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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2answers
107 views

Proof that the budget set is closed [closed]

Mas-Colell, Whinston and Green's Microeconomic Theory affirms the budget set is closed. I would like to know why. The definition of open set in the book is the following:
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1answer
51 views

How does social cost and social benefit work?

I am really lost right now. I have a test tomorrow and I am stressing out. Whatever I look at for externalities, which could be my textbook, a website, notes from class, they all contradict each other....
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1answer
23 views

Am i correct here? #greenTaxes #priceMechanism #inefficientTax #DeadweightLoss [closed]

Now accoring to this article: https://www.telegraph.co.uk/news/2016/07/30/britain-banishes-plastic-bags-as-5p-tax-sees-usage-plummet-by-6/?fbclid=...
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1answer
120 views

How do I find optimal price or maximise profit in a monopolistic market?

How do I find the optimal price for a monopolist given the monopolist's cost function and market demand? I have $Profit(y) = p*y + C(y)$ where $p$ is price, $y$ is output, and $C(y)$ is total cost. ...
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1answer
978 views

Find optimal price from demand function?

I've been struggling with this for hours, trying to figure out how to solve this. "A perfectly competitive market has the marginal cost function, c (cost is C(y)=cy) and is facing the demand function:...
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1answer
254 views

Expenditure minimization with Leontief utility

I need to solve the expenditure minimization in a context where $u(x,y) = min\{x,y\}$, i.e. where utility is Leontief. The minimization problem is $$\text{min}_{x,y}\,\,p_xx+p_yy \\ \text{subject}\,...
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1answer
313 views

Profit maximization and allocative efficiency result

I completely stuck to the last part of this exercise. I cannot understand how can I determine an allocative efficiency result. Any help will be appreciated. Thank you.
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1answer
120 views

Sustainable growth in the long run [closed]

Suppose that, in addition to physical capital and labour, an economy requires a fixed factor and a non-renewable resource to produce the final good. Prove that an economy with these input requirements ...
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1answer
36 views

Cross elasticity of demand [closed]

If Q1=(P2)⅔ 1. Determine the demand for good 1, when the price of good 2 is 8 2. Find the cross elasticity of demand for good 1, with respect to P2, when P2=2
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1answer
48 views

Random Draft Allocation: Nash Equilibrium? [closed]

I would like to find the Nash equilibrium of the following allocation problem. There are 3 courses and 3 students. Each student has to take 2 courses, and each course has a capacity of 2 seats. ...
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1answer
72 views

Microeconomic Q on Total Revenue for Producer after Excise Tax [closed]

I had a question on how an excise tax per unit of good produced for a producer would affect total revenue for a producer of that good. The graph is that supply is perfectly elastic (horizontal) and ...
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1answer
94 views

Budget constraint when one of the goods can be sold

I'm studying for a microeconomics midterm and ran across the following question: A person consumes two goods, X and Y. The consumer's only source of income is given by the quantity of Y equal to ten,...
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1answer
906 views

Profit maximisation and cost minimization [closed]

Does profit maximisation always imply cost minimisation ? And Does cost minimization always imply profit maximisation ? Can we prove both the results ??
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1answer
139 views

Utility Maximization [closed]

Assume the utility function is $u(x,y,z)=y*min[x,z]$. The prices of all three goods are equal. The agent has an amount $M$ to spend on the goods. He has to choose one of the following schemes: A) Get ...
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1answer
355 views

What consumer preferences exhaust the budget?

Suppose that a consumer has a complete and transitive preference relation over R+. Further suppose that the consumer faces prices p = (p1,p2,...,p) 0 and has ...
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1answer
973 views

Slutsky and Hicks approach in calculating SE, IE. Differences and interpretation [closed]

Level: Ungrad, Micro I have a task, http://imgur.com/a/JT4zB I have done some questions. While I can't understand the differences between Slutsky and Hicks approach. I get it theoreticaly, but I don'...
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1answer
231 views

Consumer Theory (Finding demand function) [closed]

Here's the question that I really need help with: $$U(x,y)=(x^{0.5})+y$$ $MUx=\frac{1}{2x^{0.5}}$ and $MUy=1$, where $x$ is food, $y$ is clothing $Px$ is the price of food, $Py$ is the price of ...
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1answer
999 views

Estimate total variable cost function (TVC) and average variable cost function (AVP) from marginal cost function (MC)

I need to estimate the function expressions for $TVC$ and $AVC$ from the $MC$ function for different amounts of quantity $(Q)$ From the solutions I have, that For $Q \leq 50$ $MC1(Q) = -Q + 100$ $...
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1answer
94 views

Proving government expenditure crowds out private consumption [closed]

Please help as I am not able to solve either parts.
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0answers
11 views

Quasi-Hyperbolic discounting

I am new to behavioural economics and I'm trying to work through a question. I understand the question but I don't know how to go about it as the example questions I have seen normally provide beta ...
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0answers
13 views

When is the solution to an EMP not that of an UMP

Can you construct an example with p $\geqslant$ 0 such that the solution of EMP is not the solution of UMP.
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1answer
27 views

MRTS question involving production function [closed]

My work out shows constant MRTS and also increasing returns to scale. I thought the answer was C as I only found increasing marginal products of labour and capital. I really don't see how the answer ...
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1answer
23 views

Which of the following firms can operate in a perfectly competitive industry? [closed]

This was a question in a test. I am looking for an explanation for the answer. Firm A's cost of producing output y > 0 is c(y) = 1 + y Firm B's cost of producing output y is c(y) = y(1-y)^2 Answer: ...
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2answers
54 views

What's the market equilibrium price for the used good?

On a perfectly competitive market, a buyer wants to buy a used good. He is willing to pay $30$ for a badly used good, and $60$ for a nicely used good. The seller is willing to sell a badly used good ...
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1answer
174 views

Marginal rate of substitution(yx) question

For utility function U= ln(x)+Y How do I determine if MRS(yx) is diminishing or not for this question? I got Mu(x)=1/x and Mu(y)= 1 MRS(yx)=Mu(y)/Mu(x)= 1/1/x = x Does this mean that MRS(yx) is ...
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1answer
30 views

Imperfect Price Discrimination profit per group

During imperfect price discrimination is it possible to determine profit per group. For example: Aggregated Cost function: C(Q) = 18*Q + 5; where Q = q1 + q2 Aggregated Demand (AD) for group 1: q1(...
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1answer
58 views

Anti Piketty Confusing Movement Along Demand Curve with Shift

In Anti-Piketty, the author's claim that the statement "If the supply of any good is insufficient and it's price is too high, then demand for that good should decrease which should lead to a decline ...
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1answer
169 views

Pareto-optimal allocations in the Edgeworth box

If agent A has utility function $u(x_1, x_2)$ and agent B has utility function $v(x_1, x_2)$, what are the equation(s) that characterize the Pareto-efficient allocation of goods in the Edgeworth box? ...
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1answer
2k views

Inferior and normal good and the change in price of those goods

In general, We know that if a good is normal, then as your income increases, then demand of that good increases as well as price is fixed. Similarly, if a good is inferior, then as your income ...
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1answer
37 views

Will a consumer be more, or less willing to give up a commodity (for the other) for which they have been substituting another? [closed]

Statement: "Indifference curve analysis is based on the assumption of diminishing marginal rate of substitutiins. This means that as the consumer substitutes more and more of one commodity (say X) for ...
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2answers
60 views

How much of an assets price change is due to speculators and functional buys/sellers

If (for example) a heavily traded asset like crude oil has a price move of x, how much of that is influenced by functional buyers/sellers and how much by speculators? Let's say x is +100, there are 8 ...
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1answer
47 views

Finding out an optional consumption without calculation [closed]

I need help with this task. The utility function is U(a;b)=3a+2b. The prices for the goods a and b are equal. Explain what an optional consumption of the consumer would be without calculating. ...
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1answer
349 views

What is optimal profit for this company? [closed]

I am really struggling with the following question: Question: A company produces a product that they sell in two different countries. Because of transport costs, customs etc. it is not profitable ...
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1answer
2k views

Advanced Microeconomics: Deriving Slutsky Equation

I am not sure how to derive the demand for consumption of today's bread; the first thing the problem asks for. I think it might be a piecewise function based on the interest rate that gets you from ...
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1answer
305 views

Finding an exchange rate and competitive equilibrium given an initial allocation and utility function [closed]

I am attempting to solve the following question. "Smith and Jones are stranded on a desert island. Each has in his possession some slices of ham (H) and cheese (C). Smith is a choosy eater and will ...
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1answer
63 views

Microeconomics for demand [closed]

Oscar’s demand for movies is given by Q = 10−2P. (a) What is the price elasticity of demand at a price of 2? Is Oscar’s demand elastic or inelastic at a price of 2? (b) Assume that the ...
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1answer
57 views

Marginal Profit Derivation [closed]

Find the marginal profit of a firm with a profit function: $$P(q) = -192q + 88q^2 - 16q^3$$ I got $$\frac{dP}{dq} = -192 + 176q - 48q^2$$ However, the solution reads $$ \frac{dP}{dq}= -4(q-2)(q-...
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1answer
555 views

Is this answer correct for opportunity cost? [closed]

Shouldn't the answer the question be $0. Because you arent really giving up anything?
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1answer
19 views

finding optimal values of quantities through utility function when MRS is 1 and price ratio is 1:2 [closed]

so this is a somewhat simple question but im stumped, here's why: given the utility U=2$X_1$+2$X_2$ where $P_1$$X_1$+$P_2$$X_2$=20 and $P_1$=0.5$P_2$ the question asks to find optimal values of $...
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1answer
695 views

Intuitively, why is Profit = (Price $-$ Average Cost) $\times$ Quantity?

Sources: p 289, Principles of Microeconomics (7 Ed, 2014) by N G Mankiw p 259, Modern Principles of Economics (2 ed, 2011) by Tyler Cowen, Alex Tabarrok Definitions: Profit $:=$ Total Revenue $−$ ...
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2answers
84 views

Microeconomy, monopoly, maximum profit - two different answers when solving exercise in two different ways

Suppose that monopoly produces product $X$. Let $MC = 20$, Quantity demanded function is given by equation $Q_d = 600 - 2P$ (where $Q_d$ - demand curve, $P$ - price). Calculate the amount of ...
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2answers
772 views

Find Engel Curve with a Cobb-Douglas [closed]

I have $U(x,y)=xy$, $p_1=4$ and $p_2=1$. Income is unknown. Where do I start?
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1answer
218 views

What does this formula stand for? [closed]

W/Vmp = ? I think it is the marginal product....but I have really no clue....any help on this?
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1answer
272 views

Are these preferences convex? [closed]

$Let$ the utility function defined to be : $$U(x,y)=-x^2-y^2$$ I believe they are convex, the set which is preferred to a specific indifference curve is convex, but the answer sheet says that it is ...
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1answer
198 views

Question on monopolist (involves simple calculus)

QUESTION: Consider the problem of a monopolist that sells its product in two different markets $m$, with $m=1,2$. Each market has an aggregate demand function given by $1200−α_m\cdot p_m$, where $p_m$ ...
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0answers
27 views

Explain this excerpt from a book by a Nobel Laureate

Rents are dissipated whenever the marginal returns from appropriation process are smaller than the marginal costs of appropriation. What does this mean?
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0answers
17 views

What is the socially optimal solution when MSB does not equal MSC at any point? [on hold]

I had an economics paper today, and there was a question for finding the socially optimal level of pollution given the benefits to factories and cost to citizens. We were given a set of discrete ...
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1answer
89 views

Changing Constant Factor Demands

I’ve been given this true false question: Consider the minimization of wL + rK given F(K, L) $\geq$ Q with F(K, L) strictly increasing in K and L. The conditional factor demands K*(Q, w, r) and L*(Q, ...
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1answer
77 views

How to find the optimal consumption basket? [closed]

A consumer has the following utility function and income. 𝑈(𝑥, 𝑦) =1/2 * ln 𝑥 + 1/2 * ln y Price of 𝑥 = Price of 𝑦 = 100. Income = 1000 Suppose that the consumer gets 2 redeemable coupons for ...
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1answer
172 views

Maximizing a Cobb-Douglas Function

Suppose that a competitive firm receives a price of $P$ for its output, and pays prices of w, r and v for its labor $(L)$, capital $(K)$ and natural resources $(R)$ inputs, respectively. The firm ...