Question
A Monopoly's production function is Cobb-Douglas Q = L 0.5 K 0.5 , where L is labour and K is capital. The demand function is
A Monopoly's production function is Cobb-Douglas Q = L0.5K0.5, where L is labour and K is capital. The demand function is p =(100+nm) - Q. The wage, w is $1.10 per hour and the rental cost of capital, r, is $4.5. The value of nm is a unique value for each student, which is provided in the data sheet.
A. What is the (long-run) expansion path? Illustrate Graphically.
B. Derive the long -run cost curve equation as a function of q.
C. What quantity maximizes this firm's profits?
D. Find the optimal input combination that produces the profit-maximizing quantity. Illustrate with a graph.
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