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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2answers
154 views

Derive the cost function for a Homothetic production function

I'm having trouble understanding the steps in showing that a Homothetic production function's cost function must be expressible in the form $C(w, q) = a(w)b(q)$. Since the production function is ...
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2answers
448 views

Deriving the translog production function

Ive been having difficulty deriving the translog production function defined as: $$\ln y=\alpha_0+\sum_{i=1}^n\alpha_i \ln x_i+\frac{1}{2}\sum_{i=1}^n\sum_{j=1}^n\ \beta_{ij}\ln x_i\ln x_j $$ I know ...
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3answers
119 views

what is the interpretation of $\beta_{ij}$ in the translog production function?

The translog production function is defined as the following. $$\ln y=\alpha_0+\sum_{i=1}^n\alpha_i \ln x_i+\frac{1}{2}\sum_{i=1}^n\sum_{j=1}^n\ \beta_{ij}\ln x_i\ln x_j $$ I know it is a ...
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2answers
85 views

Proof that the budget set is closed [closed]

Mas-Colell, Whinston and Green's Microeconomic Theory affirms the budget set is closed. I would like to know why. The definition of open set in the book is the following:
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1answer
48 views

Contour set in Mas-Collel, Winston and Green

Mas-Colell, Winston and Green's Microeconomic Theory uses the notion of contour set, as shown hereunder: In the context of Microeconomic Theory, what would be the definition of a contour set?
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1answer
56 views

Is this market monopoly or duopoly?

Could you help me to identify monopoly, because I got confused. There is a company with market share of 54 %. The second one has market share of 21 %. Can this market be characterized as monopoly or ...
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1answer
51 views

Textbooks addressing Markov decision processes in microeconomics/game theory/decision theory?

I have learned about the Markov decision process (MDP) formalism in the context of machine learning. I know that micro theorists also study MDP's, and agent behaviour in this context (both single and ...
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0answers
34 views

Which utility function yields following demand $\alpha p^{\epsilon}$ [duplicate]

I am looking for a utility function that will lead to the following demand $$\alpha p^{\epsilon}$$. I know it is most likely a CES utility since the elasticity of demand is constant and this is ...
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2answers
109 views

Rigorous solution of Stackelberg leader-follower game with N-players?

In the classical two-player Stackelberg game (sequential Cournot) we have a linear demand function $P = 1 - Q$ where $Q = \sum_0^2 q_i $, and we assume homogenous production cost $c$. By starting from ...
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1answer
184 views

Coefficients of Cubic Total Cost Function

Given a Total Cost equation $TC(Q) = a + bQ + cQ^2 + dQ^3$ what do the coefficients mean? For example $a$ is fixed costs, what are $b,c,d$ and how are they calculated?
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1answer
50 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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0answers
34 views

What are the difference and relation between the concepts of business process and business strategy? [closed]

What are the difference and relation between the concepts of business process and business strategy? For example, the process of strategy planning consists of the following steps: formulate missions ...
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1answer
80 views

Economic interpretation of the concavity of the expenditure function

What is the interpretation of the expenditure function's being concave?
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1answer
63 views

Do the three ways of measuring producer’s surplus give the same result?

In the Firm supply chapter of the microeconomics Varian's book, they show "three equivalent ways to measure producer’s surplus" using marginal cost, average cost and the average variable cost curves. ...
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1answer
54 views

Effect on revenue of changing price of unitary demand elastic product

In my introductory microeconomics class, a problem set had the following question: If the price elasticity of demand for Snickers bars is 1, what will a 1% increase in its price do to the total ...
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1answer
40 views

Would this hypothetical firm exit in the long run?

I'm trying to work out the following problem for my microeconomics course, using the standard method we have been taught. Problem: Output is a function of inputs $x_1$ and $x_2$, $y=x_1^{1/2}x_2$. ...
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1answer
58 views

Advance Microeconomics [closed]

Show that u=a+bM-yM^2 represents a risk averter's utility function who is interested only in the mean and the variance of the state distribution of Income M. Can anybody send me the full solution. ...
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1answer
25 views

What data/factors/attributes do the professionals monitor in a top-down analysis on the macroeconomics?

I am learning to do top-down analysis on a number of sectors in the US equity markets. I have never done it before and I would appreciate it if some professionals can share their experiences with me. ...
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1answer
15 views

What is value in the context of microeconomic analys for case of monopoly profit maximization

I'm trying to refresh my microeconomics knowledge. And I have some "blind spots" I just can't fix. Let's say we have a monopoly on the market. It's usual goal is to maximize it's profits. The point ...
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1answer
45 views

Calculating Market Concentration without sales data

I want to calculate market concentration (HHI and C4) but I don't have sales data. Is it accurate to use the share of establishments of each firm as a proxy for market power? Could you list some ...
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1answer
282 views

How to calculate marginal utility with two goods?

I'm just getting started as an amateur into microeconomics and I really can't understand this thing about marginal utility when more than one good is involved: Let's say I have the utility function U ...
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1answer
48 views

How does social cost and social benefit work?

I am really lost right now. I have a test tomorrow and I am stressing out. Whatever I look at for externalities, which could be my textbook, a website, notes from class, they all contradict each other....
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1answer
30 views

Imperfect Price Discrimination profit per group

During imperfect price discrimination is it possible to determine profit per group. For example: Aggregated Cost function: C(Q) = 18*Q + 5; where Q = q1 + q2 Aggregated Demand (AD) for group 1: q1(...
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1answer
76 views

General Equilibrium Involving Production

I need a little conceptual clarification. For a standard $N*K*M$ general equilibrium model, would an allocation, say, $y^k$ be Pareto Optimal if it does not solve $max(py^k)$? I understand that the ...
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1answer
32 views

Determining Another Possibility For a Microeconomics Question

If new, more advanced equipment reduces the amount of labor needed to produce an increased level of output, then The AVC curve will shift upward The MC curve will shift upward The ATC curve will ...
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1answer
67 views

Majority Rule and Single Peakedness

Majority Rule will induce non empty choice set if individual preferences are single peaked Is this statement true? I have some trouble in understanding the meaning of 'single peakedness' in context ...
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4answers
144 views

Understanding Classical Rationality at a Basic Level

I am a high school student in an intro Microeconomics class (note that we have not covered utility functions) and I'm utterly confused about the classical concept of rationality. I certainly ...
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1answer
71 views

Second order partial derivative and cross second-order partial derivative

I'm following a paper (Full text available here!) where at some point (pag.17 and 20) the author get the following derivative: $$\frac{\partial V}{\partial L}=Y-X\frac{dY}{dX}=\alpha X^{-\frac{c}{b}}...
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1answer
38 views

Nash equilibrium two players in a joint effortful project

I have a problem where there are two agents in a joint project, Each agent $i$ puts in effort $x_i$ $(0 \leq x_i \leq 1)$ which cost each $c(x_i)= x_i^2$. The outcome of the project is $$ f(x_1, x_2)...
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1answer
135 views

Proof of Expected utility theorem with three outcomes

I am trying to prove the expected utility theorem with three outcomes. The expected utility with $n$ outcomes is rather cumbersome and long in the economics textbook Mas-Colell. But I was hoping that ...
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0answers
37 views

proof verification in George J. Mailath and Andrew Postlewaite (2001b)

I am reading George J. Mailath and Andrew Postlewaite (2001), and this is the lemma 1 in this paper. I don't understand the induction process in this proof. I think that we should use the fact that $...
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1answer
23 views

Am i correct here? #greenTaxes #priceMechanism #inefficientTax #DeadweightLoss [closed]

Now accoring to this article: https://www.telegraph.co.uk/news/2016/07/30/britain-banishes-plastic-bags-as-5p-tax-sees-usage-plummet-by-6/?fbclid=...
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2answers
39 views

If the consumer is not a price taker, does she still set marginal rate of substitution equal to the price ratio?

Consider some consumer who consumes good $x$ and $y$. The price of $x$ is fixed to be $k$. The price of $y$ is $c(y)$. The consumer's marginal rate of substitution is given by $\frac{-x}{y}$. If the ...
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1answer
187 views

Calculating the elasticity of substitution between factors of production

Following the work of Lu (1967) (Full text available here!) I got stuck trying to derive the elasticity of substitution between factors. He use the formula developed by Allen, that when the production ...
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1answer
152 views

Proof for homogeneity of elasticities

Throughout microeconomic literature i see the following restiriction placed on the nature of elasticities in demand system estimation. This being for some arbitarary good $x$ we require price ...
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1answer
256 views

Perfect Bayesian Equilibria

What are the perfect Bayesian equilibria in the following game? The part that is confusing me is the right-hand side, where player 2 is of type N. Thanks! EDIT: My workings out so far are given ...
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1answer
51 views

Why is the price of books set by the manufacturer rather than the distributor?

For almost all manufactured goods which the manufacturer doesn't sell directly to the end consumer, the manufacturer sells to a distributor, and the distributor is then free to resell the good to the ...
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0answers
51 views

What is Application of Vector Algebra in Economics?

I through one tutors heard that vector is used in economics . But on searching about it on internet could not find anything Recently I studied about Vectors in Mathematics So I was wondering how ...
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1answer
98 views

Can the endowment point be the competitive equilibrium?

Quoting from MWG p.519, Chapter 10: Pure Exchange, The Edgeworth Box ..., any intersection of the consumers' offer curves at an allocation different from the endowment point $\omega$ corresponds to ...
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4answers
72 views

Do consumers also invest?

Definition of Investment that I have found: Investment is the expenditure incurred on the procurement of such capital assets that would help in further production . According to this, it means that ...
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2answers
49 views

How can I show whether the following function is Increasing, Decreasing, or Constant returns to scale? [closed]

I need to show whether or not the following function is increasing, decreasing, or constant returns to scale, but I can't figure out how to extract the t from it when it is put in the form $y(tX_1, ...
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0answers
13 views

Is the definition of Investment variable in Economics?

I studied that Investment is the expenditure incurred on the procurement of such goods that would help us in production of goods and services. And mainly consists of Fixed and Inventory Investment ...
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1answer
33 views

Finding individual utility

There are N agents living in an economy with two goods, $X$ and $Y$. Their preferences are described by the following utility function $u(X,Y) = 2 \sqrt{XY}$. Each agent is endowed with 1 unit of $X$ ...
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2answers
243 views

Pareto Optimality of Endowments

Consider a $2*2$ exchange economy where individual $1$ has an endowment $(4,5)$ and individual 2 has an endowment $(6,5)$. The utility functions of individuals are represented by $U({x}_i{y}_i)$=${x}...
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1answer
110 views

Blocking Coalitions

For $n$ individuals, can a blocking coalition only be formed by at least $n/2$ individuals? For example, if there are 6 individuals, can less than 3 individuals form blocking coalitions?
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61 views

Three consumers three goods competitive equilibrium

I have the economy described by the three consumers above with their respective preferences and endowments. I'm not so sure about how to proceed towards the competitive equilibrium...
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2answers
68 views

Linking top-down and bottom-up models for analyzing electricity price-based demand response: Expenditure constraint is violated?

I have a question about the contents of this paper*, which links a building energy model and a utility-maximization component. In it, the author tests several electricity prices using a Cobb-Douglas ...
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2answers
542 views

Strongly and strictly increasing utility functions

What's the difference between Strongly and strictly increasing utility functions? What I know is that if $x'>>x $ where $x'$ has all elements strictly greater than $x$ then $U(x')>U(x)$, I ...
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1answer
40 views

Necessary conditions for the existence of a competitive equilibirum

I got that in an exchange economy, conditions as preferences being continuous, strictly convex and strongly monotone and $\sum_i \omega_i\gg 0$ are sufficient conditions for the existence of a ...
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0answers
31 views

Competitive Market - Production & Number of Firms

The question is as follows: The inverse market demand for provision of gas services is given by p(y) = 1/(1+y), where p is the unit price and y measures output in appropriately scaled units. Suppose ...