5

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))}{\mathrm dq}=\frac{\mathrm dVC(q)}{\mathrm dq}. \end{equation} Next, if marginal cost is some constant $k$, then variable cost must be $VC(q)=kq$, because we can ...


5

$AVC<AR$ 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: $\text{Avg Profit}=\underbrace{AR-AVC}_{>0}-AFC$ Shutdown: $\text{Avg Profit}=0-AFC$ Since $AVC<AR$, staying in production is better since the revenues can be used ...


4

It is true that mainstream economics (which includes neoclasicall economics) is empirical but note that any explanation can only arise from theory (whether theory is explicitly formulated or only implicit in the background), and any theory is based upon assumptions. Empiricism does not mean you don't build theoretical models with assumptions, it means you ...


3

In the short run, you cannot sell your capital. To do so would be a violation of "short run" and would instead be the "long run". Case 3 (and I would also contest Case 2) are outright forbidden by the definition of short run. I would note that your question has a lot of narrative to it - which is good in some cases, but you want to keep ...


3

You are missing an integration constant $$ \log\left(\frac{p + qF(t)}{1 - F(t)}\right) = (p + q)t + \color{red}{\tilde{C}} $$ This constant you can name it whatever you want, I'm going to name it as $$ \color{red}{\tilde{C}} = \color{blue}{C}(p + q) + \ln q $$ where $C$ is just another constant. So I basically changed one constant for another one (...


3

First, let's deal with the semantics and terminology aspect: what the word "profit" means in Economics, and what the word means in the everyday/business/accounting use, are two different things. In its everyday business use "profit" is the surplus above all expenses including depreciation. So what business call "profit" the Economics discipline calls "net ...


2

I would advise you to think deeper about your research question first, as this will guide the decision to use country fixed effects. If you would like to exploit cross country variation, for example by studying how the same industry functions differently across countries, then do not use country dummies because it will absorb the variation you want. If you ...


2

$TC(q)=10+3q+0.5q^2$ is a quadratic cost function and has a shutdown point at $P=3$.


2

As suggested in the comments, there are many different signaling models with firms and workers, and also what is the "standard model" to differnt people differs in details. In most of those models, however, a firm does not make a profit in any equilibrium as the wage is equal to the expected productivity. In any separating equilibrium, the wage of ...


1

Since the authors state that the total labor input is: $$\int t_i(k)dk$$ the meaning of the total labor input in this case would be that it is the sum of all attention $t_i$ allocated over those tasks $k$. For example if we would assume that $t_i (k) = k$ then the labor supply across continuum given by $[0,1]$ would be equal to $\frac{1}{2}$ because $\int k ...


1

The probabilities are obtained using Bayes updating. Let $f_i = L$ be the event that firm $i$ is low and let $f_i = H$ be the event that firm $i$ is a high type. Assume that firm 1 knows she herself is a high type then: $$ \begin{align*} \Pr(f_2 = H|f_1 = H) &= \frac{\Pr(f_2 = H \text{ and } f_1 = H)}{\Pr(f_1 = H)},\\ &= \frac{1/3}{1/3 + 1/6},\\ &...


1

Lets first try to understand what it means: when a demand / supply curves touch the axes. The point where the demand curve touches the Y-axis (Price-axis) can be interpreted as the price which makes the first consumer willing to pay for that good (prohibitive price). The point where the demand curve touches the X-axis (Quantity-axis) can be interpreted as ...


1

Broadly, the answer to your question is it depends on the context. Generally, if you have some sort of functional form for the curves, you can tell whether they touch the axes by seeing if there is an intercept on either the P or Q axis (set P = 0 to see if there is a Q-intercept, and vice versa). So, for example, if you're working on a monopoly problem that ...


1

In micro-econometric work, prices may or may not be part of TFP. The literature recognizes two versions: TFPQ (Quantity-based) TFPR (Revenue-based) Clearly, TFPR must include prices (Revenue = quantity*prices). Many scholars argue that TFPQ is the purer and most correct measure of TFP. In the sense that higher productivity means producing more output (...


1

No actually by default when you use Cobb-Douglas function the output is not even measured in monetary units but rather as output per unit of time. This output per time can be still called income without assigning it any 'monetary' value. For example, in Robinson Crusoe economy if you catch 5 fish then those 5 fish are your income from economic perspective. ...


1

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 strategies, their best response function will always return the set of all their strategies. When you have best response functions that give sets with more ...


1

There is a nice explanation, just take a look at the source here.


1

Denesp's comment is your full answer: it's a badly-drawn chart which fails to do its one job, that was to illustrate that the long-run cost curve consists of joining up the minima of the short-run cost curves.


1

Interesting question. Indeed, it's somewhat difficult to model value added because in many models firms don't make profits all the time. But therein lies your answer I think. Model VA as $Z$ in a distribution $g$ with two dimensions $(Z,Y)$, where Y is the size of the firm, Pareto distributed, and then for any given $Y$, $Z$ is distributed as $Z \sim Y \...


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