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
107 views

Multiple Forgone Job Opportunities and Economic Profit

I'm told that forgone job opportunities are implicit costs, to be included in calculating economic profit, but I can't seem to see how I could list and consider many different forgone opportunities. ...
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1answer
112 views

Cost function from CES production function

How can I find the cost function $c(w,p)$ given that the production is $$ f(x)=(x_1^p + x_2^p)^{1/p} \ \ for\ \ 0<p <1 $$ I tried to solve it and found that $$TC(y) = \left\{ \begin{...
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2answers
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Cost function from an easy CES production function

How can I find the cost function c(w,p) given that the production is $f(x) = x_1+x_2$ I did Lagrangien's method but my problem is that I got no $x_1$ and no $x_2$ after taking the derivate. So I would ...
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1answer
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demand curve shift in a monopolistic competitive market

As more firms enter the market, the quantity demanded at a given price level will thus decline. Therefore, the perceived demand curve for any individual firm will continue to shift leftward until the ...
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2answers
15 views

What links can be made between the marginal productivities of the factors of production and the costs of production [closed]

What links can be made between the marginal productivities of the factors of production and the costs of production
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1answer
45 views

Principal-Agent Problem with Two Agents

Consider the following principal-agent problem. You are a manager in charge of two workers, indexed with $i=1,2$. Each worker is asked to perform a particular task, and each can either work hard at ...
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0answers
31 views

graph of dependent income

I would need help with the following problem about consumer theory. Let us say that $X$ is the amount of days at the sea and $Y$ is the amount of days on the cottage. We have some utility function $u(...
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1answer
155 views

CobbDouglas: Constant marginal costs and constant returns to scale

A company has a production function: $$y=x_1^{\alpha}x_2^{1-\alpha}$$ where $0<\alpha<1$. Factor input 1 costs $w_1> 0$ and factor input 2 costs $w_2> 0$. The company wants to minimize its ...
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Solved applied econmics question. Problem is the value of TVC, TC, AVC, ATC, & AFC are all negative. Should I ignore negative value?

Disclaimer: This is not a "Do my homework" type of question. Instead, this is, "I'm confused whether what I did is right or wrong?" type of question. If I ignore negative signs in ...
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1answer
614 views

Calculus and Indifference Curves in an Urban Economics Example

I am reading the paper 'The Structure of Urban Equilibria' by Jan Brueckner. It uses a monocentric city model, where all consumers earn income $y$ at the centre of the city. They buy $q$ housing for ...
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1answer
107 views

Long-term equilibrium price inelastic?

I have doubts about some economic interpretation: Why is the long-term equilibrium price inelastic? But in the short run, the equilibrium price is not necessarily inelastic. What is the economic ...
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1answer
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Find pareto optimal allocations

Consumer 1: $U_1(x_1,y_1)=x_1y_1$ Consumer 2:$ u_2(x_2,y_2)=min\{x_2y_2 , 4\} $ Initial endowments e1=(1,4) and e2=(4,1) I want to find Pareto optimal allocations and show its edgeworth box My ...
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Educating workers (micro model)

Would someone be able to check my solutions to this basic problem? This is a practice test with no solutions provided, and I have no idea if I am going in the right direction. Problem: https://ibb.co/...
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1answer
28 views

Formalizing unorganized Sector

This is a fairly basic question. What are the real benefits of formalizing the unorganized sector? What does integrating these into the organized sector achieve other than maybe increased tax revenue ...
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1answer
54 views

How to find the cost function for perfect complements [closed]

Imagine I got a production function like it : $$ \min\{x_1, x_2\} $$ How can I find the cost function?
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1answer
38 views

How many Nash equilibria are there in the above game?

5 people are eyewitnesses to a criminal incident. Each one of them wants the police to get informed but they prefer a third person to give the information. Suppose k is one of the 5 people. If the ...
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1answer
50 views

Set of consumption over all period is convex in $\mathbb{R}^T_+$?

Today in class, the professor said that the set of all consumption $c(S)$ is non-empty, compact and convex subset of $\mathbb{R}^T_+$. i.e. we know $\sum \limits_{t=1} ^T c_t = S$ where $c_t$ is ...
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1answer
347 views

Calculate optimal discount for product bundling

So recently I made some rules with my transaction data. Based on it I can determine which products are profitable to bundle it together. But even though I know e.g. product A→ product B, are there ...
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2answers
187 views

Finding Cobb-Douglas Hicksian Demand using Duality

I'm trying to follow the in-text examples from Mas-Colell. I can confirm I have the correct first order-conditions and hence the Marshallian demand functions for Example 3.D.1: $u(x_1,x_2) = x_1^\...
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1answer
58 views

How do I use a monopsony (product market) graph to show that a firm has more buying power over a supplier?

For instance, Tesco has more buying power over British farmers. How would I show this on a monopsony graph where Tesco has a surplus?
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1answer
117 views

Consumer Utility Maximization equivalent of economies of scope

Economies of scope captures the idea of having efficiency in variety. I've come across this idea only in producer theory to capture the idea that companies may benefit from their ability to reduce ...
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2answers
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Effects of change in tax on output

Suppose the government imposes a tax on each unit of output produced of $t. What is the firm’s new profit maximizing level of output? The question suggests the use of comparative to determine how a ...
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0answers
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How to create an economic model? What are the step for this? [duplicate]

How to create an economic model? What are the step for this? Is it need a real data for this? Or generating a data is acceptable? If possible, I want to know the step by step for creating a ...
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1answer
106 views

Game with an equilibrium in pure, but none in mixed strategies?

I came across the following game: The question is to find potential equilibria in mixed and pure strategies. The solution says that there is an equilibrium in pure strategies (B,N), but none in mixed ...
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1answer
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Counter example for strong and weak Pareto optimality

We know that strong Pareto efficient is equivalent to weak Pareto efficient if we have continuous and strongly monotone preferences. Please give me an example which we don’t have continuous and ...
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2answers
67 views

setting of Lagrangian function

Consider a simple consumer's problem: Max $u(X)$ s.t. $\sum_i^l p_i x_i\leq \sum_i^l p_i w_i$ $w$ is initial endowment. We can set the Lagrangian function to solve this problem. $L=u(X)+\lambda ( \...
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1answer
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Properties on conditional demand correspondence from the textbook of Mas-Colell et al

I have a question on the properties of conditional demand correspondence Let $z(w,q)$ be the conditional factor demand correspondence, i.e. the solution of the cost minimization problem \begin{align} \...
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1answer
74 views

Categorical variable as explanatory variable (right hand side)

In a linear probability model, or any sort of regression, one can use fixed effect estimation by simply adding in a STATA code i.something. This "something" can be either a village, a county or a ...
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33 views

Second welfare theorem and non-continuous preferences

Are there any monotonic and strictly convex preferences that are not continuous but the second welfare theorem does not hold for them?
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824 views

Non-Constant Elasticity of Substitution

What's the literature on Non-Constant elasticities of substitution? Say, I'm interested in the elasticity between $c_1$ and $c_2$ increasing/decreasing in income/wealth. CES utility functions with ...
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1answer
175 views

Elasticity of demand

I'm reading a paper from Pindyck (1988) where $$P_t=X_t-\gamma Q_t.$$ $P_t$ is the price, $X_t$ is the demand state variable, $Q_t$ production and $\gamma\geq0$ is apparently the ''(constant) demand ...
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What do game theorists think of behavioural economics?

Though behavioural economics has been popularized over the past decade in both industry and pop culture, it seems that not much has changed with regard to the standard economic definition of ...
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3answers
167 views

Why would microeconomics be considered more “objective” than macroeconomics?

I can imagine the following reasons for this: conflation of positive vs normative economics in macro micro phenomenon is less complex (or smaller): thus easier to create reliable models for Thanks
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1answer
99 views

Mathematical framework for modelling the relationship between price and sales of a product

In my job as a data scientist, I am required to model the relationship between the price of a product and the sales or number of unit sold. I am trying to build a simplistic model, the assumptions of ...
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2answers
274 views

What is the returns to scale of the production function q = min {K, L^(1/2)}?

I learned that when there is decreasing returns to scale, the average cost is always increasing. But the professor told us today that the other way around might not always be true. So if average cost ...
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1answer
107 views

Dead Weight Loss (Tax)

Problem Given demand $D(p)=A-ap$, and $A,a>0$ and a fixed price $0<p_1<A/a$ by some company. My solution so far CS is $CS=\int_{p}^{A/a}D(p)dp=\int_{p}^{A/a}(A-ap)dp=\frac{1}{2a}(A-ap)^2=\...
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9answers
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Seminal papers that later were proven to contain errors

I was reading on institutions, and I came across Acemoglu, Johnson and Robinson (AJR) paper on The Colonial Origins of comparative development: An Empirical Investigation, and this paper seemed so '...
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1answer
29 views

Indifference between 2 risky asset

Consider the problem of an individual that must choose how much of his initial wealth w0 > 0 to allocate to a risky asset X. The risky asset X has n ≥ 2 possible return rates, namely r1, . . . , rn,...
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2answers
109 views

What does “r” represent in the total cost function?

I know that the total cost function of a firm in the short run is: TC = wL + rK, where rK is essentially a constant. I understand the variables w, L and K, but I still don't get what r is. I mean, ...
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2answers
157 views

What is the difference between Common Goods and Common Pool Resources?

All this time I was thinking that common-pool resources are common goods, until I read this excerpt from a book.
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1answer
59 views

Why is imputed rental income for owner-occupied housing included in the measurement of household income?

In the National Income Dynamics Study in South Africa, total household income is measured by totalling labour income, government income, investment income, capital income, agricultural income, ...
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1answer
31 views

Profit-maximization for a monopoly

Between two countries, Richland and Poorland, with a strict ban on cross-border sales agreed with the Poorlandian government. The respective demand functions for both countries are: $Q_{poor} = 10 - ...
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0answers
14 views

How can costs curves shift in the short-run?

I have been researching about Orsted economies of scale strategy and I am trying to argue that due to acquisitions and aliances, the costs curves of a firm may shift in the short-run, consequently ...
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1answer
54 views

Microeconomics question

I'm given this question. I'm not sure if I'm doing it right. Can any one help? ...
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0answers
16 views

Price equilibria with transfers

I am pretty new to Microeconomics so please bear with me if I am missing something obvious. I am solving the following problem: The question is in the setting of pure exchange economy with two ...
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1answer
63 views

Correct and complete characterisation of the Walrasian demand function

I would like to propose to you the following problem and my proposed solution. In particular, I am unsure in how to correctly characterize the Walrasian demand. Can you please have a look at it and ...
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2answers
106 views

Boundary solutions in the Utility Maximization Problem

I'm trying to find boundary solutions for the following utility maximization problem, but i'm unsure on how to proceed. Here is the problem and what I got so far: $ \max x_1^\alpha + x_2 \qquad \text{...
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0answers
29 views

Types of Economies of Scale

Context: Delegation informed prime Minister that textile sector is working at fullest capacity due to government policies. They further said the energy package, timely refunds and other facilities had ...
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0answers
23 views

How to explain the flattening of the SRAC curve?

I discovered that there is a way that Short-run average cost curve could become 'flatter' instead of shifting. Yet I cannot find an explanation of why and how it can become flatter. For example, in ...
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0answers
14 views

Can a horizontal merger in a highly concentrated market be beneficial to consumers if the cost synergy of the 2 merging firms is large enough?

There are three firms in a market and they compete in quantities ( a la Cournot).Two of the three firms merge (horizontal merger). The two merging firms will be able to reduce marginal costs ...

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