling Model (How to solve a differential equation?)
I'm currently reading "SAVING RATES AND POVERTY: THE ROLE OF CONSPICUOUS CONSUMPTION AND HUMAN CAPITAL" by Omer Moav and Zvika Neeman, and I encounter some problem deriving one of the equations.
...
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Are there examples of Cost Benefit Analysis using diminishing marginal utility of income?
In Cost Benefit Analysis (CBA) constant Marginal Utility of Income (MUI) is usually assumed. This implies that a dollar received/earned is the same at low and high levels of income. In Social CBA, ...
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2answers
65 views
Monthly price elasticity and possibility of using daily values
I am calculating the price elasticity as a starting point to find a theoretical optimal price that would maximize our revenue.
I am looking at 2 years data and to use the price elasticity formula, I ...
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1answer
86 views
What are some applications of Real Analysis in Graduate Economics?
I am interested as to what areas of masters/PhD coursework that learning the fundamentals of Real Analysis would be beneficial for?
I am aware of its applications in Econometrics proofs and analysis, ...
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1answer
21 views
Effect of a change in quality on price elasticity of demand
I am interested to know how one would expect a change in the quality of a product to affect its price elasticity of demand. Two example will illustrate my confusion:
Example 1
Suppose a producer is ...
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1answer
34 views
Change in the marginal utility of leisure with respect to a change in consumption
I am reading a paper that derives a theoretical retirement model. There is a utility function and a budget constraint forming an optimal control problem. The solution to this problem states that
\...
1
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1answer
47 views
Value Function For Durable-Good Monopolist with General Distribution
It is known that with a unit mass of consumers, each of whom has a value distributed between 0 and 1, one can think of the monopolist solving
\begin{equation}
\max_{p} \ p[1-F(p)]
\end{equation}
when ...
