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Case 1: Making dresses is a labor-intensive process. Indeed, the production function of a dressmaking firm is well described by the equation Q = L

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Case 1: Making dresses is a labor-intensive process. Indeed, the production function of a dressmaking firm is well described by the equation Q = L L2JSUCI. where Q denotes the number of dresses per week and L is the number of labor hours per week. The firm's additional cost of hiring an extra hour of labor is about $20 per hour [wage plus fringe benefits). The firm faces the fixed selling price, P = $4U. Over the next two years, labor costs are expected to be unchanged, but dress prices are expected to increase to $50. What effect will this have on the firm's optimal output? 0 No effect 0 Increase O Decrease

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