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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
104 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
50 views

Calculating Price Elasticity of Demand

Hi I was given the following price vs quantity values. ...
2
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1answer
47 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
52 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
147 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 ...
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2answers
110 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
100 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
231 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
54 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 ...
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1answer
53 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
52 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
130 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
37 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
141 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
74 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 ...
3
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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
118 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
507 views

The beta delta model

What is the $\beta$-$\delta$ model? How does it relate to present bias and the present value calculation?
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2answers
66 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
52 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. ...
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1answer
1k 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 ...
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0answers
319 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
174 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
109 views

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

According to the following definition: ...
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1answer
47 views

How to Calculate Price Elasticity of Demand When Perfectly Elastic?

When we have perfect elasticity, the demand curve is a horizontal line and the elasticity of demand coefficient is equal to infinity. How do we arrive at a solution equal to infinity? We know that ...
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1answer
324 views

Profit maximizing, Quantity and Price with Dominant Firm and Competitive Fringe

A dominant firm operates in various markets. In one of these markets, it is a monopolist and produces with the following cost function: C(q1) = 5q1. The market demand is P = 1005 - Q. (a) Find the ...
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1answer
94 views

Changing Constant Factor Demands

I’ve been given this true false question: Consider the minimization of wL + rK given F(K, L) $\geq$ Q with F(K, L) strictly increasing in K and L. The conditional factor demands K*(Q, w, r) and L*(Q, ...
2
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1answer
31 views

Ownership in Neoclassical Economics/Property Rights Question

I'm currently looking at New Institutional Economics and I can't get my head around the assumption of the neoclassical irrelevance theorem stated by the neoclassical economics. It doesn't matter ...
3
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0answers
21 views

Are modern conglomerate mergers better or worse for economic competition?

Modern conglomerate mergers differ from those from decades ago as, even though they takeover smaller companies, they have a more narrow focus on related business and, in order to be successful, have ...
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0answers
19 views

How to evaluate customer lifetime value

I am learning about calculating Customer Lifetime Value (CLV). So far I have learned that there are many ways to calculate it, like stated here, which I understand, different industries will also need ...
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1answer
199 views

Utility maximimization for unusual Leontief utility function

The problem is basic utility maximization subject to a budget constraint with $$u(x,y) = min\{x+y,4\sqrt{x},4\sqrt{y}\}$$ $$p_x = 1, p_y = 1, M = 4$$ I will have to first plot the Indifference ...
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2answers
73 views

Proof of Choice Coherence in Kreps (2013)

In the first chapter of Kreps (2013), there is a proof that the choice function satisfies choice coherence. Kreps writes: I do not understand how the third sentence of (b) logically follows from the ...
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0answers
37 views

Economics of Selling Software

My understanding: Normally, selling a product has an increasing marginal cost per unit produced. Very often this increases more and more due to poor allocation of resources (diminishing returns). ...
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1answer
107 views

Question about Locally non-satiated preferences

If a consumer has locally non-satiated preferences, which of these 2 bundles is preferred and why? Bundle A: (1,3) Bundle B: (4,2) This is what I've reasoned from my very limited understanding of ...
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1answer
54 views

Optimal choice for a weird leontief function

Compute the optimal choice for a consumer with the following utility function: $$u(x_1, x_2) =\max \{\min(2x_1, x_2), \min(x_1, 2x_2)\}$$ I'm familiar with computing optimal choice for perfect ...
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1answer
37 views

Effect of Promotional Sales on a Demand Curve

If there is news that shops are having a sale on dress shoes (beginning right now), will it shift the demand curve for this good? I initially said yes, as a sale should increase the quantity demanded ...
1
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1answer
210 views

Giffen Goods & Complementary Goods

Consider that good X and good Y are complements and good X is a Giffen good. If I increase the price of good X, what affect does this have on the price and quantity demanded of good Y? My reasoning ...
2
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1answer
107 views

What is the assumption behind “indifference curve does not cross”?

If only weak-ordering and continuity is assumed, "ICs" can definitely intersect. If we assume Monotonicity or convexity in addition to weak-ordering, then we can get "no cross of IC". But those two ...
1
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0answers
35 views

Take It Or Leave It Strategy: Social Optimum

Here is what I understood Using Backward Induction, I inferred that buyer offers a price, say, $P$ and the seller will sell only if $P \geq c(I)$. Setting the lowest possible Price that will ensure ...
0
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0answers
20 views

Net Present Value with investments in multiple phases

I am trying to calculate the Net Present Value for a theoretical project in which, unlike most examples in textbooks and on internet tutorials, investments do not only happen in t=0, but they also ...
1
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1answer
56 views

Strict preference and utility function

If strict preferences over three outcomes x, y and z, do not satisfy transitivity, so that $x \succ y \succ z \succ x$, then these preferences cannot be represented by a utility function. Is this ...
2
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1answer
38 views

The impact of news in the stock market?

I am currently working on a large sample of textual data from news articles. I was just wondering whether there exists any studies which tries to explain the market anomaly known as "The-Day-Of-The-...
4
votes
1answer
382 views

Quasi-Linear Functions

I understand that quasi-linear functions have a general form $U(x_1,x_2,...,x_n,y) = f(x_1,x_2,...,x_n) + y$ and that for a quasi-linear function, the income effect with respect to the other ...
3
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1answer
105 views

3rd Degree Price Discrimination

I came across a True/False question in my economics problem set: Is the following statement true or false? "A monopolist can practice third-degree price discrimination in the two markets it ...
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1answer
99 views

How to find the optimal consumption basket? [closed]

A consumer has the following utility function and income. 𝑈(𝑥, 𝑦) =1/2 * ln 𝑥 + 1/2 * ln y Price of 𝑥 = Price of 𝑦 = 100. Income = 1000 Suppose that the consumer gets 2 redeemable coupons for ...
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0answers
205 views

Equivalence of definitions of upper contour sets

Mas-Collel, Winston and Green's Microeconomic Theory (3rd editions) offers two definitions of the upper contour set: How can the equivalence between the two definitions be proved?