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A farmer uses robots R and labor L to produce strawberries Y . To produce strawberries, the farmer needs to combine inputs in a way

A farmer uses robots R and labor L to produce strawberries Y . To produce strawberries, the farmer needs to combine inputs in a way described by the following production function: f(R, L) = min{2L, R}. The rental rate of a robot is denoted by r = $5, the hourly wage is w = $10, and the price of a kilogram of strawberries is p = $10. The farmer operates in a perfectly competitive market.

  1. Find the value of the quantity tax on robots that maximizes the fiscal revenue raised by the government.
  2. What happens to the profit maximizing production plan in the long run? Explain.

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