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Question 1 A firm has a monopoly in the production of antimacassars. Its factory is located...

Question 1 A firm has a monopoly in the production of antimacassars. Its factory is located in a town where no other industry exists and the labour supply is W = 10 + 0.1L, where W is the daily wage and L is the number of persondays of work performed. The firm production function is Q = 10L, where L is daily labour supply and Q is daily output. The demand curve for the good is P = 41 ? Q 1,000 , where P is the price and Q is the number of sales per day. a) Find the profit-maximizing output for the firm. (Hint: make substitutions so that you can write both the firm’s revenue and total costs as a function of output, Q). b) How much labour does it use? What is the wage rate that it pays? c) What is the price of the good? How much profit is made?

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