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A pizzeria hires labor (L ) and rents capital (K ) to produce pepperoni pizzas (q ). Pizzas sell forp = $ 10 each. Labor
A pizzeria hires labor (L
) and rents capital (K
) to produce pepperoni pizzas (q
). Pizzas sell forp
=
$
10
each. Labor is hired at a rate ofw
=
$
25
. Capital is rented at a rate ofr
=
$
100
. Consider the short run where capital is fixed atK
=
1
. The production function is:
q
=
10
K
L
The marginal product of labor is:
M
P
L
=
5
K
L
In the short-run, how much labor should the pizzeria hire to maximize profits?
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