6 votes

First order condition of log functions in general and interpretation

The $\gamma$ on the RHS comes from applying chain rule when differentiating the second term with respect to $a_i$. Regarding elasticity, note that with a differentiable function $f$, the ratio $f'(x)/...
Herr K.'s user avatar
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6 votes
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First order condition of log functions in general and interpretation

It just comes from the derivative of profit function. I assume that $a_i$ is the choice variable here so the derivative of $\pi$ wrt $a_i$ is (step by step): $$\frac{\partial \pi}{ \partial a_i} = \...
1muflon1's user avatar
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4 votes
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How penalties on repo fails work?

In the US, a fail penalty is applied on the failure to deliver securities in a US Treasury or Agency transaction. This applies to any trade in these securities , including a simple cash trade , or ...
dm63's user avatar
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3 votes
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Understanding the gradient of the social cost curve in a market failure/ negative externalities diagram

It simply depends on the shape of the marginal external damages. If the total damages are linear in output, then the marginal damages are constant, and the gradient of the marginal social cost is the ...
Maarten Punt's user avatar
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3 votes
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Asymmetric information assumption

In this setting, both buyers and sellers are usually assumed to be risk neutral. So adding an additional layer of uncertainty over seller's valuation is not really going to change the model's ...
Herr K.'s user avatar
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2 votes

How to improve the underperforming construction productivity by correcting its market failures?

None of the problems you mention in the construction industry are "market failures". Problems they may be, but market failures they are not. The 3 types of market failures are: ...
B T's user avatar
  • 587
2 votes

Why is there a deadweight loss in this lemons market?

You can calculate the total social surplus (= CS + PS) in this equilibrium and compare it to the social surplus in the efficient allocation of cars. Equilibrium allocation The equilibrium (under ...
Herr K.'s user avatar
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2 votes

Providing subsidies affects Marginal Private cost but not Marginal Social Cost?

The amount of external cost is determined by the level of production in this framework. If the producers receive a subsidy the MPC shift to the right as you point out. That also means that for each ...
Maarten Punt's user avatar
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2 votes

What is the difference between economic rent and economic profit?

I do not think you have the correct definition of rent there. Or to be more clear maybe that is the definition used in some subfields of economics as language can sometimes differ between subfields. ...
1muflon1's user avatar
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2 votes

I don't understand how a graph would look like for this situation

I suggest that the graph could be improved in two ways (apart from the point, which you seem to recognise, that the upward-sloping line labelled MSB should be labelled MPC (marginal private cost)). ...
Adam Bailey's user avatar
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2 votes

Is market failure the same allocative inefficiency?

In this context 'market' usually means some allocation mechanism. For example free market, or a market where someone has monopoly power. Allocation of goods and resources can be done in other ways: e....
Giskard's user avatar
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1 vote

Information asymmetry and market failure

It’s little bit more nuanced. Market failure in economics is rigorously defined as a situation where markets are not allocatively efficient (see Ledyard 2017). That is, technically speaking, market ...
1muflon1's user avatar
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1 vote
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Providing subsidies affects Marginal Private cost but not Marginal Social Cost?

The social cost of a product is the value of the resources that are consumed for its production, irrespective of property rights (and a "negative externality" is nothing else than resources consumed, ...
Alecos Papadopoulos's user avatar
1 vote

Does segregation make economic sense?

Models have been constructed that show, at least, how discrimination can rationally self-perpetuate. For instance, in The Illusive Quest for Growth, William Easterly describes a model in which ...
Dan's user avatar
  • 1,346
1 vote

Does segregation make economic sense?

In many models, we assume that firms simply want to maximize profits, and there are no externalities. If these assumptions are true, then a free market will be racism-free, gender-blind etc, etc. ...
Regio's user avatar
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1 vote

How does social cost and social benefit work?

The payoff of an individual or a group is given by $$\text{thier benefits}-\text{their costs}.$$ Let's work with an example of car ownership. It yields two benefits for me: I can use it to go to work ...
Ubiquitous's user avatar
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1 vote

How does private benefit exceed social benefit?

The net social welfare can be written as $W=B-C$, where $W$ is total welfare, $B$ is the benefit, and $C$ is the cost. Suppose we are interested in thinking about a negative externality that implies ...
Ubiquitous's user avatar
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1 vote

Does labor mobility create a certain type of market failure?

Well, from the same paper (p. 5), it's not all that clear that the theory translates to actual market failure: There is very little reliable data on either the scale of poaching or its impact ...
Dolphin 613 Motorboat's user avatar
1 vote

Looking for a term that explains market participants that lie about their participation to gain access to said market

What about a meme agent? (e.g. an agent mimics the qualities of another agent to "fool" regulators, competitors, consumers.)
JKK's user avatar
  • 29
1 vote

Calling 118 118 (UK) - A market failure?

When there was only one telephone service supplier, BT directory enquiries used to be free. If you did not know the number of who you wanted to call, you could not call. Once you got the number from ...
Ian G's user avatar
  • 11
1 vote

Calling 118 118 (UK) - A market failure?

Questions about specific markets in specific countries require targeted applied research to be answered - this is the fine hour for applied microeconomics and industrial economics. ...
Alecos Papadopoulos's user avatar
1 vote

Is there a comprehensive list of all market failures ever discovered?

Market failures often arise due to deviations from the classical assumptions of economics (e.g. Perfect Competition, Perfect Rationality, Perfect Information, Unbounded Computational Capacity, ...etc)....
tvbc's user avatar
  • 114

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