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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137 views

Finding Bertrand equilibrium with no demand function explicitly given

Two cell phone companies A and V are located at the extremes of a line of length one and transportation cost t = 4. Consider an initial situation where both firms offer a generic phone that consumers ...
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161 views

Kuhn Tucker optimization problem

Assume that the player I select $x_i \ge 0$ at constant cost level $c>0$ The payoff function for player i is $$v(x_i,t)-cx_i$$ where $t$ is technology parameter. The function v(.)is twice ...
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What are the (immediate) effects of changing a good's price on consumer and producer surplus?

Basically, I'm trying to understand why the total surplus is maximized at the equilibrium and what happens if the price isn't at the equilibrium. Say the price of a good is the equilibrium price. ...
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1answer
155 views

Monopolist engaging in international trade

A monopolist faces a demand curve given by $P=60-2Q$ and has total costs given by $TC=Q^2$. Now suppose that the country in which this monopolist is located decides to engage in international trade. ...
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2k views

Are there two deadweight welfare losses associated with a Pigovian tax?

I am constructing a diagram for an indirect tax (specific) imposed to correct a negative externality of consumption. There is a deadweight welfare loss from the externality (represented in blue) ...
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265 views

Pareto efficient adverse selection

Please look at the following. Question which I posted. I did not understand the answer for the part b - Pareto efficient. I am happy if you explain it in more details. Thank you. Also please ...
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1answer
5k views

MRS of Perfect Complements and MRS Equilibrium Condition

To preface this, I appreciate any help you offer. In reference to 1.(d) I'm trying to understand the MRS of perfect complements. Given: utility function U(x,y), commodity pair (2,8): y/x is 4 ...> a/...
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1answer
688 views

Existence of competitive equilibrium between max utility function and min utility function

u1(x1,y1)=max(x1,y1) ω1=(0.2,0.2); u2(x2,y2)=min(x2,y2) ω2=(0.8,0.8) The utility functions for two individuals and their endowments are given above for a two person two good economy. My question is ...
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513 views

Monopoly/Monopolistic Competition Productively Efficient or Inefficient?

I know both market structures are allocatively inefficient as P > MC. But, Since monopolistic competitive firms produce on the downward sloping part of their AC curves, there is excess capacity which ...
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1answer
135 views

Find Pareto-optima two good economy

There's an exercise I cannot wrap my head on. I actually have the solution to the problem, but still I don't quite understand it. Let an economy be composed of two consumers $A$ and $B$ and two goods ...
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300 views

Consumer surplus with isoelastic demand

Let $q(p) = \frac{1}{p}$ denote the demand function and $p^*$ some equilibrium price. Consumer surplus is defined as \begin{align} CS = \int_{p^*}^\infty\frac{1}{p} dp= \ln(\infty) - \ln(p^*) = \...
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379 views

Good textbook in applied microeconomics

I noticed many textbooks in undergraduate microeconomics cover the impacts of taxation but hardly any go in depth about the types of tax (unit tax vs proportionate tax). My question is, is there any ...
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562 views

Specification form for household utility function

What determines the choice of the functional form to be adopted for the household CRRA utility function, when utility depends on consumption and leisure? For examples, we have these three functional ...
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1answer
68 views

Are food stamps considered near cash?

I was wondering if certain government coupons like food stamps can be considered a form of near cash. I recall my professor saying something like near transfer, but I am unsure if the terms "near ...
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237 views

Any Resources for Micro Comprehensive Exams?

I'm currently preparing for a first year microeconomics comprehensive exam and have been looking for good resources for a while. Ideally, I was looking for any school site that has a list of (and ...
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199 views

Finding “own” price elasticity of demand

Only two groups buy the Dripfix, abbreviated as good $D$. Group 1's demand function for the Dripfix is $f_1 (p_D)=300-p_D$, where $p_D$ is the price of Dripfix. Group 2's demand function is $f_2(p_D)=...
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583 views

Help with CES Utility Function exercise

I am attempting to solve the following CES Utility Function problem: However, I am running into issues when I get to 3). For 1) I have $K = \left(\frac{\omega p_1}{p_2}\right)^{\frac{1}{p+1}}$ ...
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2k views

Pros and Cons of Elasticity of Demand Represented as an Absolute Value

I've been reading quite a bit about elasticity of demand. There seems to be an argument among texts as to whether elasticity of demand should be represented as negative or as an absolute value. The ...
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1k views

Optimal production level for a typical firm in long-run

Assuming all firms have identical cost functions. Now suppose there is an increasing shift in the demand curve. As we all know that for increasing costs case, both average costs (AC) and marginal ...
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1answer
136 views

Cournot model with piecewise inverse demand

Do you know if there exist results for Cournot oligopoly (or duopoly) when the inverse demand is a piecewise continuous? Something of this type $P(Q) = \alpha-\beta Q$ (if $0\leq Q<Q'$) $P(Q) = ...
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1answer
961 views

Best micro/macroeconomics books [duplicate]

Does anyone of you could recommend me some good Macroeconomics and Microeconomics books based on your personal experience. I am an engineer and I do not have a background in Economics. I am planning ...
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581 views

WAPM and CRS across all production plans

In Hal Varian's Book "Microeconomic analysis" on page 35 he gives the following description of a profit maximising firm. ...If the firm is maximising profits, then the observed net output choice ...
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54 views

Revenue maximization same as increase contribution margins?

Under which condition, will it be the same whether you choose to use revenue maximization or to increase contribution margins? In what industry is this possible? In my thought process, I was ...
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42 views

Quality Provision Game

A seller owns a single unit of an invisible good. It is worth $v(s)$ to a buyer, where $s ∈ R^+$ is the quality of the good. The function $v(·)$ is strictly increasing and strictly concave with $v(0) =...
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1answer
7k views

How to derive an aggregate demand function (and optimal uniform price) from two demand functions?

If I have two demand functions $P_1=100-10X_1$ and $P_2=50-10X_2$ and $X_1=40$ and $X_2=60$ with $MC=10$ We have two consumer groups: 1 and 2, where 1 has a higher willingness to pay, and we have ...
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1answer
3k views

Using the Slutsky equation

Suppose we have utility: $$U(x,y)=x^{0.5}y^{0.5}$$ Then Marshallian Demand for good $x$ is: $$x(p_{x},p_{y},I)=\frac{0.5I}{p_{x}}$$ And Hicksian Demand for good $x$ is: $$x^{c}(p_{x},p_{y},U)=p_{...
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1answer
1k views

Marginal rate of technical substitution

I am a student in an intermediate microeconomics class and am having a little trouble understanding the marginal rate of technical substitution. I understand that it represents the amount that labor (...
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1answer
46 views

Even if immigrants take USA jobs, don't they consume proportionally to maintain supply-demand equilibrium?

I heard many times politicians argue that immigration (in USA in particular, but applies to anywhere) are taking "real" Americans jobs. Then I tough, but they also are new consumers on the market, so ...
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1answer
92 views

Understanding Price Elasticity of Supply

I understand that the price elasticity of supply is just the percentage change in quantity supplied for a percentage increase in price of an item. However, when I look on Wikipedia, I am struggling to ...
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1answer
763 views

Why are complementary goods defined as when a good's demand is inversely correlated with the price of another?

Take a standard example: hamburger patties and hamburger buns. It is understandable that if the supply of hamburger patties increases (for whatever reason), the price of these patties will decrease, ...
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175 views

Optimal Pricing with Advertising

Below are three different demand curves (i) - (iii), which depend on advertising (A). (i) Q(P,A) = A $\times$ ($\alpha$ - $\beta$P), where $\alpha$, $\beta$ > 0 (ii) Q(P, A) = $\alpha$ + A - $\beta$...
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625 views

$\alpha$ condition and choice structure

I am trying to prove a statement that if $c_R$ is a choice structure, then it must satisfy Sen's $\alpha$ condition. However, if $X=\{a,b,c \}$, I can construct some choice structure like $c(\{a\})=a,...
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112 views

Clearly explaining the concept of “normalizing” price and relative prices to undergraduate

I am trying to clearly explain to the concept of "normalization" or relative prices. Because students are so used to just think of prices in absolute terms, it is initially tough to make the leap to ...
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1answer
2k views

How to solve Bertrand Equilibrium with a non-constant MC?

I know that Bertrand Oligopolies will charge a price equal to marginal cost. But if marginal cost is, say, 2Q or 4Q^2 (i.e. not constant) then how does one determine where, on the MC curve, the ...
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1answer
327 views

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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1answer
171 views

Structure of Non-profits and Moral Hazard

When one looks at a Non-Profit Organization there are three main things people notice. 1.They are an Income tax exempt organization 2. They are primarily financed by donations 3.They are heavily ...
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2answers
115 views

Market behavior when consumer must choose product before knowing price?

What forces influence the price in a market, wherein the consumer must choose a good before knowing the price, and afterwards only knows the price of the good purchased, not that of any competing ...
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1answer
258 views

To calculate cross elasticity of demand, does percentage change in quantity demanded have to be market demand instead of individual demand? [closed]

If I try to calculate cross elasticity of demand (XED or CED) with individual demand quantity, it seems to break down since even small increase when the base number is small is a big increase in ...
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1answer
696 views

How do I calculate consumer surplus and producer surplus from this? [closed]

Calculate the consumer surplus, producer surplus and total surplus in the market equilibrium. Market for beef and home demand and home supply: $$ Q_d(p) = 50 - p $$ and $$ Q_s(p) = p $$ With $p$ ...
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2k views

Why is Price Vector Orthogonal to Vector connecting two bundles on Budget Hyperplane

Here is my revised version/understanding why price vector is orthogonal to any vector from a bundle on the budget hyperplane to another bundle on the hyperplane: (see below for original question) ...
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1answer
21 views

Retailer Price Setting for Existing Inventory in the Event of an Increase in Price Paid for the Good

If you are a retailer, and the price you pay for one of your retail goods goes up, how do you price the inventory you already had (which you paid a lower price for)? Here is an example of a TFD (True,...
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1answer
494 views

Is there any difference between using LRAC and LRATC in a long-run market structure diagram?

I am currently being taught to use average total cost (ATC) to label the U-shaped curve in the short-run on a market structure diagram, and long-run average cost (LRAC) for the equivalent curve in a ...
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96 views

Can anyone help me understand the budget constraint of an investor in complete market?

In the problem below, u is a utility function; $\beta$ is a discount factor; pc(s) is the price for a contingent claim for state s. c is initial consumption and and y is initial wealth. s represents a ...
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52 views

Are all fixed capital public goods?

fixed capital: any kind of real or physical capital (fixed asset) that is not used up in the production of a product public goods: goods that are non-rival and non-excludable in consumption Both of ...
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32 views

Static wage posting model and indifference to wage levels

Suppose a monopsonistic firm has the following simple profit function: $$\pi (w) = PL(w) - wL(w) $$ where $L(w)$ is the labor supply, $P$ is the constant output price, and it has a linear production ...
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98 views

Causes of interlocking directorship connections between firms

I need to interpret some empirical results telling me that firms (intended as profit-maximising entities) prefer to be controlled (e.g. through interlocking directorships) by smaller and less ...
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1answer
1k views

When should one use Lagrange Multipliers as opposed to calculating the ratio of Marginal Utilities for MRS?

As far as I could see in the examples I found, they led to the same result through relatively similar processes. I have only looked at 2 variable utility functions, so is does the use of Lagrange ...
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1answer
70 views

Economic Effects of Presidential Candidate Proposal: Pay the same % in taxes no matter what you gain

There's a presidential candidate in USA that promises to change IRS laws in order that everybody pays the same % in taxes, i.e., the rich will pay the same percentage as the poor. This would seem to ...
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66 views

Manufacturing economics book?

I am interested in manufacturing economics - suppose I have to built an engine, I would like to learn a systematic approach to break down what the costs of building an engine would be and how I could ...
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1answer
88 views

Is the following graph possible?

Is the following graph possible? I've attempted to sketch the TC/TR curves for it but they don't seem to be able to satisfy the following two properties at the same time: 1) Slope of Total Cost (TC) ...

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