# 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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### Given an MRS how to be better off

Let's assume we have 2 agent A and B. A has n good x and m good y and B has a good x and 2a good y. If we know their MRS's at their current bundles how can we offer them a trade that makes both of ...
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### K in the Cobb Douglas function

I'm using the Cobb Douglas production function for a Mathematics investigation into how optimisation works in Economics. The assumption is that the firm require's only one type of capital, that is, a ...
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### Questions about merger simulation with logit demand

I'm trying to learn how to do merger simulation with logit demand. I think I get the concept of it and most of the math, but I'm struggling to put everything together and see how you would actually ...
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### What are Frisch Demands useful for?

Frisch demands are demand equations found usually in an intermediate step of the standard utility maximization problem. By example for the basic two-good case of a consumer with quasilinear ...
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### Is there a reproducibility crisis in Economics?

I am an undergraduate economics student, and came across this paper by John Ionnadis on 'The Power of Bias in Economics Research'. the findings are quite bleak. https://academic.oup.com/ej/article/...
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### What is the time period I should assume for factor prices in the cost function? [closed]

I have a quick and rather urgent question. Using the method of Lagrangian multipliers I got my cost function for my Cobb Douglas function of the form AQ^(1/b) where b>1, and A was an extremely large ...
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### Fixed vs Flat Tax Rate Question

Sam consumes, among other things, telephone services. He pays a fixed tax t on every phone call he makes (in addition to the regular price), and ends up paying 100 dollars every year in telephone ...
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### Optimal tax level that raises revenue R < e given Hicksian demand elasticities

I have to find a uniform tax rate that raises revenue R < e and I am given a Hicksian cross price elasticity demand matrix below. I know I want to use Ramsey's first-best but I am not sure, how to ...
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### Finding budget share given Hicksian demand elasticities

I'm not sure how to go about solving this. I tried thinking of this as a linear function where a share of marijuana = $-.4 -.106tobacco +.506alcohol$ and find a share of each good by doing a system of ...
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### Why is discriminating monopoly better than competitive markets for producers?

In intermediate microeconomics by Hal Varian, It is said that discriminating monopoly is better than competitive markets for producers. Why so?
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### Some basic questions on infromation asymmetry

How does asymmetric information and bid-ask spread are connected? For instance, economic theory tells us that, the more the problem of information asymmetry, the higher the spread is. What is the ...
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### Axiom: More is Better; But when is more better?

I'm taking an introductory microeconomics course and have been introduced to the 3 axioms of economic preferences. These include Completeness Transitivity Non-satiation My understanding of non-...
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### Are these two derivatives the same with regards to TR?

Given that Marginal Revenue is change in Total Revenue: TR = P*Q P = f(Q) TR = f(Q) * Q MR = dTR/ dQ Or ...
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### Pareto Set with strictly convex preferences

Suppose the agents A and B have the following utility functions $x_A y_A+12x_A+3y_A$ and $x_By_B +8x_B+9y_B$ respectively with endowments (8,30) and (10,10). The contract curve's equation turns out ...
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### Differentiability vs Continuous Differentiability

Why do optimization textbooks, as well as appendices for MWG JehleReny etc. simply state conditions in terms of continuous differentiability, even when the weaker condition of differentiability is ...
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### Minimizing consumption in a single market( Partial Equilibrium)

Let there be a good X where the optimal consumption is 0; i.e the social costs for any unit provided would always be greater than the utility surplus of the market. We know that prohibiting it( ...
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### Can we compare risks of lotteries?

I understand the concepts of risk-aversion, risk neutrality and risk-attraction. I wonder if it possible to compare risks between two lotteries without giving the utility function. For instance, Let ...
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### In the long run, would a production-possibility curve expand outward if the country preferred more consumer goods than capital goods?

PPC will not expand outward if the country preferred more consumer goods than capital goods. The total amount of resources in an economy at any given point of time is fixed. If a country ...
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### Diminishing mariginal utility and risk preferences

Diminishing marginal utility is a concept only in cardinal utility theory rather than ordinal utility theory. As diminishing marginal utility implies a concave shape of the utility function, does it ...
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### When to use a lagrange multiplier?

I have a question in regards to the use of Lagrange multipliers in macro models. I have seen that when writing a Lagrange there are two ways to write the Lagrange multiplier: 1) Indexed or 2) ...
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### How to compute Walrasian equilibrium in the case of logarithmic utility?

If the utility is $U = \ln x + 2 \ln y$, how do you compute Walrasian equilibrium via usual formula for demand $x=a(x p_x + y p_y)/p_x(a+b)$ ? What is $a$ and $b$? In case of Cobb-Douglas function ...
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### Notation? Inverse of demand function

I'm looking through The Investment Decisions of Firms by S.J. Nickell, and I've come across some notation that I don't quite understand. Any clarification would be very welcome. Nickell first assumes ...
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### How would increase labor productivity lead to improved living standards of people in an economy?

I would like to know more about the mechanisms through which higher labor productivity would translate into higher living standards for a population in a given economy.
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### Supply and Demand plotted on a three dimensional Cartesian coordinate system

Is it possible ? if it's possible can someone give me a reference ? Thanks !
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### Refinements in signaling games with three sender types

What are the pros and cons of the Intuitive Criterion and the Criterion of Divinity in signaling games with three types? I find that separating equilibria often survive the intuitive criterion, ...
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### Inforamtion asymmetry modeling

Is there any cook book, in finance, for models in information asymmetry, so as to make some practice?
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### MWG Proposition 2.F.1

Is homogeneity of degree zero necessary in proposition 2.F.1? It seems like the proof does not assume homogeneity of degree zero to establish the proposition. If this is true, it seems that ...
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### Mathematic notation of scale returns

I'm having trouble with returns to scale mathematical notation which i found counterintuitive even I'm fine with its definition. Any help will be very appreciated. There are three possible types of ...
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### Fixed costs in the long run

Can anyone please help me understand how fixed costs in the long run are zero? In Microeconomics by J. M. Perloff, the author gives the example of a factory's rent and says that if we are talking ...
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### Budget Constraint in Utility Maximisation Problem with Lagrange Multipliers

Lets say we have a utility function $U: \mathbb{R}^{2} \to \mathbb{R}$ given by $U(x,y)$ and a binding budget constraint $p_{x} x + p_{y} y = m$, where $p_{x}, p_{y}$ are prices of goods $x,y$ and $m$ ...
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### In a production function, the technology can vary across the firms and times. But the “power” must be same for the same industry?

Let $F_t=A_tK_t^\alpha L_t^{1-\alpha}$ be the production function with two parameters. In regression, we know the firm level $F_t$, $K_t$, and $L_t$. We want to estimate $A_t$ and $\alpha$. I've ...
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### For the case of two goods, give an example of preferences that are represnted by a continuous utility function that allows for fat indifference curves

The question in the title sounds like a trick question, due to the monotonicity property that indifference curves have, such that for two goods x and y, strong monotonicity implies y > x. Possible ...
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### In the Cournot Duopoly Model,why is the Equilibrium achieved at 1/3 Rd of the Market Share?

I've been reading it for a while,while I do get the action reaction movements,I can't understand as to how the 1/3rd value was reached. Can anyone intuitively or mathematically explain as to how it's ...
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### Optimizing Lagrangian Function Subject to 4 Input/Output Constraints:

The objective function: $$\text{utility}=U\left(x_{c}, y_{c}\right)$$ subject to, $x_{o}=f\left(y_{i}\right)$ $y_{o}=g\left(x_{i}, x_{o}\right)$ $x_{c}+x_{i}=x_{o}+x^{*}$ $y_{c}+y_{i}=y_{o}+y^{*}$ ...
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### Job search theory in discrete time

Let us assume that there is a labor who lives in discrete time universe and discounts future payoffs with the discount factor $b\in (0,1)$. And we assume that this labor is at period $t=0$ at first. ...
I have the following Dynamical system for market impact function $$p_{t+1}-p_t=a(d_t-s_t)$$ $$s_{t+1}-s_t=bp_ts_t-cs_t$$ $$d_t=y-rp_t$$ where $s_t$ is quantity supplied, $d_t$ is quantity demanded, ...
The function below is a utility function simplified after subject to an implied participation constraint. $$E\left(\pi_{n}\right)=e^{*}-E\left(s^{*}\right)=e^{*}-c\left(e^{*}\right)$$ where \$ \pi_n ...