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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452 views

Homothetic function versus straight Engle curve

Homothetic functions can be defined as follow (Green, 1964, p.49): If two figures A and B are "homothetic", or "similarly placed" with reference to a point P [for example, the origin], then for any ...
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139 views

What are some applications of Akerlof's 'lemons' in goods and services markets?

How can the idea of Akerlof's 'lemons' be applied to goods and services markets (that doesn't include second-hand cars)?
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219 views

Troubleshooting Utility Maximization with the Lagrange Method

I'm trying to solve a utility maximization problem through the Lagrange method. The utility function is something like $u(x,y)=x+B(y-a)$. However, I'm running into problems as x and y do not come up ...
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264 views

Wooldridge's Microeconomics book vs Cameron and Trivedi's textbook

I'm debating between 2 Microeconometric classes at my college, (I realize I'm fortunate to have a choice). One class uses Wooldridge's "Econometric Analysis of Cross Section and Panel Data" the other ...
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143 views

Example in which revealed preference doesn't imply preference

I'm studying Varian's Intermediate Microeconomics, in which the principle of revealed principle is stated as follows (for now we're assuming strictly convex indifference curves): Let $(x_1, x_2)$ be ...
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1k views

Negative Marginal Returns

In my economics class, we learned that in the short run, there are three stages of marginal returns: increasing, decreasing, and negative. As a firm adds the first few units of labor, specialization ...
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236 views

What does the area defined by two different values for quantity under a supply curve represent?

Assume that a and b (b is greater than a) indicate the quantity of supply on a linearly increasing supply curve. How can be the area formed by those two points under the supply curve interpreted? The ...
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26 views

Question regarding demand schedule and equilibrium consumption [closed]

Please refer to the two images posted at this link: http://imgur.com/a/si3ko Referring to Page 2, I'm not quite sure what the author is trying to say regarding the two bracketed portions. Considering ...
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373 views

Difference between NPV and PDV

What is the difference between Net Present value and present discounted value when periods are given in infinity $\infty$ . Both are then equal to $\frac M r$?
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268 views

Inferior goods, monotonic utility and strict concavity [duplicate]

Is it possible to have an inferior good under the assumption of a utility function which is strictly monotonically increasing and strictly quasiconvex? I do not think so, but I could not find a ...
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38 views

Inelastic offer, tax paid by seller, who supports the charges

I have a small problem, I have a situation where we have a perfectly inelastic offer and a normal demand, then there is a tax that is paid by the supplier who supports the totality of the charges ? Is ...
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91 views

own and cross elasticity for many products

This publication uses this formula to fit a model to predict the demand of a product A: ...
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1answer
98 views

The equation for the firm's demand for labour

I have been stuck on this for a few hours (actually a few days). I can't find much useful information on the web that has made it any clearer. Suppose that a firm’s production function of output Q is ...
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442 views

Showing the Utility Possibilities Frontier is downward sloping

The slope of the UPF must be equal to the slope of the MRT and the MRS. Is it therefore enough to show that the slope of the MRS is negative?
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42 views

Uses of loans during recession

I've noticed that certificates of deposit have dropped their interest rates in my country. This seems to be due to lack of trust in economic opportunities and has caused an increase of liquidity in ...
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166 views

Solving a Cournot oligopoly game with N firms [closed]

This is the full question: Find all pure strategy Nash equilibria of the Cournot oligopoly game with $N$ firms facing linear demand $P = a − Q$ when the total cost for each firm is $c_i(q_i) = q_i^2$. ...
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165 views

Identify whether a good is giffen good or not and under what condition

Given the following partial information about a consumer's purchases.He consumes only two goods. In year 1, $p_1^1=p_2^1=100,x_1^1=x_2^1=100$ In year 2, $p_1^2=100,p_2^2=80,x_1^2=120$ Over what ...
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406 views

How to find a firm's cost function based on its production function [closed]

The question A firm’s production function is given by $$q=F(L,K)=L^{1\over{4}}K^{1\over{4}}$$ find the firm's cost function $C(w,r,q)$, What I know so far I'm aware that the Technical rate of ...
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223 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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2answers
57 views

What is the formula for how many more I need to sell in order to justify raising cost?

I need to know the name and formula for this problem. I have widgets which have a certain lube content to them. We currently are selling the widgets for 3.00 each. The lube costs .50 cents for each ...
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1answer
2k views

How the presence of increasing returns to scale lead to market failure [closed]

How the presence of a sector with increasing returns to scale in a "perfect" economy may lead to market failure ? Can sb explain for me with the support of charts ?
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1answer
1k views

If government impose price control, what happens?

I have this MCQ homework that I would like your opinion about Suppose government chooses to impose a price control on a good. Which of the following is NOT a potential consequence of the restrictions ...
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1answer
63 views

price elasticity of output, makes sense?

I was wondering, in a log-log model of output, labour and commodity price where output is the depedent variable, does it make sense if the coefficient on the price variable is interpreted as the "...
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1answer
867 views

Robinson Crusoe Production Economy [closed]

Robinson Crusoe’s preferences over coconut consumption, C, and leisure, R, are represented by the utility function U(C, R) = CR. There are 48 hours available for Robinson to allocate between labor and ...
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240 views

Can budget lines be discontinuous?

It's been awhile since I've taken introductory microeconomics. I read budget lines can be discontinuous awhile ago but am suspicious as to such a concept being discussed in intro micro classes ...
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523 views

Representing these lexicographic preferences by non-continuous utility function?

I have the following preferences and I am wondering whether I could represent them by a utility function: $R_1 \succ R_2$ <-> $R_1\leq Q$ and $R_2 > Q$, $R_1 \succ R_2$ <-> $R_1 \leq Q$ and ...
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1answer
739 views

Given the supply and demand function what is the difference? [closed]

Given some unspecified demand and supply functions. I need to calculate quantity and price after taxation, but what is the difference between having a tax of 20% of total revenue and 20% of profits ($...
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61 views

Microeconomics: Question on Market for Factors

I am stuck and confused by a section of what I read in my textbook, could you please help me understand the paragraph? If you only vary one means of production and the market for it is competitive ...
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1answer
418 views

Mathematical Proof as to why does the total revenue increase when the prices are increased for an inelastic product? [duplicate]

I was recently reading up on the Price Elasticity of Demand and the section of Inelastic demand mentions that if a firm has inelastic demand for its product and wishes to increase its total revenue ...
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1answer
369 views

Government's intervention question [closed]

Given that demand for a good X is equal to $q_D=393-2p$ and market supply is $q_S=p/4-12$. Find equilibrium price and quantity, consumer and producer surplus and draw a diagram illustrating the ...
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1answer
866 views

How to interpret Marginal Cost values? [closed]

The Marginal Cost (MC) of an additional unit of output is the cost of the additional inputs needed to produce that output. Here is one of the formulas for calculating marginal cost: $\ MC=\Delta CF\...
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1answer
59 views

Present Value at time 0 [closed]

Land is an indestructible capital asset that offers a perpetual revenue flow. You own a piece of land that returns $20,000 per year forever. The relevant real interest rate to consider is 4%. What is ...
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1answer
784 views

Zero Economic Profit and opportunity cost?

In microeconomics textbook, there is always this notion of zero economic profit in perfect competition. We know that when people gets negative economic profit, they often leave the market. What I ...
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93 views

Principal Agent Question Private Benefit

If an agent can take action which impacts social welfare in a noisy way, the private net benefit of the action is $P(x,t)=x-s(\frac{x^2}{2} + t)$, $s$ is $(0,1)$ How can I determine the privately ...
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2answers
134 views

Does the Samuelson condition assume all the prices for the private goods are the same?

Suppose I have two agents with utility functions $U_i$ and $U_j$ and budgets $p_x x + p_g g = m_i$ and $p_y y + p_g g = m_j$. If I solve a social planner UMP, I will get for my g FOC (after plugging ...
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1answer
2k views

Cost function and short run supply

Suppose there is a number of identical firms producing diamonds. Let the total cost function for each firm be given by $C(q, w)$, where q is the firm’s output level and w is the wage rate of diamond ...
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1answer
2k views

What happens to a production possibilities curve whenever there is too much labor? [closed]

If too much labor is added to a country's production, what happens to the production possibilities curve?
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1answer
690 views

Real world example of using difference quotient vs. derivative

When would you use the difference quotient in an economic model rather than the derivative to assess the change in some endogenous variable? Real world examples seem to be lacking in textbooks on ...
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1answer
163 views

Marginal rate of technical substitution for multi-dimension inputs? [closed]

Suppose I have a vector x = ($x_1,x_2,x_3,x_4,x_5$) of inputs. How it is the MRTS($x_1,x_2,x_3,x_4,x_5$) ? And which is the relation with the marginal products of inputs 1-5 ?
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110 views

Why do all apartment complexes in Albuquerque have pools?

Apartment builders have a constrained optimization problem whereby they balance building different amenities to attract tenants with varying preferences. Recently when searching for apartments I ...
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1answer
110 views

Minimization of costs combination of factors of production

Given the production function $D(x,y,z)=\min\{2x, \left( 2y+4z\right)\}$, and knowing that P-price $P_x=30,P_y=20,P_z=5$ and volume of production $D=200$. How much of x,y and z is needed to minimize ...
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1answer
2k views

Why is the social value curve NOT the supply curve shifted downwards?

Abbreviate 'Social Value' as SV. In some other resources such as this, the SV curve is known as the Social Marginal Benefit curve. The following quotes explain [1.] why the SV curve is the demand ...
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78 views

Perfect competition profits question

Market is supplied by: 50 competitive companies all of them have relatively low costs given by an equation $C_l(q)=350+2q+q^2$ and by n companies of higher costs given by an equation $C_h(q)=400+2q+q^...
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792 views

Perfect competition questions

I have problems with deciding whether those statements are true or false. In a short/long run price of equilibrium on a perfectly compettive market might be either lower or higher then average total ...
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27 views

Why is the opportunity cost 0 in this case?

My book says that the opportunity cost of purchase of a specialized equipment that has no alternative use is zero and hence such an expenditure is a sunk cost. However, while calculating the user cost ...
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0answers
22 views

Change of demand curve

I am supposed to solve the following problem: The price of coal oil is increasing more than 1%, due to the annoucment about decreasing the supply of coal oil on the market. How it will effect curve ...
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Under what conditions should I use a Social Accounting Matrix Model vs. Multimarket Model vs Computable General Equilibrium Models?

What are the differences between the SAM, multimarket and CGE models. When should I use one over the others?
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How can I model the impacts of improved agriculture technologies and food aid in a multimarket model?

Given a multimarket model for staple agricultural commodities wheat, rice, maize and sorghum, in a low-income economy, Im trying to figure out how I can use the multimarket framework to look at the ...
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1answer
89 views

Derive demand function $x(p,w)$ from utility function $u(x) = \min\{x1, x2\} + x3$

I know how to solve the two-good case with $u(x) = \min\{x1, x2\}$, but the addition of $x3$ confuses me. Problem Derive the demand function $x(p,w)$ from $u(x) = \min\{x1, x2\} + x3$ What I did ...
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18 views

Is oil supply really inelastic in the short term

Is oil supply really inelastic in the short run? Though it remains evident that in the short run, the known capacities of oil can't be increased and hence we can assume that there remains a upper cap ...