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2. Frustrated by princess toys that fail to meet her daughters' expectations, Aurelie has started her own princess toy company. She manufactures these toys using
2. Frustrated by princess toys that fail to meet her daughters' expectations, Aurelie has started her own princess toy company. She manufactures these toys using only labor, according to the production function, Q = f(L), where L is the number of workers she hires. The marginal product of labor is strictly positive and decreasing in the number of workers. Each worker is hired in a competitive market at the wage rate, w. Aurelie sells her toys in a com- petitive market at price, p, with the objective of maximizing profit. Aurelie's manufacturing process is quite detrimental to the environment. Specifically, if Q > 0 is the quantity of toys that Aurelie produces, her greenhouse gas emissions will be E(Q) > 0, where E(.) is a strictly increasing function: de @ > 0. To try to reduce her greenhouse gas emissions, the government has imposed a ft per-unit tax on her output, where t
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