Advanced Microeconomic Theory

This text offers a rigorous, application-driven companion to standard graduate textbooks in microeconomics. It presents 200 carefully structured, step-by-step exercises with detailed solutions, enabling students to develop fluency in core analytical tools and to independently reproduce key results in consumer and producer theory. The book systematically integrates central concepts in advanced microeconomic theory, including preference axioms, utility representation, utility maximization, Walrasian and Hicksian demand, and duality between expenditure minimization and utility maximization. It further develops welfare measurement—covering compensating and equivalent variation, consumer surplus, and deadweight loss—alongside production theory, cost functions, and profit maximization. Chapters on choice under uncertainty extend the analysis to expected utility theory, risk aversion, stochastic dominance, and insurance demand, while later sections introduce non-expected utility models such as prospect theory and ambiguity aversion. The final chapter examines externalities and public goods, emphasizing policy applications in taxation, environmental regulation, and welfare analysis. This textbook is appropriate for advanced undergraduate, Master’s, and first year PhD students in economics, finance, and related disciplines, as well as researchers working on applied economic theory. The authors have provided a table of suggested exercises by course level to facilitate instructors seeking structured problem sets to support teaching and coursework.