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8 votes
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Do the three ways of measuring producer’s surplus give the same result?

Ask your teacher what he meant, because there is either a misunderstanding or he is mistaken. Producer's surplus will come down to $y \cdot p - VC(y)$. In the first graph, by definition of $AVC$ we ...
Giskard's user avatar
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6 votes
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Is it true that if marginal cost is constant, then average variable cost is also constant and equals marginal cost?

Your intuition is correct. First, you're right that "marginal cost only depends on variable cost", since \begin{equation} MC(q)=\frac{\mathrm dTC(q)}{\mathrm dq}=\frac{\mathrm d(FC+VC(q))}{\...
Herr K.'s user avatar
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5 votes

Why do some perfectly competitive, loss-making firms shutdown and others don't?

$AVC<AR$ means, without considering fixed cost, the firm is making a profit of $AR-AVC>0$ per unit of output. Compare the two options: keep producing vs shutdown: Keep producing: $\text{Avg ...
Herr K.'s user avatar
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4 votes
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Graduate level texts/notes that cover the Short Run and Long Run Costs of firms' production

Textbooks: Mas-Colell, Whinston, and Green (1995). Microeconomic Theory. Chapter 5 Geoffrey Reny. Advanced Microeconomic Theory, 3rd edition. Chapter 3 Kreps (1990). A Course in Microeconomic Theory. ...
luchonacho's user avatar
  • 8,591
4 votes

Is the marginal cost the same for every firm in a perfectly competitive market?

No, the marginal cost curves are not necessarily the same for each firm in the market. However the values of marginal costs are. To disprove the general claim that "The marginal cost curve of each ...
BB King's user avatar
  • 6,238
4 votes
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What is the difference between knowledge-based and R&D?

A knowledge-based company sells products or services that are primarily knowledge-based. This doesn't have to be new knowledge - it can be existing knowledge. An R&D company earns its way by ...
410 gone's user avatar
  • 8,168
4 votes
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How to find cost function from leontief production

Cost minimisation problem of the firm is defined as follows: \begin{eqnarray*} \min_{x_1\geq 0, x_2\geq 0} & w_1x_1+w_2x_2 \\ \text{s.t. } & \min(2x_1+x_2, x_1+2x_2) = y \end{eqnarray*} where $...
Amit's user avatar
  • 8,986
3 votes
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Where does investment originate from in the circular flow model?

Investment ultimately comes from households through savings. From a macroeconomic perspective savings is equal to to investment ($S=I$). Investment comes from income because saving is portion of ...
1muflon1's user avatar
  • 57k
3 votes
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Proximity-concentration hypothesis: homogeneous firms and symmetric countries

$π = φ^{(σ−1)}*\frac{f_E+f_D}{φ^{(σ−1)}*(1+τ^{(1-σ)})}+φ^{(σ−1)}\frac{f_E+f_D}{φ^{(σ−1)}*(1+τ^{(1-σ)})}-f_E-2f_D$ $π = 2\frac{f_E+f_D}{(1+τ^{(1-σ)})}-f_E-2f_D$ $(1+τ^{(1-σ)})π = 2(f_E+f_D)-(1+τ^{(1-σ)}...
Jesper Hybel's user avatar
  • 3,466
3 votes

How are assets distributed by types of organisations?

The Flow of Funds (Financial Accounts of the United States) should have what you need. For example, table B.1 Net National Wealth Table Description Table (Billions of dollars; amounts outstanding ...
BKay's user avatar
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3 votes

Companies mutually owning each other

You can have both cases: X=Y=100 and X=Y=0 in your accounting. Both companies show the shares of the other company in their books. If you check the balance sheet of A and B respectively, you will find ...
T123's user avatar
  • 303
2 votes

How to determine the marginal product for the following question?

MP = Change in output / Change in input For the first product MP1 = 1 / 500 For the second MP2 = 1 / 600 Hence, the MP is decreasing. Hope this helps.
Nikita Gritsuk's user avatar
2 votes
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market equilibrium quantity $\ne$ firm profit maximising quantity?

In intro micro you usually assume that every firm in a perfectly competetive market has the same costs and production function etc. Hence, the MCs are the same for every firm. Under this assumptions, ...
Pablo E's user avatar
  • 34
2 votes
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Measure of New Firms Born in Each Period

I don't know your model. Just some general input: It seems that you have a model with a continuum of firms. That is, there are many firms and each one is strategically small. In mathematics, a ...
Bayesian's user avatar
  • 5,291
2 votes

Stackelberg with 3 firms

Start with the second stage, this is just Cournot competition between firm 2 and firm 3. You can solve this for the Nash equilibrium by setting the first order condition for firm 2 and firm 3 and ...
user18214's user avatar
  • 805
2 votes

What's the difference between economies of scale and increasing returns to scale?

Economies of scale are normally understood to refer to a situation in which, as output is increased, the cost per unit of producing that output falls (see here and here). Increasing returns to scale ...
Adam Bailey's user avatar
  • 8,529
2 votes

How do the assumptions $p'+q_ip''<0$ and $p'-c''<0$ ensure the stability of the Nash equilibrium among private firms in basic mixed oligopoly model?

The stability conditions are from Hahn (1962). They ensure that, under a specific adjustment process, the firms' outputs will converge to the Cournot-Nash equilibrium. The assumed adjustment process (...
smcc's user avatar
  • 691
1 vote

Companies mutually owning each other

I do not think X=Y=100 is logically wrong. Shares are traded on their perceived value. If the sellers' perceived value is low A and B can simultaneously buy all the shares in the other. A would ...
H2ONaCl's user avatar
  • 941
1 vote

Companies database with strange negative values, are they reasonable from an economic point of view?

Sales, liabilities, total assets and capital expenditures should be logically non-negative. You should however consult metadata/manual for the dataset. Perhaps negative sales record situation where ...
1muflon1's user avatar
  • 57k
1 vote

Measurement for the downstream use of a commodity

If you are looking for certain commodity data from the US. The USDA Economic Research Service has data on market size of certain commodities. But I am not sure about firm level data. https://www....
Mike J's user avatar
  • 1,467
1 vote

Measuring productivity with the Törnqvist index

The formula you have above to solve for multifactor productivity (or total factor productivity) is correct; however, after reading your post, you are interpreting it differently. The terms with ...
Mike J's user avatar
  • 1,467
1 vote

Perfect Substitution with a Continuum of goods?

Seems like the problem specified as specified right now should have as solution $C(\omega)=\frac{\delta(\omega)}{P(\omega)}$ if $P(\omega)=\min_{\omega'} P(\omega')$ and zero otherwise. The solution ...
Regio's user avatar
  • 4,188
1 vote

Best Response Functions for Cournot

In general a best response function returns a set of best responses. This can be seen in much simpler games than Cournot. To give a degenerate example, if a player is always indifferent between their ...
Xabu's user avatar
  • 56
1 vote

Why do firms losing money almost always reduce labor costs via layoffs instead of pay cuts?

I think this can be explained by prisoner's dilemma. Short answer: if by pay cuts a firm would lose its competitiveness in attracting high quality employees, the best strategy for a firm is to lay ...
HarmlessEcon's user avatar
1 vote
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Using metrics provided by FRED to identify the business cycle

Identifying business cycles or short/medium fluctuations of an economy can be quite hard. In business cycle theory it's pretty common to use the Hodrick-Prescott-Filter to identify short term (...
PAS's user avatar
  • 349
1 vote

Using metrics provided by FRED to identify the business cycle

Prediction is difficult, especially about the future. (Berra, Goldwyn, Bohr et al.) The problem with noting that recessions often occur immediately after low periods of unemployment is that you do ...
Henry's user avatar
  • 4,765
1 vote

I'm studying the effect of a law on a sector: how do I select the control group?

Ideally, but not always feasible, the first option would be to select a similar region where the law is not in place and compare them (e.g. different country / State / city) If it is not possible to ...
JoaoBotelho's user avatar
  • 2,155
1 vote

Optimal production level for a typical firm in long-run

It appears we start at long-run equilibrium point. The fact that all firms operate at the level where $q^*:MC = \min AC$, means that given demand $Q^d$ and the cost structure, what is endogenously ...
Alecos Papadopoulos's user avatar

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