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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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2answers
153 views

Best Response Functions for Cournot

For a Cournot Duopoly game with Linear Demand functions, we need to find the optimal quantity of each firm such that profit is maximised. Given the linearity of the Demand curves, we will obtain a ...
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1answer
40 views

Consumer behaviour [closed]

If the last dollar spent on commodity X gives him less marginal utility, he will withdraw this amount from X and spend it on Y if it gives him higher marginal utility. Here consumer how can consumer ...
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0answers
166 views

Real world examples of supply curve shapes

I get the basic intuition that at higher prices, produces would be willing to produce more, but I feel like theory can only take my understanding so far. I want to know what are the real world ...
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1answer
66 views

Elasticity of substitution between leisure in two periods

This is a basic question, but I am new to macro models. The question is from Romer's text. Assume a household only has one member and has no initial wealth, and the household lives for two periods. ...
2
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1answer
94 views

How to calculate the intercept of an indifference curve in an Edgeworth box?

Consider an exchange economy with two goods (Good 1 and 2) and two individuals ($A$ and $B$): $A$'s utility function is $u_A(x_{A_1}, x_{A_2}) = 2x_{A_1} + 5x_{A_2}$ $B$'s utility function is $u_B(...
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2answers
67 views

Monthly price elasticity and possibility of using daily values

I am calculating the price elasticity as a starting point to find a theoretical optimal price that would maximize our revenue. I am looking at 2 years data and to use the price elasticity formula, I ...
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1answer
83 views

Imperfect substitute

Perfect substitute- Pepsi and Coca-Cola and Imperfect substitute- Tea and Coffee . Here why tea and coffee considered imperfect substitute?
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1answer
90 views

Non Collusive Cournot Duopoly model with two firms, zero costs and linear demand curve

I am reading Modern Microeconomics by Koutsoyiannis. In a Non Collusive Cournot Duopoly model with two firms, zero costs and linear demand curve. Firm A produces half the total market demand to ...
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2answers
253 views

feature of indifference curve [closed]

The characteristic feature of indifference curve is that it will not touch the X axis or Y axis. But as a special case it will touch the Y axis if the combination is between Money and Commodity. "If ...
2
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1answer
39 views

Short-run and Long-run cost against the price of the variable input

This is an image of page 133 of Microeconomics; Gravell and Rees.In the fourth line there is a statement about the slope of those curves. Can anyone please explain me the reason??
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1answer
192 views

Differences between Slope of budget line and MRS?

Slope of budget line= change in y/ change in x and also Marginal rate of substitution= change in y/ change in x. If the definitions are same of both then what is the difference between the two? I ...
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1answer
35 views

Implication of the concavity of u

Suppose that we have the following inequality: $u( y- d) - u(y-d') \ge u(y' - d) - u( y' -d')$. The concavity of $u$ together with $y\le y'$ then implies that $d \le d'$. I sometimes come ...
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2answers
65 views

Statistical distribution of wages and wealth

How are wages distributed globally? Wages do not follow a normal distribution, do they? Is wealth distributed in the same way or differently?
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1answer
83 views

A question about the exchange economy

The question I am given is the following: Consider an economy that has only three goods, mineral water, orange juice, and wine available in fixed amounts, and three agents, A, B and C. So in this ...
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1answer
82 views

what is the marginal cost divided by the average cost

Marginal cost and average cost are both a u-curve. They cross in the competitive equilibrium. If we divide one by the other, is the ratio the degree of competition? Ratio is 1 in perfect competition....
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2answers
183 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
629 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
127 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
139 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
79 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
57 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
57 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 ...
1
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2answers
117 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
213 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
53 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
35 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 ...
4
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1answer
90 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
70 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. ...
3
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1answer
62 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
43 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
62 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. ...
0
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1answer
28 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
16 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 ...
1
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1answer
861 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
51 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
33 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
92 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 ...
0
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1answer
50 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
69 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 ...
5
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4answers
145 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 ...
0
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1answer
88 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)...
3
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1answer
160 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
38 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
25 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
43 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 ...
0
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1answer
209 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 ...
2
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1answer
216 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 ...