# 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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### Optimal tax level that raises revenue R < e given Hicksian demand elasticities

I have to find a uniform tax rate that raises revenue R < e and I am given a Hicksian cross price elasticity demand matrix below. I know I want to use Ramsey's first-best but I am not sure, how to ...
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### locally nonsatiated preferences

what does this symbol mean in the discuss of locally nonsatiated preferences: $\varepsilon > 0$ and $||y-x||<\varepsilon$.
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### Perfectly competitive firms. Economies of scale

My textbook says the following: "Perfectly competitive markets only achieve productive efficiency if you assume that there are no economies of scale in the industry." Why is this the case? And by "...
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### Mathematical Micro/Macro Economics Textbook Recommendation

I was formerly an economics major and now also majoring in mathematics. I want a textbook that is rigorously based on mathematics; not just using mathematics whenever the author wants, but in a more ...
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### Axiom: More is Better; But when is more better?

I'm taking an introductory microeconomics course and have been introduced to the 3 axioms of economic preferences. These include Completeness Transitivity Non-satiation My understanding of non-...
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### Are these two derivatives the same with regards to TR?

Given that Marginal Revenue is change in Total Revenue: TR = P*Q P = f(Q) TR = f(Q) * Q MR = dTR/ dQ Or ...
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### Pareto Set with strictly convex preferences

Suppose the agents A and B have the following utility functions $x_A y_A+12x_A+3y_A$ and $x_By_B +8x_B+9y_B$ respectively with endowments (8,30) and (10,10). The contract curve's equation turns out ...
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### marginal utility of consuming vs marginal rate of substitution

good day all I am taking second year economics, but my textbook is not very clear on this topic A quoted from Intermediate Microeconomics and Its Application. Nicholson, Snyder. 11th Edition. ...
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### Can we compare risks of lotteries?

I understand the concepts of risk-aversion, risk neutrality and risk-attraction. I wonder if it possible to compare risks between two lotteries without giving the utility function. For instance, Let ...
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### Minimizing consumption in a single market( Partial Equilibrium)

Let there be a good X where the optimal consumption is 0; i.e the social costs for any unit provided would always be greater than the utility surplus of the market. We know that prohibiting it( ...
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### Utility Functions: Implying endless consumption?

Do utility functions imply that if a consumer's income infinite, his consumption should also be infinite? The reason why I'd think this is the case is based on my basic understanding of utility ...
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### Notation? Inverse of demand function

I'm looking through The Investment Decisions of Firms by S.J. Nickell, and I've come across some notation that I don't quite understand. Any clarification would be very welcome. Nickell first assumes ...
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### 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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### In the long run, would a production-possibility curve expand outward if the country preferred more consumer goods than capital goods?

PPC will not expand outward if the country preferred more consumer goods than capital goods. The total amount of resources in an economy at any given point of time is fixed. If a country ...
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### Diminishing mariginal utility and risk preferences

Diminishing marginal utility is a concept only in cardinal utility theory rather than ordinal utility theory. As diminishing marginal utility implies a concave shape of the utility function, does it ...
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### When to use a lagrange multiplier?

I have a question in regards to the use of Lagrange multipliers in macro models. I have seen that when writing a Lagrange there are two ways to write the Lagrange multiplier: 1) Indexed or 2) ...
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### Does quantity demanded refer to all consumers or individual consumers?

When looking at points along the demand curve, is each quantity corresponding with each point referring to the total quantity demanded by all consumers in a market or the quantity demanded by ...
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### How to compute Walrasian equilibrium in the case of logarithmic utility?

If the utility is $U = \ln x + 2 \ln y$, how do you compute Walrasian equilibrium via usual formula for demand $x=a(x p_x + y p_y)/p_x(a+b)$ ? What is $a$ and $b$? In case of Cobb-Douglas function ...
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### How would increase labor productivity lead to improved living standards of people in an economy?

I would like to know more about the mechanisms through which higher labor productivity would translate into higher living standards for a population in a given economy.
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### Supply and Demand plotted on a three dimensional Cartesian coordinate system

Is it possible ? if it's possible can someone give me a reference ? Thanks !
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### Population growth and household income

I heard a real estate agent say “as a city’s population increases so will the household income.” He went on and gave an example of how a city had a population growth of 20% and a household income ...
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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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### How do we define an efficient tax in microeconomics?

I am currently working through problems to study for an upcoming exam. I am not seeking a solution per se. I am looking at the intertemporal choice model. I am looking at two periods where consumption ...
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### Numerical Question on a subsidized monopoly

Suppose a government agency has a monopoly in the provision of internet connections. The marginal cost of providing internet connections is $\frac12$, whereas the inverse demand function is given by: ...
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### Inforamtion asymmetry modeling

Is there any cook book, in finance, for models in information asymmetry, so as to make some practice?
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### MWG Proposition 2.F.1

Is homogeneity of degree zero necessary in proposition 2.F.1? It seems like the proof does not assume homogeneity of degree zero to establish the proposition. If this is true, it seems that ...
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### Budget Constraint in Utility Maximisation Problem with Lagrange Multipliers

Lets say we have a utility function $U: \mathbb{R}^{2} \to \mathbb{R}$ given by $U(x,y)$ and a binding budget constraint $p_{x} x + p_{y} y = m$, where $p_{x}, p_{y}$ are prices of goods $x,y$ and $m$ ...
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### In a production function, the technology can vary across the firms and times. But the “power” must be same for the same industry?

Let $F_t=A_tK_t^\alpha L_t^{1-\alpha}$ be the production function with two parameters. In regression, we know the firm level $F_t$, $K_t$, and $L_t$. We want to estimate $A_t$ and $\alpha$. I've ...
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### In the Cournot Duopoly Model,why is the Equilibrium achieved at 1/3 Rd of the Market Share?

I've been reading it for a while,while I do get the action reaction movements,I can't understand as to how the 1/3rd value was reached. Can anyone intuitively or mathematically explain as to how it's ...
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### How can an outcome be Pareto efficient but not Kaldor-Hicks efficient?

An policy is a Pareto improvement if it makes some people better off and no one worse off. And a policy is a Kaldor-Hicks improvement if it can be turned into a Pareto improvement by redistributing ...
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### Optimizing Lagrangian Function Subject to 4 Input/Output Constraints:

The objective function: $$\text{utility}=U\left(x_{c}, y_{c}\right)$$ subject to, $x_{o}=f\left(y_{i}\right)$ $y_{o}=g\left(x_{i}, x_{o}\right)$ $x_{c}+x_{i}=x_{o}+x^{*}$ $y_{c}+y_{i}=y_{o}+y^{*}$ ...
Let us assume that there is a labor who lives in discrete time universe and discounts future payoffs with the discount factor $b\in (0,1)$. And we assume that this labor is at period $t=0$ at first. ...