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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How to distinguish if production costs changes the elasticity of the supply or shifts it?

I have specific doubts about how a factor affects supply elasticity and how it shifts the supply curve. In many cases, the literature shows that some factors affect supply in both ways. For example, a ...
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Production efficiency under monopoly

Sorry, I forgot to mention that in this case, the demand curve is above the LAC at the point where MR = MC. In other words, the price is set higher than the long-run average cost. I am trying to wrap ...
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Interpretation of market condition given by relation between elasticities

The total market demand is given by the sum of the two destinations ($e$ and $f$) given to the product. Given these conditions: Demand: $d(p) = e(p) + f(p)$ where: $d(p) > 0$, $d'(p) \leq 0$; $e(...
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Maximize marginal products

Say a firm is facing a budget line as stated below:($K$ stands for capital and $L$ stands for labor) $$200K + 100L = 1000$$ Under this circumstance, a rational firm will look for ways to maximize its ...
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How to interpret risk premium

I do not understand the notion risk premium. Let us suppose that John goes to the city by car, but he is thinking about not paying for the parking. If he is caught in the act he must pay the fine. How ...
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Solved applied econmics question. Problem is the value of TVC, TC, AVC, ATC, & AFC are all negative. Should I ignore negative value?

Disclaimer: This is not a "Do my homework" type of question. Instead, this is, "I'm confused whether what I did is right or wrong?" type of question. If I ignore negative signs in ...
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How to create an economic model? What are the step for this? [duplicate]

How to create an economic model? What are the step for this? Is it need a real data for this? Or generating a data is acceptable? If possible, I want to know the step by step for creating a ...
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Second welfare theorem and non-continuous preferences

Are there any monotonic and strictly convex preferences that are not continuous but the second welfare theorem does not hold for them?
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How can costs curves shift in the short-run?

I have been researching about Orsted economies of scale strategy and I am trying to argue that due to acquisitions and aliances, the costs curves of a firm may shift in the short-run, consequently ...
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28 views

Types of Economies of Scale

Context: Delegation informed prime Minister that textile sector is working at fullest capacity due to government policies. They further said the energy package, timely refunds and other facilities had ...
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Can a horizontal merger in a highly concentrated market be beneficial to consumers if the cost synergy of the 2 merging firms is large enough?

There are three firms in a market and they compete in quantities ( a la Cournot).Two of the three firms merge (horizontal merger). The two merging firms will be able to reduce marginal costs ...
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Set of rationalizable strategies for this 4 x 4 matrix

I would like to find the set of rationalizable strategies for this 4x4 game: The first thing I did was try and find all PSNE. I found two, the ones I bolded. Thus, my answer to this question is that ...
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Differentiated or uniform tax

Suppose Person 1 is working in Denmark and has the utility function, $$u(c,l)=c-\frac{\eta}{\eta+1}(24-l)^{\frac{\eta+1}{\eta}}$$ His wage after tax is $w(1-t)$, where tax, t, $0<t<1$. A second ...
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Max of the tax provenue [duplicate]

I have this utility function: $$u(c,l)=c-\frac{\eta}{\eta+1}(24-l)^{\frac{\eta+1}{\eta}}$$ where c is consumption and l is sparetime. Then I also think we must have the condition: $$pc+wl=24w$$ where ...
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General Equilibrium: Two Consumers with Perfect Substitutes and Perfect Complements Utility Functions

I am attempting to solve a general equilibrium in pure exchange economy problem where the first consumer has an endowment of $(3, 4)$ and a utility function of $U(x) = 3x + 5y$. The second consumer ...
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Cartel and pricing

If it is revealed that a group of 8 soft drink manufacturers ( from an industry of 10 soft drink manufacturers) had engaged in a cartel between 2005-2010, how do I estimate the impact that their ...
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Similarities between microeconomic and macroeconomic failure. And, how microeconomic failures affect the economy at the macro level?

I can't make a relation between microeconomic and macroeconomic failures? I know they have differences. However, I want to know the effect of these two economic breakdowns on each other. I am meaning ...
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Triple Difference model using Repeated cross-sectional data

I have a repeated cross-sectional data from the Demographic and Health Surveys. And I want to run a triple difference model, along the lines of Yelowitz (1995). My identification strategy is such that ...
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Question about deadweight social burden triangle. Error in the test?

I have been trying to answer the following question for the past two hours. I've looked at textbook examples, online resources and lecture notes. There seem to be two correct answers but I may be ...
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How can I distinguish between those factors that affect supply elasticity and those that shift it?

How can I distinguish between those factors that affect supply elasticity and those that shift it? I am trying to make two regressions, one with the determinants that affect its elasticity and the ...
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Prodest package in R for TFP estimation, gives different results

I have the following issue: each time I run the estimation of the TFP by using prodest package in R 4.0.3, I obtain different coefficients before the variables as well as omega variable is different: ...
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Walrasian Equilibrium

Need help solving last two parts of this problem. We’ve solved for the general equilibrium but not sure how to go from there. The endowments of two consumers are given by $w_1 = (40,80)$ and $w_2 = (...
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Economic and Statistical Significance Of Coefficient

I want to know If I am comprehending these terms correctly Summarizing the difference between economic and statistical significance of coefficients (Describing the terms, process of assessing each ...
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Unique competitive equilibrium in an exchange economy

I was working on the following excercise: In an exchange economy $\varepsilon$ with two goods and strictly monotone, continous and strict concave utility functions, suppose all demand functions are ...
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Neutral good and quasi linear

if my good y is neutral and x is essential. My indifference curves look like vertical, but I want to ask that How does my utility function look like and can I say that this is quasi linear because mrs ...
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Violation of the transitivity axiom [duplicate]

I'm struggling to think of a way to violate the transitivity axiom. I was thinking about the following scenario: Let's say that you're voting on three different choices, A, B and C. If you pit A vs. B,...
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Binary relation on the set $X = \{v, w, x, y , z\}$ that is asymmetric and transitive but not negatively transitive

So I am trying to find a binary relation on the set $X = \{v, w, x, y, z\}$ that is asymmetric and transitive but not negatively transitive, and is quite tricky. Will $R = (v, w)$ be asymmetric and ...
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Demand curve:log Quantity, logprice,logprice of N substitute goods,log income, need something else?

Imagine the following situation: a seller of a company has the price and quantity sold for a certain good, that seller can simply make a regression like: ln(Quantity) = ln(Price) ~ ln(price of ...
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What is the relationship between Marshallian demand and Two-Stage Least Squares Estimation Procedure

I was reading Varian, and he gives an example of how to find the quantities demanded using a CobbDouglas utility function with observable data, and a question arose: what is the relationship between ...
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law of diminishing marginal returns and regression on the factors of production

Does it make any sense to create an equation with Profit ~ Production factor1 + Production factor1 ^ 2 + Production factor2 + Production factor2 ^ 2 to explain how much the increase of 1 in a company'...
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Quasi-linear utility. Deriving demand

I was trying to derive a general demand for the good $x$ for this quasi-linear function $u(x,y) = y + 2\sqrt{x}$ subject to standard budget constraint $p_x x + p_y y \leq M$ Using Kuhn-Tucker ...
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Perfectly Inelastic Supply curve and Producer margin [duplicate]

If the supply curve is perfectly inelastic then it is vertical as no matter what the price is supply will be same. Producer surplus is area below equilibrium price and above supply curve. so in case ...
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Marginal rate of substitution interpretation

I am trying to interpret the marginal rate of substitution stidied in an article. The article in question is Burbidge, J. B., Robb, A. L., 1980. Pensions and retirement behaviour. The Canadian Journal ...
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31 views

How do I analyze an economic model with no variable costs?

I'm somewhat new to economics, and I'm working on a strange model: It involves webmasters of web pages acting as producers of clicks that can be consumed by other webmasters, who pay per click. I'm ...
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Why don't we give social security in such a way that previous optimal bundle is once agin the optimal budle?

In this the budget line has shifted inwards due to increase in the price of goods. And then we provide social security such that the past optimal bundle becomes affordable but is not optimal. So why ...
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Absolute and Comparative Advantage Help

I started studying microeconomics and I am having trouble figuring our how can I find the "?" values in this table? If someone could help me I would be really grateful. ...
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Estimating multi-output production technologies

For a given firm, is it ever appropriate to estimate an independent production function for each output? For example, a university produces journal articles $A$ and services a number of students $S$ ...
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How do I figure out whether the ICs are convex or concave?

Question: Randy Ratpack hates studying both economics and history. The more time he spends studying either subject, the less happy he is. But Randy has strictly convex preferences. (a) Sketch an ...
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how to calculate Leontief demand functions from first order conditions of a CES function when sigma tends to 0?

This question is NOT about how to approximate a CES function to a leontief function. Knowing that: $i= good (\begin{array}{*{20}{c}} {1}&{or}&{2} \end{array})$ $j= firm (\begin{array}{*{20}{c}}...
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What kind of tax diagram can show the full consumer tax burden?

If a government increases a purchase tax on an apartment, the tax will be fully burdened by the consumer, as the "producer" will simply be the owner of the house. But in a diagram, should ...
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If the Yield (Y) of the cosnumers change, does the $Q_{D}$ remain parallel?

Because we have a change in Yield (Y) which is a factor of demand, we have a move in the $Q_D$. However, not all changes in the Yield affect the $Q_D$ the same way right? For example, if we know that $...
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Capital in terms of labor

I have a question that asks to find $\frac{\partial K}{\partial L} $ from $Q=cL^aK^b$, when $Q$ and $c$ are constants. It lists 4 answer choices but I’m just not sure how to approach it. Implicit ...
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29 views

Auction Makrets and delearship markets

The largest difference is that the NYSE is an auction market and the Nasdaq is a dealer market. In the former, the highest bid for a stock is matched with the lowest asking price. In the latter, ...
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How is the defintion of the mean preserving spread (MPS) not too general?

The mean preserving spread is defined as follows: Consider two lotteries g and h. Let $x_g$ und $x_h$ denote the corresponding random variables. Then h is a mean preserving spread (MPS) of g, if: $...
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Grab the dollar Bayesian game

$\epsilon_i$ is distributed uniformly on $[-\phi, \phi] $ where $\phi>1$. My working so far is as follows: $$\mathbb{E}U_1[I]=1+\epsilon_1\\\mathbb{E}U[N]=0\\$$ Therefore, the optimal strategy for ...
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Farmer and owner Bayesian game

A farmer has talent $\theta$ uniformly distributed on $[0,1]$. His payoff from farming his land is $\theta.$ Before setting up his farm, he chooses some $w\geq0$, which a plant owner can either accept ...
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What would we say on the utility of risk and its consequences?

Anything has its risks and anything has its utility or desutility. The risk aversion causes a looking for safer alternatives in the market which maximizes utility in a trading off between risk and ...
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Is there a case where the demand of a consumer with monotonic preferences, does not fall on the budget line?

In other words, apart from (weakly) monotonic preferences are there any other necessary conditions for Walras's Law? Does monotonicity imply completeness and transitivity?
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143 views

How to find the Utility Possibility Frontier when there are Perfect Substitutes?

I am trying to derive the Utility Possibility Frontier (UPF) when both utility functions display perfect substitutes (in an Edgeworth economy with to consumers and two goods). The specific problem: $...
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Equivalent Variation of Price Change

If Bernice (whose utility function is min {x; y} where x is her consumption of earrings and y is money left for other stuff ) had an income of \$12 and was paying a price of \$3 for earrings when the ...

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