6. (25 points) Suppose Epic Arts (EpA) makes computer games using a Cobb-Douglas production function of q = (Ki) x (L!) where q - the number of copies of the Border Nights Deux produced, K = the number of computers, and L = the number of programmers hired. (a) (2 marks) What is the firm's short-run problem when the number of computers is fixed at K = 100. The market wage for a programmer is w = 25, the rental rate of capital is r = 625 and the price of each game is P. (b) (2 points) What is the firm's labour choice L' here? Note: the labour choice will be a function of the price P. (c) (4 points) Suppose Epic Arts is in a perfectly competitive market, what price would earn the firm zero profits? What is the labour choice in this case? (d) (5 points) In reality, most major games are sold for $80. What does this mean for the firm? Make sure to explain (think labour, profits, and quantity). (e) (4 points) To make up for the lost profits, the firm decides to sell loot boxes for cosmetics as part of the game. Suppose Epic Arts can hire another firm to produce the loot boxes using the production function 4 = 4(K) x (L:) where lo is the number of loot boxes. This firm is able to pay programmers w = $10 and the rental rate of capital r = 250. If they plan to sell 640 in total, what is the optimal amount of capital and labour to hire? (f) (3 points) Suppose the government outlaws loot boxes as an illegal form of gam- bling. The firm decides to turn part of the original game into downloadable content (DLC) to offset some of the losses (i.e. there is no additional cost). If only 50% of the users buy this new DLC when priced at $30, then what is the loss for the firm now? Are the consumers better off or worse off? How about the firm? Explain. g) (5 points) In reality, the cost of producing a video game functions more like a large fixed cost with the variable cost being mainly dependent on the production of physical copies of the game. Explain the concept of fixed cost and variable cost. Explain the relationship between both fixed cost and marginal cost as well as variable cost and marginal cost. Why might game manufacturers want to move towards download only games? ScanBackThisquestion as you to illustrate and explain how a perfectly competitive market with mentions hranis will Behave in the short run and lone run