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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Question about nested input requirements
In Michael Carter's "Foundation of Mathematical Economics" we have the following exercise:
Prove that the input requirement sets are nested. That is, prove that $V(y') \supseteq V(y)$ $ \forall $ $y'...
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Semi Annual Deposit that earns 5% Compounded Quarterly
I was asked:
A man planned to endow 1000000 USD to his son on his son's 21'st
birthday. How much is his semi-annual deposit in a special account
that earns 5% compounded quarterly if the first ...
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1answer
57 views
Economic Overview of Pacific Island Nations
What are the key drivers of growth for these small pacific island nations? I would expect tourism and natural resources to be pretty central to these economies. Is there anything else? What are the ...
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Impact of Economic Crisis on Supermarkets And Chemists?
In the undergoing Greek financial crisis, I’ve heard more than once that the three prime sufferers in any economic crisis are the 'bankers', 'supermarkets 'and 'chemists'. I do understand why the ...
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Given Cobb-Douglas production functions for 2 factories (same owner), how will the owner produce $y$?
So my question is this:
A company owns two factories, A and B, each with the following production functions:
$f_A(x_1,x_2)=x_1^{\alpha}x_2^{1-\alpha}$
$f_B(x_1,x_2)=x_1^{\beta}x_2^{1-\beta}$
Now ...
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Risk and uncertainty [closed]
A risk averse is given this: Option1: 1000 with p=0.25 and 100 with p=0.75. Option 2: 325 for sure. Which option would he choose?
For this part, I know the person will choose option 2 over option 1.
...
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74 views
Implementing Coasian bargaining to achieve social welfare
In this excellent answer, Ubiquitous elaborates on the Coasian solution as an alternative to Pigouvian subsidies. I wanted to explore and understand the solution a bit further.
Consider the setting ...
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428 views
Altruism and locally non-satiated preferences
Is there an altruistic utility function that cannot represent a locally non-satiated preference?
As an example of an altruistic utility function:
$U^1(x^1,...,x^H)=u^1(x^1)+\sum^H_{j=2}U^j(x^j)$, ...
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Where can I find quarterly/monthly medicare/medicaid state level drug utilization data
I read a paper titled 'State generic substitution laws can lower drug outlays under
medicaid'. It uses quarterly state level medicaid drug utilization data. However, I could only find yearly data at ...
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1answer
62 views
Elasticity of subsitution: a redundant calculation?
Elasticity of subsitution is a measure of the curvature of an isoquant1 and can provide us information regarding the nature of the production functions we are dealing with. this is visualized in ...
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1answer
219 views
Do you get economies of scope from horizontal or vertical integration?
Economies of scope: make it cheaper to produce a range of products together than produce each one on its own as company can share inputs (e.g marketing and finance) removing cost redundancy
Would ...
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1answer
71 views
Is a lack of “rules” dangerous for cryptocurrency
An issue/disadvantage that the gold standard had was a lack of mechanisms that forced economies to abide by the rules of the game. As a result, they could at any time de-monetize gold and therefore ...
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2answers
49 views
Sequential price setting SPNE
Firms A and B are in an oligopoly. They both face the linear market demand curve $X=A-\alpha P$, where $X$ is total market demand, and $P$ is price. Assume constant marginal costs $C_{A}$ and $C_{B}$, ...
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1answer
42 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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1answer
59 views
Scarcity in Relation to Free Goods
This is a basic economics question about scarcity in relation to free goods. The hypothetical question is that if iTunes decided to have free streaming for all their songs, would there still be ...
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1answer
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Regarding the units of the shift produced by subsidies on supply curve
I am giving my first steps on microeconomics and I can't fully understand why by applying a per unit subsidy, the supply curve is shifted by a fixed amount. In wikipedia's words:
Marginal subsidies ...
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5answers
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Which measure to check in analysis (p-values or $R^2$)?
In an analysis e.g. OLS regression which measure would you look at?
$R^2$, $adjusted-R^2$ or $p-value$?
How would you consider a regression with p-values >0.15 but with an $R^2$ of 40%?
In general ...
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1answer
549 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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3answers
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Is it possible to have constant marginal cost and decreasing average cost simultaneously? [closed]
I thought about possibility of occurring such event in the case of presence of fixed costs, but I would like to know others opinions.
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3answers
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Why is that when one person or group gets a good or service, someone else will have to live without it?
!
There's this statement in my Applied Economics book that I don't understand. Why is that when one person or group gets a good or service, someone else will have to live without it? I hope you ...
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1answer
2k views
What is the difference between budget constraint and budget line?
Are those things mean the same thing or they are actually different?
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1answer
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Why does profit maximization implies that both of the following are equal? [closed]
Why Profit maximization implies that rate of return to capital equals the net marginal product of capital. Prove and give intuition why both are equal.
I also wonder that why it doesn't implies rate ...
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2answers
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How can I prove $U(x) = [𝛼_1𝑥_1^𝜌+𝛼_2𝑥_2^𝜌]^{(1/𝜌)}$ is equal to Cobb-douglas Utility function when $𝜌\rightarrow0$ [closed]
This is the question, I have problem with part b, I don't know what function should I use to reach the result
thanks in forward
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A case where the solution to Expenditure Minimisation Problem is not a solution to Utility Maximistion Problem
I am looking for a preference relation which satisfies the above property.
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1answer
208 views
Mixed Nash equilibrium
I have game table posted below:
$$\begin{matrix} &\#2 \\ \#1 &
\begin{array}{c|c|c|c}
&D &E &F \\ \hline
A &4,4 &6,6 &2,6 \\ \hline
B &6,4 &2,2 &0,4 \\ \...
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1answer
32 views
Bargaining Theory: reading list
I looked around in the forum but I have not found this question yet. I would like to approach the topic of bargaining models in the spirit of Rubinstein, Ariel. "Perfect equilibrium in a ...
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2answers
64 views
Mathematic notation of scale returns
I'm having trouble with returns to scale mathematical notation which i found counterintuitive even I'm fine with its definition. Any help will be very appreciated.
There are three possible types of ...
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2answers
58 views
For the case of two goods, give an example of preferences that are represnted by a continuous utility function that allows for fat indifference curves
The question in the title sounds like a trick question, due to the monotonicity property that indifference curves have, such that for two goods x and y, strong monotonicity implies y > x.
Possible ...
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4answers
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What is the difference between microeconomics money and macroeconomics money?
In microeconomics, \$USD are a store of value. I can sell a candy bar for \$1, and I can hang onto that \$1 for a year and then buy the same candy bar for that same \$1. If I print \$1 (and get away ...
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1answer
40 views
Does more variable input cause marginal product to decline?
Previously, I believed that after a certain point, additional variable input results in a decline in productivity. For example, if you hire too many waiters, they will eventually get in the way of ...
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1answer
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Comparative Advantage Question
The theory of Comparative Advantage in production and trade specifies that countries should engage in the production of goods and services for which they have a comparative advantage or lower ...
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1answer
957 views
Difference between Opportunity cost and marginal cost
I understand that the marginal cost is the cost of producing one additional unit of a good or service.
Is it correct to say that the opportunity cost is part of the marginal cost (I'm trying to ...
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1answer
182 views
Does quasi-concave utility function imply convex indifference curve?
It is well-known that convex indifference curve (i.e. the function is convex)/ preference would imply quasi-concave utility function. But does quasi-concave utility function imply convex indifference ...
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2answers
58 views
profit-maximization
I'm having trouble on my homework and I need some help.
A company sells products in a perfectly competitive market, where the price is $p = 24.$ For each of the following cost functions, write down ...
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2answers
102 views
Utility function is given as U(x1, x2) = 10x 0.5 1 + 5x2
Given a utility function $U= {10x^{0.5}} + 5y$, calculate the MRS and explain its economic meaning.
The MRS I calculated is $\frac{1}{\sqrt{x_1}}$, but I can't really understand it's economic meaning ...
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1answer
48 views
discount factor, function, and rate
Consider an exponential discount factor $\delta\in(0,1)$.
Similarly, consider an exponential discount $\textit{function}$: $g(t)=\delta^t$.
Then, is defining the discount $\textit{rate}$ as below a ...
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1answer
2k 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
237 views
In perfect competition, why is there economic loss if marginal cost > marginal revenue?
Here's a graph for reference:
In the left graph, I read from a book (CFA L1 notes) that
At any output above the quantity where $MR = MC$, the firm will be generating losses on its marginal ...
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2answers
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What is excess demand/ excess supply?
I've been reading up on Walras' Law and thought I understood it pretty well. However one of my friends asked me point blank what is an example of excess demand or excess supply is and I had some ...
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1answer
144 views
Graduate level texts/notes that cover the Short Run and Long Run Costs of firms' production
In undergrad econ we learned that it would cost a firm more money to increase its production in short term than in long term.
MWG does not seem to cover this topic. I need a Graduate level texts/...
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1answer
100 views
how to raise utility of an individual having min utility function
I was doing an exercise of utility and got confused with a min utility function. endowments can redistribute among individuals. How am i supposed to increase his utility. Can i simply reduce the ...
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2answers
76 views
Books on Technological Progress and Growth
I've done some google search for good, reader friendly albeit technical, books on technological progress/change and economic growth. However, I've not found what I want. If you are using or have heard ...
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2answers
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What are examples of inversely (negatively) correlated stock prices in economics?
I’m looking for example of two goods/wealth that demonstrate inverse/negative correlation. For example if price of A rises then price of ...
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2answers
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Does the contract curve always have to connect the initial points on an edgeworth box? Why or why not?
What if the contract curve goes out of bounds? In that case, do I assume it superimposes itself on the axes it is closest to?
I hope this was clear. Not sure how to explain this other than visually......
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1answer
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Why do firm output decreases when fixed cost decreases in Long Run?
So in long run if fixed cost is lowered, more firms enter the industry and increase the supply, bringing up industrial output. According to the firm diagram, Average Cost lowered so that the firm ...
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2answers
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Definition of a 'Competitive Firm' and a 'Perfectly Competitive Firm'
In many of my intermediate microeconomics quiz and test questions I encounter the term "competitive firm" and/or "perfectly competitive firm", e.g.: In the short run, a perfectly competitive firm ...
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Increase in the price of skateboard wheels cause a decrease/no change in the demand of skateboards? (2 separate markets w/ 2 separate buyers)
Would an increase in the price of skateboard wheels cause a decrease/no change in the demand of skateboards? (2 separate markets with 2 separate buyers)
Note: I'm going to be mainly focused on the ...
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2answers
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How can I build a fixed point theorem argument in pure strategies?
To begin with, I am recalling the Banach Fixed Point Theorem.
Let $(X,d)$ be a non-empty complete metric space with a contraction mapping $T:X\to X$. Then $T$ admits a unique fixed-point $x^*$ in $X$ ...
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1answer
35 views
Proving ranking using completness and transivity
The book by Jehle and Reny says that one can proof the ranking of consumption bundles using the axiom of completness and transivity.
But the have not proved this in the book and I also have a hard ...
