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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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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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
498 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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1answer
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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1answer
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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1answer
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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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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2answers
57 views

Articles about police complaints for a lit review?

I'm doing a research paper about how different cities have different quality of police service. I want to do a regression where the dependent variable is number of sustained complaints per 10 officers ...
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1answer
58 views

Will there be any competition amongst cement retailers?

If we consider a cement manufaturer in a given country, say India, then will the cement retailers of that companies' product compete with each other? And if so, then what kind of a competition will it ...
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1answer
25 views

What are the Impacts on an economy when a large mining venture begins to reduce production and lay off workers in a remote region?

I am currently unsure about how such a question above should be answered. To clarify , I am confused as of which topics relating to the question i should discussion in order to answer it. (For ...
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2answers
2k views

Net Present Value in Nominal Terms

I have the following question from my homework: When calculating the net present value of an investment project, the firm of Henry & Norman expects profit in the first year to be $60,000, and ...
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1answer
142 views

Removal of tax excise on producers, will increase supply?

If the government removes an excise tax on producers, will their supply increase? For example, Price of gasoline is $2 a gallon Producers are taxed at 50 cents per gallon by the government Weekly ...
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1answer
635 views

Derive the demand functions: Hotelling-style Model

So I have this economics question that I have been trying for a while now and I can't seem to get the answer correctly. Below is the question and after I will show what I have so far. An explanation ...
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1answer
165 views

What are alternatives to lottery that would create same economic impact?

Lotteries can be detrimental to a subset of society since people who often play dont understand stats and that for most part lottery is negative expected value. However, taxes (and portion of ticket ...
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1answer
152 views

What would happen if total welfare were evenly distributed?

Suppose that there is a market with a large number of consumers and producers. Assume that the government knows the reservation prices of all people in the market. Suppose that the government uses ...
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1answer
306 views

How does Marginal rate of substitution change?

If you are at a point $(x,y)$ where your $MRS(x,y)=3z$, and you later exchange goods to be at point $(x-a,y+b)$, where your $MRS(x-a,y+b)=z$, can you conclude that you are one the same indifference ...
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1answer
668 views

How to show that the income elasticity of Marshallian demand is equal to unity? [closed]

Suppose that the expenditure function is multiplicatively separable in $\textbf{p}$ and u so that $$e(p,u) =k(u)g(\textbf{p}),$$ where k(·) is some positive monotonic function of a single variable, ...
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87 views

About marshallian demands

Let an agent with utility function $U(x_1,x_2,x_3)=min\{ x_1, x_2 \} +x_3$. We want to maximize $U$ subject to $p_1 x_1+p_2 x_2 +p_3 x_3= I$ First intuitively $x_1^*=x_2^*$ substituting en the budget ...
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3answers
519 views

Why is market power presumably high when goods are fungible and demand relatively inelastic?

What does the fact that the goods in an industry are fungible add to a market power analysis if you already know demand is relatively inelastic?
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1answer
93 views

Computational Bayesian Statistics and Economics

What is there that links computational Bayesian statistics and Economics(preferably macro)? I'm looking for a primer or gentle introduction on the matter. It doesn't need to go into much detail. Any ...
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1answer
79 views

Is the lack of information on customer behaviour good for banks?

Discussing chapter 18 on Microeconomic Theory Basic Principles and Extensions - Nicholson and Snyder book - regarding Asymmetric information a student raise an interesting point of view regarding the ...
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1answer
93 views

How does this company gain from economies of scale?

Given this story, I am (my younger brother is) asked why (rather than how?) a particular company Pepper plc is likely to benefit from economies of scale. In short, Jo has a shop that sells electrical ...
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1answer
64 views

Substitutive or supportive factors of production

Given the function: $y=A K^\alpha L^\beta, A,\alpha,\beta >0$ $y=aK+bL^{0.5}, a,b>0$ Decide whether capital and labour are substitute or supportive factors of production. How to solve this ...
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1answer
524 views

Shifts in demand curves

When plotting a demand curve for a good, lets say carrots with price on the y-axis and quantity demanded on the x-axis. A shift any determinant of demand other than price of carrots results in a shift ...
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1answer
9k views

what is the optimum level of production?

The demand function of a monopolist is $q = 12 - p$ where $p$ is the price. Using the total cost and total revenue I was trying to calculate the optimal (short term) level of production. I tried to ...
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1answer
214 views

Kimball (1995) Specification of Final Good Production

Kimball (1995) defines production of the final good ($Y$) with intermediate goods $y_l$ in his equation (1) as $$ 1 = \int_0^1 G\left(\frac{y_l}{Y}\right) dl $$ with $G(1) = 1$, $G'(x) > 0$ and $...
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1answer
37 views

How to evaluate if an activity is likely to produce a positive ROI?

I am trying to establish if it would be worth my while to sell a product in a particular online marketplace but am unsure how to evaluate if it would be financially worth my while. The marketplace in ...
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1answer
165 views

Relationship between Revenue-Elasticity and Price-Elasticity

I have attempted to solve this problem and would be grateful if someone looked over my solution 5% increase in price results in 5% decrease in total revenue. I need to determine price elasticity of ...
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1answer
62 views

How to determine the worth of a good

I've searched around the web for awhile now and I'm beginning to think this might be an unanswerable question. I want to know if there is a theoretical way to determine the worth of a particular good, ...
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1answer
1k views

Relationship between short-run marginal cost(SRMC) and long-run marginal cost(LRMC)

While reading Intermediate Microeconomics from Hal Varian, I fell short in understanding the relationship between SRMC and LRMC. I can see how in SR, when fixed factor is chosen at LR optimizing ...
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22 views

Von Neumann–Morgenstern implications for repeated strategic games

I am currently studying game theory and have just begun looking at repeated strategic games. In my lecture notes, it states that "preferences are unique up to an affine transformation", ...
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1answer
28 views

Why wouldn't other firms follow suit if an individual firm decides to cut its price?

Why doesn't the demand curve an individual firm faces in a perfectly competitive market have the same elasticity as it does in a oligopolistic market? Under perfect competition, if a firm increases ...
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30 views

Is there a name for goods/services/rights/etc. for which the “direction” of payment in a transaction could vary based on circumstances?

For example, consider Amazon Hub Lockers, order pick-up boxes usually located in 3rd party retail venues such as drug/convenience stores, etc. Amazon benefits by reducing last mile delivery costs and ...
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0answers
35 views

Imputing # of unemployed from Labor Force Survey

I am working on state-level data, where one state has recently stopped publishing the absolute figures for the number of the unemployed. Instead, it currently only releases U and LFP rates. ...
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0answers
30 views

graph of dependent income

I would need help with the following problem about consumer theory. Let us say that $X$ is the amount of days at the sea and $Y$ is the amount of days on the cottage. We have some utility function $u(...
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0answers
27 views

Educating workers (micro model)

Would someone be able to check my solutions to this basic problem? This is a practice test with no solutions provided, and I have no idea if I am going in the right direction. Problem: https://ibb.co/...
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1answer
42 views

How to find the cost function for perfect complements [closed]

Imagine I got a production function like it : $$ \min\{x_1, x_2\} $$ How can I find the cost function?
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15 views

Price equilibria with transfers

I am pretty new to Microeconomics so please bear with me if I am missing something obvious. I am solving the following problem: The question is in the setting of pure exchange economy with two ...
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0answers
21 views

How to explain the flattening of the SRAC curve?

I discovered that there is a way that Short-run average cost curve could become 'flatter' instead of shifting. Yet I cannot find an explanation of why and how it can become flatter. For example, in ...
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1answer
18 views

The optimal price for a demand curve with a steep slope

Given the demand function, $$D(p)=A-ap$$ I've found the optimal price, $$p=\frac{A+ac}{2a}$$ Where $c$ is cost and $A,a >0$. My question is how is the optimal price is dependent of $a$ (1) - what ...
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20 views

Airline competition and econometrics

If I wish to understand the competitive constraints of airline A on airline B, what sort of econometric relationship should I investigate ?. Immediately what comes to mind is to look at the impact of ...
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0answers
34 views

Identifiability of Non-Parametric Utility Function?

I recently learned that EU characterized by independence and weak ordering is identifiable, but a utility function like: $U(x)=v_1(x)v_2(x)$ is not identifiable. Does it mean that "cardinal ...
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1answer
26 views

Demand function for good x

$U(x,y) = x + 4y$, I tried to find demand function for good x, so I did utility maximization. max $U(x,y) = x + 4y $ subjects to $P_x.x + P_y . y = I$ and I found the $Px /Py = 1/4$, so $4Px = Py$. ...
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15 views

unit iso-quant curve and unit iso-value line

This question is about international trade theory. For the labor L and capital K, I know the theory of iso-quant and iso-cost. The price will be determined where iso-cost line touches iso-quant curve. ...

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