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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148 views

Effects of giving everyone in the US \$4.33 million dollars each? [closed]

This image has been doing the rounds on facebook: Funny arithmetic error aside, what would be some of the effects of giving everyone in the United States \$4.33 million dollars each?
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Stiglitz 1976 on irrelevance of corporate financial policy

In this paper, Stiglitz gives a verbal argument as follows: Let us consider verbally what actions of the individuals are required to offset various actions by the firm. Assume the ...
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1answer
166 views

What are alternatives to lottery that would create same economic impact?

Lotteries can be detrimental to a subset of society since people who often play dont understand stats and that for most part lottery is negative expected value. However, taxes (and portion of ticket ...
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1answer
407 views

Government's intervention question [closed]

Given that demand for a good X is equal to $q_D=393-2p$ and market supply is $q_S=p/4-12$. Find equilibrium price and quantity, consumer and producer surplus and draw a diagram illustrating the ...
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2answers
4k views

What is the difference between 'actual' and 'potential' interaction between buyers and sellers?

In the book "Microeconomics" by Pyndyck and others, the author(s) define a 'market' as a collection of buyers and sellers, who by the actual or potential interaction with each other determine the ...
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3answers
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Marshallian demand help [closed]

Consider a consumer with a Cobb-Douglas utility function over three goods of the form $u=(x_1+z_1)^\alpha \cdot (x_2+z_2)^\beta \cdot (x_3+z_3)^\gamma$ with $\alpha, \ \beta, \ \gamma, \ z_1, \ z_2, \ ...
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1k views

Why do firm output decreases when fixed cost decreases in Long Run?

So in long run if fixed cost is lowered, more firms enter the industry and increase the supply, bringing up industrial output. According to the firm diagram, Average Cost lowered so that the firm ...
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1answer
88 views

Is the following graph possible?

Is the following graph possible? I've attempted to sketch the TC/TR curves for it but they don't seem to be able to satisfy the following two properties at the same time: 1) Slope of Total Cost (TC) ...
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1answer
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What is the difference between Herfindahl Index and the Concentration Ratio

I was recently reading about the Herfindahl Index and from what I've learned so far, is that HHI is preferred over the Concentration Ratio. However, I didn't quite understand the reasoning that lead ...
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1answer
72 views

Are Microeconomics limited to one country?

For my IB Econ internal assessment I want to comment on the falling oil prices across the globe. Would this be covered under Micro because it's 1 specific market? or is it international because it ...
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1answer
48 views

What does this $(\gamma _{0.clothes} + \gamma _{1.clothes} * \ kids)$ term mean in my linear demand equation?

I have the following demand equation system (expenditure ratio model): $w_{clothes}= \beta _ {clothes} + \alpha_{clothes} * \ kids + (\gamma _{0.clothes} + \gamma _{1.clothes} * \ kids)* \ income + ...
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796 views

Profit maximization

The table bellow shows the relationship between total cost and output for a firm in a perfectly competitive market. The firm sells its product for €7 per unit. I was told to answer the following ...
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1answer
2k views

Mathematical analysis of Marginal Cost

Marginal cost is the cost associated with producing one more unit of output. Mathematically speaking, marginal cost is equal to the change in total cost divided by the change in quantity. $\ ...
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190 views

Comparing Nash equilibria

Suppose two players play the following game: \begin{array}{cc} & L & R \\ U & 1,1 & 0,0 \\ D & 0,0 & 4,4 \end{array} Is there any way to compare the top-left Nash ...
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1answer
1k views

How to interpret Marginal Cost values? [closed]

The Marginal Cost (MC) of an additional unit of output is the cost of the additional inputs needed to produce that output. Here is one of the formulas for calculating marginal cost: $\ MC=\Delta CF\...
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Articles about police complaints for a lit review?

I'm doing a research paper about how different cities have different quality of police service. I want to do a regression where the dependent variable is number of sustained complaints per 10 officers ...
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1answer
248 views

Monopoly second degree discrimination - two part tariff

In a Monopoly with second degree discrimination - two part tariff will the consumer with higher demand always pay a higher entrance fee and lower unit price than the cunsumer with lower demand or is ...
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2answers
92 views

Indifferent choice assumption in economics

Take, for instance, that you have a game similar to the one proposed by Levitt and Duggan (2000) in sumo wrestling (link: http://www.nber.org/papers/w7798.pdf, section II (pages 9-10) in which the ...
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1answer
92 views

A Deceptive Raffle

Suppose we have a hungry fox. He has a gigantic bunch of spoiled carrots that he cannot eat (and wouldn't eat if they were fresh anyway), but he knows the local bunnies in the neighboring area love ...
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2answers
135 views

In which market structure does the consumer has almost zero knowledge about the good?

Consider goods that are almost identical (e.g. cement) and require technical knowledge to understand their merit, which an ordinary consumer might not possess. What then is the feature characteristic ...
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80 views

A high store loyalty indicates what kind of competition among cement retailers selling products of the same brand?

To provide some context, this question occurred to me while I was considering the cement retail market. If one considers retailers selling cement of only one brand, then the concept of brand loyalty ...
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1answer
61 views

Monopoly Profits [closed]

Have a question: In the town of Johnson, there are 100 identical citizens and one bus company. The bus company is owned by the citizens, each of whom receives 1% of the bus company’s profits. Nobody ...
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61 views

Market with substitutes: Response of prices and quantities

The demand function for theater tickets is $D_t(p_t,p_c)$, where $p_t$ stands for the price of theater tickets and $p_c$ stands for the price of cinema tickets. Supply of theater tickets is described ...
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2answers
356 views

List of behavioral economists [closed]

Even though there is a massive literature on behavioral economics, i couldn't find anywhere a list of economist that focus on that discipline. Since i am interested in environmental economics, i ...
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1answer
61 views

Present Value at time 0 [closed]

Land is an indestructible capital asset that offers a perpetual revenue flow. You own a piece of land that returns $20,000 per year forever. The relevant real interest rate to consider is 4%. What is ...
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1answer
270 views

On closedness: commodity space

In Intriligator (2002, p. 143) we find the following statement: \begin{align} C = \{(x_1,x_2,\ldots,x_n) : x_j \geq 0,~j=1,2,\ldots,n\} \subset [0,\infty)^n \end{align} Thus commodity space ...
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1answer
58 views

Will there be any competition amongst cement retailers?

If we consider a cement manufaturer in a given country, say India, then will the cement retailers of that companies' product compete with each other? And if so, then what kind of a competition will it ...
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1answer
25 views

What are the Impacts on an economy when a large mining venture begins to reduce production and lay off workers in a remote region?

I am currently unsure about how such a question above should be answered. To clarify , I am confused as of which topics relating to the question i should discussion in order to answer it. (For ...
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0answers
56 views

Separate optimization problem versus one big Lagrangean

I am a bit confused about when to consider a separate optimization problem and when to combine different problems into a single optimization problem. Consider an individual who derives utility from ...
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3answers
520 views

Why is market power presumably high when goods are fungible and demand relatively inelastic?

What does the fact that the goods in an industry are fungible add to a market power analysis if you already know demand is relatively inelastic?
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1answer
142 views

Removal of tax excise on producers, will increase supply?

If the government removes an excise tax on producers, will their supply increase? For example, Price of gasoline is $2 a gallon Producers are taxed at 50 cents per gallon by the government Weekly ...
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1answer
291 views

Time costs and the St. Petersburg paradox

In the St. Petersburg paradox, we end up with the problem that a rational agent should be willing to play the game for any wager, if we look at expected income or utility of expected income. The ...
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1answer
2k views

A graphic calculator for simple microeconomics problems

I can do simple calculations in micro-economics, such as: given the utility function of a consumer, calculate his demand curves; given utility functions of two consumers and initial endowment, ...
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2answers
152 views

Why do companies push users to use inferior software?

Sometimes, companies influence users in order to make them use inferior software and other services. For example, Microsoft makes it difficult to use anything other than Bing for Cortana, even though ...
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8k views

Definition of a 'Competitive Firm' and a 'Perfectly Competitive Firm'

In many of my intermediate microeconomics quiz and test questions I encounter the term "competitive firm" and/or "perfectly competitive firm", e.g.: In the short run, a perfectly competitive firm ...
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967 views

Should Costs of Travel to Buy Goods be Regarded as Transaction Costs?

Within the approach of New Institutional Economics associated with Oliver Williamson and others, emphasis is placed on transaction costs as a key factor in explaining why different forms of economic ...
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1answer
307 views

How does Marginal rate of substitution change?

If you are at a point $(x,y)$ where your $MRS(x,y)=3z$, and you later exchange goods to be at point $(x-a,y+b)$, where your $MRS(x-a,y+b)=z$, can you conclude that you are one the same indifference ...
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213 views

Finding Pareto efficiency from competitive equilibrium

So to my knowledge, the competitve equilibrium would be Marginal cost= Marginal private benefit. My question is, how would you determine what the pareto efficiency is from the Marginal social benefit ...
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1answer
640 views

Derive the demand functions: Hotelling-style Model

So I have this economics question that I have been trying for a while now and I can't seem to get the answer correctly. Below is the question and after I will show what I have so far. An explanation ...
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1answer
387 views

Demand function of a family

Different family members have different utility functions, but All family members consume the same bundle. For example, consider a family $F$ that has to select a bundle of funiture ($x$) and ...
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1answer
382 views

Tax wedge in labour market

I'm reading a book ( Macroeconomics - Institutions, Instability and the Financial System ) and on page 62, the authors define tax wedge as the "difference between the real consumption wage and the ...
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1answer
200 views

General Equilibrium Modelling

I have a question regarding GE modelling. The firm's problem is to: $$ \max\pi=pf(k,l)-wl-rk $$ If this is true, we choose $l$ and $k$ to maximize the difference between costs and revenues. This ...
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231 views

What are some ways to add quality to the supply-demand model?

Please excuse me, I hardly know anything about economics yet. When the quality of a product changes, the demand curve moves. But what if there are different versions of a product, of varying ...
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2answers
364 views

Why are there estate taxes after the owner passes away?

Isn't it unfair for estates to be taxed after death? The person who bequeathed the estate probably purchased it with after tax money, so wouldn't it then be taxed twice? What is the purpose of the tax ...
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1answer
152 views

What would happen if total welfare were evenly distributed?

Suppose that there is a market with a large number of consumers and producers. Assume that the government knows the reservation prices of all people in the market. Suppose that the government uses ...
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1answer
79 views

What is an equilibrium generated by replication?

Sorry this might be a little too rudimentary for you, but I'm not an Econ background. When I was doing exercises for MGW chapter 17 "Positive Existence of Equilibrium" I came across the following ...
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1answer
1k views

Profit maximizing in monopsonist market

The question is as follows: The Happyland Hospital is a monopsonist employer of nurses in the small city of Happyland. The market supply function of nurses is $S(W) = 0.1W - 100$, where $W$ is the ...
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336 views

Constrained optimization for $u(x_1,x_2,x_3,x_4)=\alpha \min \{a x_1, b x_2\} + \beta \min \{c x_3, d x_4 \}$ [duplicate]

Suppose preferences are represented by the following utility function \begin{equation} u(x_1,x_2,x_3,x_4)=\alpha \min \{a x_1, b x_2\} + \beta \min \{c x_3, d x_4 \} \end{equation} Write the ...
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162 views

Microeconomic Model of Knowledge and Technology

Can you point me to any microeconomic models of knowledge and technology? It is intended to be used for simulation. The problem that arises is that you need to simulate the effects of technology on ...
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272 views

Convex consumer preferences

Man has blue and red marbles. If he has more red marbles then blue one he wants to exchange one red for two blue($1R:2B$). If otherwise (more blue then red)he wants to exchange one blue for two red($...

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