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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1answer
82 views

Doubts in modelling the Arthur(1991) paper: Designing economic agents that act like human agent

I am implementing Arthur's paper "Designing economic agents that act like human agent: A behavioral approach to bounded rationality" from 1991 in JAVA and I am having a problem understanding one part ...
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1answer
1k views

Benefits of a cartel among firms

Suppose I have $n>2$ firms selling differentiated products. These firms form a cartel for the price. The cartel has size $n_c$. Let $\pi_{i,m}$ be the payoff of a firm $i$ outside the cartel and $\...
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2answers
11k views

The relationship between the expenditure function and many others!

I dont understand the relationships between Hicksian demand, walrasian demand (marshallian), the expenditure function and the indirect utility function (including the value function V(b)). I have ...
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1answer
576 views

Effect of specific tax on demand and supply

There are intersecting supply and demand curves. A tax is levied on suppliers. Say the tax is a fixed tax (for example, VAT) and not an ad valorem tax. Why can we not just move along the demand ...
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1answer
2k views

Walrasian Equilibrium under Leontief Preferences

There are two people in the economy, A and B. Both have the utility function: U=min{x,y}. A has an initial endowment of (x,y)=(50,100) and B has (x,y)=(100,50). I know how to draw the Edgeworth box ...
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1answer
495 views

Moral Hazard or Adverse Selection?

I pay the doctor before he conducts the surgery. Can anyone explain to me whether this statement shows moral hazard or adverse selection?
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2answers
8k views

What is a substitute/complement in terms of mixed partial derivatives?

I am trying to understand how substitutability relates to mixed partial derivatives. I thought the change in marginal utility with respect to a change in the amount of $x$ would correspond to $$\frac{\...
6
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1answer
386 views

Estimating Price Elasticity from sales

I'm looking at data for an online shop with clothing items listed at different prices. I'd like to use this information to do some kind of profit maximization (i.e. I'd like to have some understanding ...
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0answers
285 views

Risk and uncertainty [closed]

A risk averse is given this: Option1: 1000 with p=0.25 and 100 with p=0.75. Option 2: 325 for sure. Which option would he choose? For this part, I know the person will choose option 2 over option 1. ...
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3answers
1k views

Question about the Ellsberg Paradox in Expected Utility Theory

The von Neumann-Morgenstern theorem states that, assuming a person's preferences under risk satisfy certain rationality axioms, then there exists a utility function u, the von Neumann utility function,...
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1answer
259 views

How does Google price the items on Google Play?

I am a fledgling computer science researcher working in intersection of economics and computation. Please excuse me if this question seems out of place to the administrator. I am currently studying ...
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1answer
906 views

Equi-marginal Principle

Hi the textbook i am studding from simply states that 'the rule for rational consumer behaviour is know as the equi-marginal principle. This states that a consumer will get the highest utility from a ...
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1answer
2k views

Corner solution-consumer theory [closed]

$$U(q_1,q_2)=4{q_1}^{0.5}+q_2$$ $$P_1=1$$ and $$P_2=2$$ Initially $$Income=40$$ Then the question asks :how do I know what income I can get a corner solution? Anyone can help me with this? Thank you
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1answer
492 views

Shifts in demand curves

When plotting a demand curve for a good, lets say carrots with price on the y-axis and quantity demanded on the x-axis. A shift any determinant of demand other than price of carrots results in a shift ...
3
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2answers
613 views

Marginal rate of substitution

This is a homework question. Suppose a consumer has preferences over two goods that can be represented by the utility function $U(x,y) = 2\sqrt{x} + y$ The marginal rate of substitution of $x$ for $...
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2answers
3k views

Translog Preferences

What are translog preferences? The wikipedia article only clears up that it stands for transcendental logarithmic preferences, and that they are a generalization of Cobb-Douglas preferences. Do they ...
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3answers
99 views

Papers on measuring institutions

I'm new to this subject, and I'm looking for papers on measuring the 'quality' of institutions and their possible role in the development of a country. ANy help would be appreciated.
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2answers
8k views

Are Cobb Douglas goods complements or substitutes?

Given $$U(x,y)= x^\alpha y^{1-\alpha}$$ $\alpha \in (0,1)$, are Cobb Douglas goods (here $x$ and $y$) complements, substitutes, or neither? Why? An explanation with mixed partial derivatives would ...
2
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2answers
647 views

Discounted (present value) calculation

I had a homework problem regarding calculating a discounted present value. My solution is: 15000 * (1+.08)^1 + 15000 * (1+.08)^2 = $33 696 The question is this: ...
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4answers
2k views

What are Giffen Goods?

What exactly are Giffen goods and are they of purely theoretical interest or has there been empirical evidence of their existence?
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1answer
768 views

labor leisure trade off

Walras has available 24 hours per day. He has to alloacate this 24 hours between leisure $(L)$ and work. His utility function depends on leisure and the composite good $(C)$ and is given by $U=LC$. ...
7
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2answers
600 views

on economic growth and Second Welfare theorem

While I was studying eighth edition of Mankiw's Macroeconomics, in chapter 9 on Economic Growth(pg. 245), the author mentions : "Some economists have proposed increasing the incentive to save by ...
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2answers
1k views

Does concavity of the utility function has any bite?

A utility function in general has only ordinal meaning, any monotone transformation preserves the order isomorphism of the underlying preference ordering. However, there are several econometrics ...
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1answer
611 views

Deriving indifference curves

I have been trying to work this out for quite a while now, but I can't seem to understand how to solve these kind of questions. Any help (or hint) would be highly appreciated. Professor Goodheart's ...
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1answer
8k views

what is the optimum level of production?

The demand function of a monopolist is $q = 12 - p$ where $p$ is the price. Using the total cost and total revenue I was trying to calculate the optimal (short term) level of production. I tried to ...
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1answer
94 views
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1answer
370 views

For what demand function is a monopoly most harmful?

Consider a firm with zero marginal cost. If it gives the product for free, then all the demand is satisfied and the social welfare increases by the maximum possible amount; call this increase $W$. ...
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1answer
191 views

Kimball (1995) Specification of Final Good Production

Kimball (1995) defines production of the final good ($Y$) with intermediate goods $y_l$ in his equation (1) as $$ 1 = \int_0^1 G\left(\frac{y_l}{Y}\right) dl $$ with $G(1) = 1$, $G'(x) > 0$ and $...
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1answer
58 views

Aggregate efficient production and division of labour

How to resolve the following seeming contradiction? Mas-Colell, Whinston, Green p. 148 Prop. 5.E.1 says that the efficient aggregate (coordinated) production is just the sum of individually optimal ...
3
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1answer
261 views

Microeconomic foundation of discrete choice model

(1) Does the following result in a "valid" (in the sense of being consistent with the economic theory) market demand function? A consumer $i$ maximizes a utility $u_{ij}$ in choosing one of J ...
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1answer
1k views

Intertemporal utility maximization through consumption

I need help in solving this question from one of the entrance examination. Q.Consider an economy where a representitive agent lives for three periods. In the first period, she is young - this is the ...
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2answers
133 views

What is the name of the gain/cost ratio

I wanted to know what is the formal name of the (gain/cost)x100 ratio calculation (growth rate perhaps?). Any clarification would be greatly appreciated.
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1answer
37 views

How to evaluate if an activity is likely to produce a positive ROI?

I am trying to establish if it would be worth my while to sell a product in a particular online marketplace but am unsure how to evaluate if it would be financially worth my while. The marketplace in ...
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1answer
48 views

If strict preferences map onto $\Bbb{N}$ what do weak preferences map onto?

Suppose I have $$\text{apples} \succ \text{pears} \succ \text{pineapples}$$ I can map this onto the natural numbers as follows $$\text{apples}\mapsto 1$$ $$\text{pears}\mapsto 2$$ $$\text{pineapple}...
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1answer
155 views

Relationship between Revenue-Elasticity and Price-Elasticity

I have attempted to solve this problem and would be grateful if someone looked over my solution 5% increase in price results in 5% decrease in total revenue. I need to determine price elasticity of ...
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1answer
83 views

Perfect competition profits question

Market is supplied by: 50 competitive companies all of them have relatively low costs given by an equation $C_l(q)=350+2q+q^2$ and by n companies of higher costs given by an equation $C_h(q)=400+2q+q^...
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4answers
1k views

Are billboards beneficial for the economy? Why?

Billboards cost money to make and don't really seem to significantly benefit anyone other than billboard-makers. A company c putting up billboards presumably increases profits from the resulting ...
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1answer
4k views

Negative Gini Coefficiente?

Is it possible to have a negative gini coefficient? In which situations is it possible? Any help would be appreciated.
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1answer
61 views

How to determine the worth of a good

I've searched around the web for awhile now and I'm beginning to think this might be an unanswerable question. I want to know if there is a theoretical way to determine the worth of a particular good, ...
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1answer
1k views

Relationship between short-run marginal cost(SRMC) and long-run marginal cost(LRMC)

While reading Intermediate Microeconomics from Hal Varian, I fell short in understanding the relationship between SRMC and LRMC. I can see how in SR, when fixed factor is chosen at LR optimizing ...
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0answers
73 views

Implementing Coasian bargaining to achieve social welfare

In this excellent answer, Ubiquitous elaborates on the Coasian solution as an alternative to Pigouvian subsidies. I wanted to explore and understand the solution a bit further. Consider the setting ...
2
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1answer
101 views

Is it possible to calculate how long it will take to reach Break Even Point if the information provided is only an ROI (Return On Investment) of 10%?

Is it possible to calculate how long it will take to reach Break Even Point if the information provided is only an ROI (Return On Investment) of 10%? Only ROI is provided. If there is a way to ...
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0answers
173 views

undergrad Producer theory problem [closed]

Two commodities, X and Y, are produced with identical technology and are sold in competitive markets. One unit of labour can produce one unit of each of the two commodities. Labour is the only ...
2
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1answer
239 views

Is there an economic term for decreased demand due to expected decrease in price due to a product's value lasting for a finite amount of time

So, at work we are doing a charity bake sale. Lunch hour is long gone. An email was sent out offering everything at half price. I imagine decreased demand as everyone knows they have to get rid of ...
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2answers
458 views

Is elasticity purely an aggregate concept or can it be individualized

First question here. I am not an economist by training, but I do quite a bit of econometric analysis in my job (my background is maths). I often get asked about elasticity, and I am familiar with ...
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0answers
425 views

Altruism and locally non-satiated preferences

Is there an altruistic utility function that cannot represent a locally non-satiated preference? As an example of an altruistic utility function: $U^1(x^1,...,x^H)=u^1(x^1)+\sum^H_{j=2}U^j(x^j)$, ...
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3answers
464 views

Literature Recommendation: Advanced Undergraduate Economics

I come from a strong quantitative background and am going to law school in the fall. I'm interested in financial product regulation and competition law. I have taken an introductory course in ...
8
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1answer
341 views

Muth exposition of the rational expectations hypothesis

I am reading in statistical decision theory and stumbled upon the rational expectations literature (rationality with incomplete information->dynamic problem->N.L Stokey->husband). The assumption that ...
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2answers
9k views

Find the optimal demand functions for capital and labour for this firm

I'm trying to solve this question which states: Suppose that a profit maximizing producer has a production function described by Q = K^3/4 L^1/4 and faces the general isocost line (TC = rK + wL). ...
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1answer
317 views

Estimate function expression for TC and MC

I have this Labor (L) 0 1 2 3 4 5 6 7 8 9 10 11 Output 0 32 72 114 161 204 242 272 292 304 302 288 and I need to estimate function expressions for $TC$, $AVC$, and $...