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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2
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1answer
33 views

Obligations of a company

Any company may "feel" obligated towards several parties at once: its shareholders its employees its customers its partner companies (sub-contractors and suppliers) its country and social environment ...
0
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1answer
62 views

robinson economy with production

Facing a little bit of a problem with this questions, did a similar one BUT the utility function was not linear and got MRS dependent on goods (was not just a number) - here I am at a loss. The ...
2
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1answer
70 views

WARP implies completeness, transitivity and thus rationalizability. What is wrong with the statement?

Let $A$ be a menu and $R$ be a complete and transitive binary relation. Define choice correspondence generated by $R$: $$c_R(A)=\{x\in A|| xRy \ \forall y\in A\}.$$ Theorem (from Kreps 1988): for ...
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2answers
57 views

Providing subsidies affects Marginal Private cost but not Marginal Social Cost?

According to the theory that I'm seeing on the internet and in textbooks, when a government wants to correct underproduction due to a positive externality of production, they can decide to subsidize ...
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1answer
39 views

Decreasing and increasing returns to scale question

Hi, I have deduced that this function exhibit increasing returns to scale but I am not sure how to verify part d. My answer doesn't show that there is decreasing returns to scale but I can't be sure d ...
2
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1answer
19 views

Substitution effect when price of both goods change by the same percentage

I am trying to grasp the concept of income- and substitution effects. The way, I've understood it, the decomposition bundle is found, at the original indifference curve, where the slope equals that ...
0
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1answer
29 views

Emergence of notion “primitive business” in the era of Industry 4.0 and globalization

It has always been the conventional wisdom that businesses should be fit to survive in the market competition, that only the best businesses can survive beyond horizon of several years, that survival ...
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0answers
31 views

Afriat theorem for negative goods

GARP and Afrait theorem assume that the alternative $x\in\mathbb R_+$ is always positive. In some economic contexts, such as financial choices, the attribute can be negative. I wonder if we can ...
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0answers
7 views

wage/productivity, what does it show

I just confused about the fact that does wage/productivity show the wage gap? So if wage/productivity is the wage gap then by the increase in productivity the wage gap should decrease as the ...
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1answer
53 views

Is truth cheap, and falsehood expensive and volatile? [closed]

Question: In a scenario where data is bought and sold in a double-auction market, will the trading price and volatility of a given piece of data become inversely proportional to its accuracy over ...
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0answers
34 views

Homogeneity in Marshallian demand function

I have worked out the expenditure function for a Marshallian demand function, R represents a fixed cost and the questions asks about why the expenditure function is unusual. The answer explains it is ...
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1answer
31 views

Trying to apply in practice the theory of finding the optimal price in a cournot competition

I recently received my bachelors degree in economics. For fun I wanted to try to apply some micro-economic theory of finding the optimal price in a cournot competition. I wanted to do this for a ...
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1answer
19 views

Which of the following firms can operate in a perfectly competitive industry? [closed]

This was a question in a test. I am looking for an explanation for the answer. Firm A's cost of producing output y > 0 is c(y) = 1 + y Firm B's cost of producing output y is c(y) = y(1-y)^2 Answer: ...
2
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1answer
64 views

First order conditions in a Moral Hazard problem

Consider a principal-agent problem where effort is observable. Let $\pi$ denote profit, let $w$ denote the wage to be paid to the agent, and let $f(\pi|e)$ denote the pdf of the profit, conditional on ...
2
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2answers
226 views

Stackelberg with 3 firms

I'm currently trying to solve the following problem: Stackelberg with 3 firms Imagine there are three firms on a monopolistically competitive market. The marginal cost of produc- tion in each ...
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0answers
19 views

How are preferences related to relative prices?

For instance, across regions of a country or between countries. Is that different preferences for food lead to distinct relative prices in different regions or countries? Or is it the other way ...
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1answer
62 views

Supply curve for a competitive firm with constant MC

I know that for a perfectly competitive firm, the supply curve is given by $p=MC \ge AVC$, where $AVC$ is the average variable cost. Now I get really confused when the $MC$ comes out to be a constant....
4
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1answer
57 views

GARP and SARP assumed mononticity?

Monotonicity means the decision maker prefer more goods than less. It is not mentioned in textbook that SARP and GARP preasumed monotonicity. GARP: if $a$ is indirectly revealed preferred to $b$, ...
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1answer
57 views

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: ...
2
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1answer
55 views

Proof of monotonocity of preferences

Question from Intermediate Microeconomics by Hal Varian: "We claimed in the text that if preferences were monotonic, then a diagonal line through the origin would intersect each indifference curve ...
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2answers
81 views

Why is Marginal Cost = Price better than Marginal Cost > Price for maximizing profit? [closed]

Isn't MC>P a better aim? Given the revenue you earn from each unit is more than cost in producing each unit?
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1answer
46 views

Marginal Cost Calculation issue

I calculated the Marginal cost for the below question. But it seems the results are wrong After coming up with an innovative idea for a new product, you paid 4000 to an industrial designer to draw ...
0
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1answer
76 views

Utility Possibility Frontier with two consumers and 3 commodities

I am trying to solve the following problem: Consider a pure exchange economy with three commodities and two households with individual endowments: $$e_1=(1,2,3), e_2=(3,2,1),$$ respectively, and ...
2
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1answer
46 views

Calculating Price Elasticity of Demand

Hi I was given the following price vs quantity values. ...
2
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1answer
43 views

Why is Walras equilibrium inefficient when we are dealing with public goods?

I know that when we have public goods we have that: $$MRT = MRS_a + MRS_b$$ Though I fail to understand why does this makes Walras equilibrium inefficient. Thank you very much for your help!
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1answer
51 views

fixed an marginal cost calculation issue

I'm trying to solve a question that is quite difficult for me. I did part of the question but, bit difficult to decide the exact answer for the below question. After coming up with an innovative ...
5
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1answer
146 views

General mathematical model of incomplete contracts?

I have read various articles about incomplete contracts, like Hart's papers and Milgrom's papers. But I have not found a paper that defines mathematically, in the most general way possible, what an ...
3
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1answer
42 views

Why do some perfectly competitive, loss-making firms shutdown and others don't?

Question: Why do perfectly competitive, loss-making firms that have (AC>AVC>AR) shutdown but Firms that have (AC>AR>AVC) not shutdown? -Both of these types of firms are making a loss. How is it ...
3
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2answers
92 views

How to efficiently study and learn Economics?

I read there are a couple of questions asked in this regard, but I am not quite satisfied with the provided answers. I am currently doing my master's degree (expecting to pursue a PhD) in Economics, ...
2
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3answers
79 views

Is there really an “efficient equilibrium *price*” with externalities?

In the "Intro to Micro" approach to externalities, I've always felt uneasy as a teacher with the idea that there is something like an "efficient equilibrium" with a single "efficient price". To keep ...
2
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2answers
225 views

Is it possible to give, in economics, an example of a relation ( set of ordered pairs) that is not a function?

In mathematics, some relations ( sets of ordered pairs) are not functions. I know economists make use of functions. But do they also consider relations that are not functions. In which branch of ...
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1answer
51 views

Utility maximization in a 2-good scenario with an option to buy a combo of the two

I am solving the following question: Suppose that we live in a two good world, books (x) and movies (y), with utility function given by $u(x,y)=min(x+2y,2x+y)$. Prices of books and movies are 25 and ...
1
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1answer
50 views

Cournot's game profit maximisation first order condition question

My question is about the last part (I attached the rest for context). I don't understand the final line at all. I thought the first order condition would just be to set the derivative = 0. Very ...
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1answer
22 views

Budget constraint in Radner Sequential Trade Equilibria

Suppose that $q$ is a k-tuple vector of prices for the k assets whose quantities are given by the k-tuple $\theta$. I have just read that in the Radner Sequential Trade Equilibrium (not sure if this ...
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0answers
10 views

Have any economics papers used unified cure models?

Does anyone know if there are unified cure models (aka split population models) in time-until-employment studies that combine the mixture cure approach with the promotion time approach as described in ...
3
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1answer
50 views

Perfectly competitive constant MC Questions [closed]

If I have a market in which I have constant MC, no fixed costs, and perfect competition- when would it make sense for a new firm to enter the market(granted they have the same technology)? Would I ...
2
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1answer
52 views

Plotting the isoquant curves

I have the following equation $$Q_1(K, L) = AK^α L^β, A, α, β > 0$$ I'm asked to derive the isoquant curve which yields the following diagram: Could anyone please explain to me how the form of the ...
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1answer
32 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?
4
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1answer
77 views

Is First Order Stochastic Dominance (FOSD) relation convex?

A convex relation is that $x\succeq y$ implies $\alpha x+(1-\alpha)y\succeq y$. Let $>_{FOSD}$ be $\succ$, is the FOSD convex? Intuitively it seems convex.
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0answers
54 views

Cournot competition subgame perfect Nash equilibrium with two products

QUESTION: Assume there are two types of products, labelled $l$ and $n$. Firms compete in the market by choosing which product to sell and then choosing the quantities. Let $Q_n$ and $Q_l$ denote the ...
4
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2answers
73 views

How do you reconcile the Law of Increasing Opportunity Costs and Economies of Scale?

Marginal cost of production always increases, while marginal benefit of production decreases. As far as I understand, that is why the supply curve has positive slope and the demand curve negative ...
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0answers
36 views

Are that models that explain how companies become more efficient?

I'm trying to model/understand the following intuition: Company makes a product Product gets sold, company makes a profit Company does something with the profit to become "better" at what they do: ...
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3answers
105 views

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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1answer
159 views

The beta delta model

What is the $\beta$-$\delta$ model? How does it relate to present bias and the present value calculation?
1
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1answer
34 views

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 ...
4
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1answer
49 views

Are there multiple equilibria in the second price auction?

Suppose that $n\geq 2$ bidders compete in a second price auction. Each bidder $i$ knows their own valuation $v_i$, but only knows the distribution generating the valuations of the other players. ...
0
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1answer
212 views

Deriving demand function from utility function

How do I derive the demand function from $$U=y + 2\sqrt{x}$$ Currently I have $MRS = \frac{1}{\sqrt{x}} = \frac{P_x}{P_y}$, so, $P_y = P_x\sqrt{x}$ Using the budget line: $$I = xP_x + yP_y \implies ...
2
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0answers
146 views

Finding long run equilibrium price, quantity and number of firms with a linear average cost function

I've been been brushing up on my micoreocnomics lately and I came across a question in Perloff that looked really simple, but for some reason I am struggling to answer: Assume we are in the long run ...
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2answers
69 views

Finding Optimal Bundle and Change in Satisfaction after Changes in Budget Constraint

I am looking at the following exercise and struggling with the solution proposed by my microeconomics book. A consumer spends all his income on two goods, X and Y. The prices he paid and the ...
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0answers
55 views

What is the difference between imperfect substitutes and complements in a production function?

According to the following definition: ...