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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questions
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Take It Or Leave It Strategy: Social Optimum
Here is what I understood
Using Backward Induction, I inferred that buyer offers a price, say, $P$ and the seller will sell only if $P \geq c(I)$. Setting the lowest possible Price that will ensure ...
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1answer
59 views
supply-demand imbalance
I have a basic question
What are the different means/mechanisms available to address supply-demand imbalance?
The answers that come to my mind are :
Using pricing (when demand > supply)
Using ...
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0answers
357 views
By continuity, the upper and lower contour sets of a bundle are closed [duplicate]
Mas-Collel, Winston and Green's Microeconomic Theory (3rd edition), states that the continuity of a preference relation implies the upper and lower contour sets of a bundle are closed. I would like to ...
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47 views
Understanding the proof using the mean value theorem
This is from Hopkins and Kornienko (2004) : Running to keep in the same place. The above proof is for the proposition 1 in this paper. I don't understand how the mean value theorem is applied in this ...
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1answer
250 views
Reason for marginal revenue is less than price in monopoly [closed]
I understand the fact that marginal revenue is less than price because in the monopoly firm faces a downward sloping demand curve.
As well as, by expanding output firm is going to lower the all the ...
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2answers
2k views
Why does the incentive compatibility constraint bind (moral hazard)?
Consider a very basic model of moral hazard with two possible effort levels $e_L<e_H$ and two possible levels of output $y_L<y_H$. If the agent doesn't participate, they get utility of $\bar{u}$....
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30 views
The Crisis of Argentina
newbie here.
Q1 - What needs to be done by the Argentinian government for their currency to regain back its strength?
Q2 - Why has the Argentine Peso depreciated against the U.S Dollar for more than ...
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436 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
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 across this ...
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1answer
139 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 ļ¬xed amounts, and three agents, A, B and C. So in this ...
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2answers
393 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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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 ...
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0answers
41 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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0answers
237 views
What is Application of Vector Algebra in Economics?
I through one tutors heard that vector is used in economics .
But on searching about it on internet could not find anything
Recently I studied about Vectors in Mathematics
So I was wondering how ...
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0answers
17 views
Is the definition of Investment variable in Economics?
I studied that Investment is the expenditure incurred on the procurement of such goods that would help us in production of goods and services.
And mainly consists of Fixed and Inventory Investment
...
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36 views
Competitive Market - Production & Number of Firms
The question is as follows:
The inverse market demand for provision of gas services is given by p(y) = 1/(1+y), where p is the unit price and y measures output in appropriately scaled units. Suppose ...
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1answer
131 views
Find a subgame perfect equilibrium and a Nash equilibrium
I want to know if my thinking is correct.
Look at the following game.
As the game has only one subgame (i.e., the game itself) then the Nash Equilibria will coincide with the subgame perfect ...
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0answers
52 views
Lagrangian multiplier
Consumer's problem
\begin{equation}
\max \sum_{t}\beta^{t}[c_{t}-1/2(1-x_{t})^{2}],
\end{equation}
\begin{equation}
\ s.t. c_{t}+q_{t}b_{t+1} \leq (1-\tau_{t})(1-x_{t})+b_{t},
\end{equation}
where c=...
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0answers
131 views
Vertical Marginal Cost curves
When would a marginal cost curve be vertical? I understand this happens when the marginal cost jumps, from say 0 to 100, but in such a case, I think there should be a discontinuity rather than a ...
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1answer
315 views
Calculate optimal discount for product bundling
So recently I made some rules with my transaction data. Based on it I can determine which products are profitable to bundle it together.
But even though I know e.g. product Aā product B, are there ...
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0answers
641 views
Quasi-linear Optimal Consumption Bundle
I have a question involving optimal consumption bundles for quasi-linear preferences. Utility is given by
$$U(x_1,x_2) = 16\sqrt{x_1} + 2x_2$$
and $p_1 = 8, p_2 = 4, I = 30$.
What I have so far ...
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2answers
145 views
Does $U(x,y) = x^2 + y^2 + 2xy$ represent transitive, monotonic preferences?
I'm a monitor for a microeconomics course and a student came up with this question. That this utility function represents monotonic preferences I think it's clear. Both goods have positive and ...
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0answers
42 views
Elasticity of Substitution between 2 factors, without knowing relative prices
I'm trying to figure out the elasticity of substitution between input $s$ and input $v$. I know that the marginal rate of substitution between these two inputs are $\frac{v^2}{s(v+k)}$, where $k$ is ...
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0answers
23 views
Why is the expected value conditional on the trade taking place in an adverse selection problem?
I have been asked the following question, and I don't understand why the expected value of the firm is conditioned on the trade taking place.
"Suppose that a firm owns a business unit that it wants ...
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1answer
82 views
What are the identification problems in measuring peer effects?
I am currently writing my bachelor thesis on peer effects. However, the more I read about the identification problems (I read e.g. Manski, Moffitt, Angrist, Goldsmith et al.), the less I understand. I ...
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0answers
105 views
Value of companies with circular ownership [duplicate]
Given two companies, total assets of $100 million each.
Company 'A' owns \$50M of company 'B'.
Company 'B' owns \$50M of company 'A'.
If you look at the value of both companies do you get \$200M or ...
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0answers
35 views
Law Of Variable Proportions
In the Law of Variable Proportions, it is said that a producer prefers to work in the second phase where it is the phase of diminishing returns while number of variable factors are increased. But ...
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0answers
29 views
Regression on derived consumer preference
I have a data set with some demographics of consumers who bought a product that can be used to imply their preference (beta) using Cobb-Douglas (see comments of original question). Iād like to check ...
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0answers
114 views
Signaling questions (separating equilibrium)
Consider two firms
Inverse functions: $p(q)=max\{a-q,0\} $
$q$ is total production and a is positive constant.
This value of a takes two values ah=2 (high demand) and aL=1 (low demand). Their ...
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0answers
12 views
what is the project monitoring and impact analysis(PMIE)?
what is the project monitoring and impact analysis(PMIE)? Can anyone explain basic features of this?
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0answers
21 views
Model of sales of a new product
I am looking for any popular model to calculate sales of a new product under the assumption that some goodnesses of the product are given.
For example, the novelty $N$ and usefulness $U$ of a new ...
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0answers
41 views
Charging a minimum increment on the second price in online advertising auctions
Many ad servers running GSP auctions tend to charge a $0.01 increment on the second price. I was wondering if there was any theoretical basis for this, or is it just a way for ad servers to make a ...
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0answers
65 views
Maximization under two different states of the world [closed]
What I did is the following one but I am not sure at all:
Any help will be appreciated. Thank you.
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1answer
47 views
How to calculate the optimal wage and the optimal rent on capital in an economic model?
In Dhondt & Heylen (2009)*, they specify a certain production function.
Under some standard model assumptions such as perfect competition and so on, they calculate the optimal wage as
$$ w_t = \...
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0answers
229 views
Firm's profit max problem, in present value terms
So I am kinda stuck on this question. The question goes as follows:
Consider a multiperiod firm, selling q1 units of a product in period t=1 at spot price P1 and q2 units in period t=2 at spot price ...
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1answer
418 views
Revenue maximization
We have two firms with identical cost structure compete in a market
Demand function = $p=a-bq$
And $q=q_1+q_2$
They are identical in every way. However, firm 1 maximizes profit and firm 2 ...
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0answers
109 views
Kuhn Tucker optimization problem and game theory [duplicate]
Consider a game with two players, where each player i= 1 ,2 has preferences $u_i$= $s_i^a$$c_i^{1-a}$, where c_i is the consumption and $s_i$ is social interaction. $s_i$ is given by :
$s_i$ = $t_i$ + ...
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1answer
60 views
Economics term for unfavorable goods
What are called goods, whose maintenance expenses are higher than initial price tag. There is a specific term for that, but I can't find it.
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0answers
77 views
Using aggregate marginal revenue as a way to estimate demand
We also know that for a competitive market, the supply curve is the sum of the marginal cost curves.
Can one make an extension of this idea to having the demand curve being equal to the sum of ...
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0answers
22 views
Present value of perpetual rise in income
If a student successfully completes an MBA program in 2 years, he will earn $50,000 more than what he could earn without the degree for his lifetime. Calculate the present value of this perpetual rise ...
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0answers
111 views
MRS in Walrasian equilibrium price expression?
I have the utility function $U^A=\alpha ln(x^A)+\beta ln(y^A)$ for consumer $A$ and $U^B=\gamma ln(x^B)+\phi ln(y^B)$ for consumer $B$. They are endowed with $\omega^h_x$ and $\omega^h_y$ of $x$ and $...
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1answer
124 views
Utility Function in Consumer Credit
I have been studying the area of unsecured consumer credit (consumer loans and credit cards) and credit scoring. My question is: can we have a utility function (either a lender's or borrower's utility)...
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0answers
51 views
Best strategy for investing and buying out property with many owners(20+)
First I am not economist, so sory if I am not using economicaly correct language. But this is a real life situation.
I would like to know what are the buy out strategies for investor when he has to ...
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0answers
50 views
Is production side (or so called “firms”) considered in “social welfare”?
When micro-economists refer to "social welfare" as measure of an outcome of a competitive equilibrium economic model, or "welfare economics" in general, is this taken to include a measure of the ...
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2answers
142 views
Welfare status when a positive externality is subsidised
I was wondering if there is still welfare loss for example there is a positive externality in production of a good and the government decides to subsidise the good?
I think it does still have ...
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0answers
67 views
How big is the consumer surplus for typical consumer goods?
Economic transactions happen when both think it will benefit them - that is, when there are gains from trade on both sides. But that says nothing about the size of that gain. If you're a consumer, ...
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1answer
51 views
Shutting off production in short term
could you help me to solve the task, please? The task is following.
Total costs of the Ńompetitive firm are $TC = Q^3 +6$ (Q in thousands \$). If the production is stopped then monthly costs are 4000\$...
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0answers
232 views
MWG Example 3.E.1
I do not understand how Mas-Collel, Whinston, and Green derive the Hicksian demand functions in Example 3.E.1 in their textbook.
Allow me to give further background regarding the problem: The ...
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1answer
95 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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0answers
60 views
Why are share repurchases particularly accretive?
From the "Manual of Ideas"...
VALUE CREATION VIA BUYBACKS Share repurchases tend to be particularly accretive in the case of companies generating cash from operations while trading below tangible ...
