Consider a monopoly beer manufacturer operating under the following conditions in the short run: Beer gets produced by means of a Cobb-Douglas production function q = 1.52L0.6K0.4. The firm's capital is fixed at K=100 units in the short run. The hourly wage rate is $24 and the hourly rental rate of a unit of capital is $8. The inverse demand curve faced by this beer monopolist is p=100q-0.2. What is the profit-maximizing levels of employment (L) and output (q) for this firm, in the short run?
Consider a monopoly beer manufacturer operating under the following conditions in the short run: Beer gets produced by means of a Cobb-Douglas production function q = 1.52L0.6K0.4. The firm's capital is fixed at K=100 units in the short run. The hourly wage rate is $24 and the hourly rental rate of a unit of capital is $8. The inverse demand curve faced by this beer monopolist is p=100q-0.2. What is the profit-maximizing levels of employment (L) and output (q) for this firm, in the short run?
Chapter8: Monopoly
Section: Chapter Questions
Problem 15SQ
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