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A firm solves the following optimization problem max [PK L 4L rK subject to the constraint K - L = 0 Here p is the
A firm solves the following optimization problem max [PK" L 4L rK subject to the constraint K - L = 0 Here p is the price of output, K is capital and L is labor. The constraint is imposed by the government that restricts firms to have equal amounts of both inputs. Assume that the multiplier is strictly positive so that the firm would like more of capital than labor., that is, the firm would like the constraint to be relaxed to K - L = 3 A government inspector indicates that for a bribe, he is willing to overlook a small violation of the constraint: he is willing to allow the firm to use a small amount more of capital than labor. If w = r = 1, a = and b = find the maximum possible bribe that the firm is willing to pay A firm solves the following optimization problem max [PK" L 4L rK subject to the constraint K - L = 0 Here p is the price of output, K is capital and L is labor. The constraint is imposed by the government that restricts firms to have equal amounts of both inputs. Assume that the multiplier is strictly positive so that the firm would like more of capital than labor., that is, the firm would like the constraint to be relaxed to K - L = 3 A government inspector indicates that for a bribe, he is willing to overlook a small violation of the constraint: he is willing to allow the firm to use a small amount more of capital than labor. If w = r = 1, a = and b = find the maximum possible bribe that the firm is willing to pay
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